Philadelphia Inquirer

Exelon/PSEG Merger — Bright Idea, Bad Wiring

The Philadelphia Inquirer — Thursday, March 31, 2005

Editorial

Energy giant Exelon Corp. proposes a merger with New Jersey's major hometown utility that would create the nation's largest electric and gas company. And guess what they're offering consumers? Not a single dollar in up-front savings – nada, zilch, bupkus.

What's wrong with that picture? Plenty.

Unless consumers can be guaranteed substantial, tangible benefits, they should demand that utility regulators in Pennsylvania, New Jersey and Washington reject the merger.

The promise of creating a stronger company isn't enough by itself to justify uniting Exelon, corporate parent of Peco Energy Co., and New Jersey's Public Service Enterprise Group Inc., which serves almost two million Public Service Electric & Gas customers.

For Peco consumers in and around Philadelphia, the opening bid from Exelon may seem a rather tired and predictable bargaining ploy. They've seen this before – only five years ago, in fact.

In early 2000, Exelon Corp. was formed through the merger of Chicago's Unicom Corp. and Peco Energy. In that deal, the energy giants at first low-balled consumers by millions of dollars with an offer that – like the current deal – included absolutely no rate relief for customers.

Eventually, Exelon agreed to better terms for consumers and the region, amid a clamor by a dozen-plus consumer, environmental, business and government advocates. The utility lowered rates by $200 million over four years, boosted support for clean energy sources, pledged to meet specific reliability targets, and retained hundreds of Peco jobs in Center City Philadelphia. Even that settlement was less than what consumers actually deserved.

So it's good to see many of the same consumer advocates pressing today for improvements in the Exelon/PSEG proposal. In Harrisburg, the state's utility consumer advocate, Irwin A. "Sonny" Popowsky, and others, say that any deal has to be sweetened considerably for consumers. Meanwhile, opposition this week from New Jersey consumer groups understandably centered on the loss of local control to "out-of-state CEOs and shareholders making decisions about when and how our lights go on."

Critics of the merger also argue convincingly that regulators need to look at Exelon's potential stranglehold on energy supplies in its market.

While Exelon pledges to sell off thousands of megawatts of generating power to address such concerns, regulators will have to make sure the firm does enough. And just as much scrutiny should be focused on Exelon's increased role in supplying natural gas, particularly in this region and across New Jersey.

One likely benefit of a merger would be Exelon's full control of PSEG nuclear plants. The Chicago-based Exelon – with Peco Energy expertise – has a better record of running its nukes efficiently, safely and at high capacity.

As with the Exelon/Peco merger proposal, Exelon and PSEG contend that their merged utility will be a stronger competitor, providing better service, and positioned to hold down future rate hikes. But the Exelon pledge to "mitigate rate increases over time" is a pathetic rallying cry on consumers' behalf. With a $12 billion merger in the works, Exelon and PSEG should be prompted to do much better - or ordered by regulators to break off their engagement.

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