Philadelphia Inquirer

Exelon-PSEG Merger

Customers deserve more

The Philadelphia Inquirer — Saturday, July 8, 2006

Editorial

Isn't it great when the cavalry rides in and saves the day?

Well, don't ask local utility customers. They wouldn't know. The U.S. Justice Department has declined to mount up to protect consumers in a megamerger of local utilities.

Its recent ruling in the Exelon-Public Service Enterprise Group merger safeguards about a buck a month in energy savings for the region's utility customers.

Whoopee.

The feds recently set terms for its approval of the $16.6 billion merger between Peco Energy Co.'s parent and the Newark-based PSEG.

Under an agreement with the two utilities, Bush administration lawyers would require the merged utility to sell off six power plants in Pennsylvania and New Jersey.

Federal officials said the sell-off would limit the merged Exelon's marketplace clout to push prices higher. Assume for the moment that the feds have the marketplace calculation right, even if that's a premature leap of faith.

The plant sell-off, then, would supposedly buttress the rate discounts Exelon has promised its Pennsylvania customers, and likely would offer New Jersey ratepayers.

Those discounts would eventually trim the typical Peco Energy bill by about $1 a month. In addition to that $125 million total savings, Exelon offers to preserve 1,100 Peco jobs until 2010 and spend nearly $31 million on economic development, clean energy and aid for low-income customers.

Customers have no reason to turn cartwheels over such modest benefits from such a huge, power-concentrating merger.

These benefits are substantially less generous than those flowing from the smaller merger in 2000 that created Exelon. And energy prices in the region are among the highest in the nation. Fact is, utility users have no reason to want this merger approved. It's not irrational to fear this merger would worsen consumers' situation, given the power the merged company would wield in the Eastern Seaboard's energy market.

The Justice Department's consent decree all but concedes the last point: The feds now are on record that the Exelon-PSEG merger would give the new utility a greater ability to control energy prices.

The question for New Jersey utility regulators, who have yet to sign off on this deal, is whether selling six plants is an adequate curb on Exelon's pricing power, and whether ratepayer savings of only a dollar a month are adequate.

Utility mergers are complex, but the basic points are simple:

More divestiture of power plants would be better. So would greater upfront customer savings.

Certainly, the clamor of boos and hisses on the merger coming from New Jersey consumer advocates, industrial energy users, and even a majority of Assembly members indicates the proposed merger isn't customer-friendly as proposed.

The task now falls to Board of Public Utilities president Jeanne M. Fox and her colleagues to push for better terms for utility customers – or to reject the merger.

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