Philadelphia Inquirer

The Exelon Deal Dies

The Philadelphia Inquirer — Monday, September 18, 2006

EDITORIAL

When an auctioneer starts the bidding at an unfair price, it takes a mighty long time to reach a deal that's attractive to potential buyers.

Maybe that's one reason utility customers and government regulators were never really sold on Exelon's controversial, $17 billion takeover of New Jersey's major utility, Newark-based Public Service Enterprise Group.

The deal that Peco Energy Co.'s parent finally scrapped last week was launched without any tangible benefits for consumers. Meantime, shareholders were promised savings of nearly $1 billion. It didn't add up.

Even though Exelon's opening, no-soup-for-you bid proved to be a bargaining stance, the merger never was sweetened enough over the many months it was in play. When Exelon pulled the plug Thursday, the typical monthly rate cut it offered customers amounted to little more than the cost of a few boxes of lightbulbs.

The bigger risk remained that the merger would create a goliath without competition, capable of hiking energy prices. Such hikes would wipe out even modest upfront concessions. Had Exelon and PSEG offered to sell off more power plants, they might have allayed such concerns.

Still, the whole merger nearly sailed through as Exelon hoped: After all, it received the nod from regulators and consumer advocates in Pennsylvania, who got assurances of additional aid for low-income customers and modest rate cuts for all. But it was utility regulators and consumer advocates in Jersey who rightly demanded more.

At the state's Board of Public Utilities, president Jeanne M. Fox refused to be stampeded by threats that Exelon would walk away. It helped that she had the backing of Gov. Corzine to evaluate the merger fairly, without pressure either way.

In early August, the BPU staff made a reasonable counteroffer to Exelon's last offer. It was the energy giant's decision to scrub the merger, rather than go further in addressing legitimate concerns over the deal.

Going forward, Exelon and PSEG still can work together for the benefit of Jersey customers – by continuing their partnership on PSEG's nuclear energy program. Paying for Exelon expertise in running nuclear plants efficiently and safely is money well spent for PSEG.

In the Philadelphia region, Exelon should continue its efforts to make energy affordable for all, as well as remain open to talks on a possible merger of Peco's natural gas business with the Philadelphia Gas Works.

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