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Exelon execs pledge merger will not spread generation costs to DC customers


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Exelon execs pledge merger will not spread generation costs to DC customers

Exelon Corp.stressed to District of Columbia Council members that electricity customers inthe District would not be vulnerable to costs from its nuclear generationbusiness after its acquisition of PepcoHoldings LLC.

Exelon's nuclear generation business is separate from thecompany's regulated utility business, Exelon President and CEO Chris Cranesaid in testimony July13 before the D.C. Council's Committee on Business, Consumer and RegulatoryAffairs.

"What that means — and the Public Service Commissionhas made clear — is that no District utility customer will ever bear any costassociated with our nuclear plants. Period," Crane said.

The affirmation came as a number of Exelon's nuclear plantsare facing potential closures as a result of market conditions. Exelonsubsidiary Exelon Generation Co.LLC on June 22 informedthe U.S. Nuclear Regulatory Commission in June that it will close the 1,078-MWClinton plant onJune 1, 2017, and the 1,819-MW QuadCities plant on June 1, 2018.Both are in Illinois.

The committee held the roundtable to hear the impact ofpost-merger activity on D.C. ratepayers. The PSC on March 23 conditional approval of Exelon's acquisitionof Pepco Holdings, whose utility subsidiaries include , whichserves the District and neighboring portions of Maryland.

After a two-year process to get the merger approved, the transactionis expected to deliver $51 million in savings over the next 10 years, ExelonSenior Executive Vice President and Chief Strategy Officer Bill Von Hoenesaid in histestimony. After the 10 years, customers would see more than $8 million peryear in savings, Hoene added.

Councilmember Vincent Orange, who chaired the roundtable,asked about potential rate increases after 2019, when there are no longercommitments from Exelon to offset distribution costs to customers. As part ofthe merger agreement, Exelon will contribute $25.6 million to residential andmaster-meter apartment customers to offset potential increases in distributioncosts until January 2019, according to Pepco Holdings President and CEO Dave Velazquez'stestimony.

But estimates from Pepco suggested that the rate increase,if approved, would amount to only a 1% per year increase in annual rates. Pepcoin June requested toincrease its electric distribution rates by $85.48 million, which translates toan average monthly bill increase for D.C. customers of $4.36, or 5% from since2013, when Pepco requested its last rate increase, Velazquez said. By2019, "if you think about it being five years since the last rateincrease, that $4.36 amounts to approximately a 1% increase a year,"Velazquez said during the roundtable.

Pepco affirmed that it will work with the District to meetits renewable energy goals, according to statements made by Pepco RegionPresident Donna Cooper. The city mandateshalf of its power sales by 2032 come from qualified renewables of which asubset of 5% must come from solar systems.

Under the merger agreement, Exelon would have to develop upto 7 MW of solar in the District and procure 100 MW of wind capacity fromexisting or new projects over the next five years.

The D.C. Office of the People's Counsel, or OPC, set up aninternal merger compliance team to monitor Exelon's achievement of thecommitments under the merger agreement including its commitment to keep pacewith getting new solar arrays operating. One of the merger commitments requiresPepco to allow solar array owners to operate their systems within 20 businessdays of complying with the PSC's interconnection requirements, People's CounselSandra Mattavous-Frye saidin testimony.

Mattavous-Frye also said the counsel is weighing whether toappeal the PSC's Order 18148, which deniedmotions for reconsideration filed by the OPC, the D.C. government and otherparties and allowed the acquisition to close. Thedeadline for appeals is Aug. 16.

D.C. Attorney General Karl Racine is also weighing anappeal, according to a June 17 statement.

The D.C. Council may hold another meeting in the fall tohear from the PSC, which was not able to testify July 13 because of the ongoingchallenges to the merger and the potential for appeals, Orange said.