The proposed merger of Pepco Holdings, Inc. (NYSE:POM) and Exelon Corporation (NYSE:EXC) obtained approval from Washington D.C. regulators on Wednesday.
In April 2014, Exelon agreed to acquire Pepco Holdings for $6.8 billion in cash to create the leading Mid-Atlantic electric gas and gas utility. The combined utility businesses of both companies would serve approximately 10 million customers and it would have a rate base of around $26 billion.
Pepco and Exelon merger is in the public interest
The Public Service Commission of the District of Columbia voted in favor (2-1) of the approval of the merger between Pepco Holdings and Exelon. The Commission concluded that the merger is in the public interest.
The Commission said the transaction is beneficial for ratepayer and the District because the $72.8 million Customer Investment Fund that included $25.6 million in rate base credits and $11.25 million in funds for energy efficiency and energy conservation programs especially for low and limited income residents.
The merger also provides $21.55 million to promote the District’s sustainability agenda through pilot projects to modernize the electric distribution grid to accommodate more distributed energy resources.
“These benefits, among others, would not be available to District ratepayers if the merger is not approved,” according to the Commission.
The Commission’s approval allows Exelon CEO Chris Crane to complete the deal, which would help the company offset losses from its nuclear power plants because Pepco Holding has steady, regulated earnings.
The companies already obtained regulatory approvals in the states of Delaware, Maryland and New Jersey.
Pepco shares surge
The stock price of Pepco Holding increased more than 25% to $26.69 per share around 3:15 in the afternoon in New York. The stock climbed as much as $27.22 per share earlier today.
Last month, Pepco posted adjusted earnings of $0.49 per share for the fourth quarter of 2015, up from $0.23 in the same period in 2014. The company said its strong earnings were driven by higher distribution and transmission revenue.
On the other hand, the stock price of Exelon declined more than 1% to $34.55 per share at the time of this writing.