• 2 hours Senior Interior Dept. Official Says Florida Still On Trump’s Draft Drilling Plan
  • 4 hours Schlumberger Optimistic In 2018 For Oilfield Services Businesses
  • 6 hours Only 1/3 Of Oil Patch Jobs To Return To Canada After Downturn Ends
  • 9 hours Statoil, YPF Finalize Joint Vaca Muerta Development Deal
  • 10 hours TransCanada Boasts Long-Term Commitments For Keystone XL
  • 12 hours Nigeria Files Suit Against JP Morgan Over Oil Field Sale
  • 19 hours Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 24 hours Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 1 day Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 1 day Venezuelan Output Drops To 28-Year Low In 2017
  • 1 day OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 1 day Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 1 day Kinder Morgan Delays Trans Mountain Launch Again
  • 2 days Shell Inks Another Solar Deal
  • 2 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 2 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 2 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 2 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 2 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 2 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 2 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 3 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 3 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 3 days Norway Grants Record 75 New Offshore Exploration Leases
  • 3 days China’s Growing Appetite For Renewables
  • 3 days Chevron To Resume Drilling In Kurdistan
  • 3 days India Boosts Oil, Gas Resource Estimate Ahead Of Bidding Round
  • 3 days India’s Reliance Boosts Export Refinery Capacity By 30%
  • 4 days Nigeria Among Worst Performers In Electricity Supply
  • 4 days ELN Attacks Another Colombian Pipeline As Ceasefire Ceases
  • 4 days Shell Buys 43.8% Stake In Silicon Ranch Solar
  • 4 days Saudis To Award Nuclear Power Contracts In December
  • 4 days Shell Approves Its First North Sea Oil Project In Six Years
  • 4 days China Unlikely To Maintain Record Oil Product Exports
  • 4 days Australia Solar Power Additions Hit Record In 2017
  • 4 days Morocco Prepares $4.6B Gas Project Tender
  • 5 days Iranian Oil Tanker Sinks After Second Explosion
  • 7 days Russia To Discuss Possible Exit From OPEC Deal
  • 7 days Iranian Oil Tanker Drifts Into Japanese Waters As Fires Rage On
  • 7 days IEA: $65-70 Oil Could Cause Surge In U.S. Shale Production
Alt Text

Nuclear Power's Resurgence In The Middle East

While nuclear power loses popularity…

Alt Text

Are Higher Uranium Prices Around The Corner?

The world’s largest uranium producer…

Alt Text

Is This The End Of Nuclear Power In The UK?

The UK has been planning…

Nuclear Utility Suffers Setback As DC Pursues Clean Energy

Nuclear Utility Suffers Setback As DC Pursues Clean Energy

Regulators for Washington DC rejected the proposed purchase of Pepco Holdings by Exelon, potentially killing off the $6.84 billion acquisition. By law, the DC Public Service Commission (PSC) said, the deal must benefit the public, and not just leave it unharmed. Chairman Betty Ann Kane said on August 25 that the body’s move was “one of the most important decisions the commission will ever make.”

The rejection was momentous, as Exelon had already received approval from neighboring states in the region, including Virginia, Maryland, New Jersey, Delaware, along with the regulatory approval from the Federal Energy Regulatory Commission (FERC). The shareholders of Exelon and Pepco had also given their endorsement.

But DC regulators took heavier scrutiny than their counterparts in other states. The PSC, in the summary of its decision, underscored the skepticism over allowing a deal to go through, arguing that “a rate case lasts only until the next rate case. This decision is forever.” The deal garnered more interest than any other proceeding conducted by the commission in over a century, the PSC said. Pepco’s share price dropped by more than 15 percent immediately following the announcement, and Exelon’s stock was down more than 4 percent.

There were a long list of problems that pushed the commission into blocking the takeover of Pepco, and some of the arguments highlighted the pivotal point that the utility industry finds itself in. Related: Donald Trump Sees No Danger For Environment In Keystone XL Pipeline

DC’s PSC argued that the takeover of Pepco could interfere with the city’s mandate “to pursue a cleaner and greener future that includes more renewable energy resources and more distributed generation,” which could be difficult “at a time when the electric industry is undergoing significant transformation.”

Weighing the pros and cons, the PSC noted the significant benefits to the city and its ratepayers from the proposed merger. For example, Exelon would pay $33.75 million into a fund that the district could use at the PSC’s discretion. That amount is equivalent to about $128 per ratepayer. Also, Exelon offered a significant premium for Pepco, offering up $1.6 billion more than what Pepco’s assets were worth.

On the other hand, the merger would not provide benefits to the District in the form of enhanced reliability. Nor would the more complicated management structure be a good thing for the city. Regulators would have a tougher time overseeing a massive utility in which Pepco was just one part of the combined company’s portfolio.

Pepco is the city’s only distribution company. If it was swallowed up by Exelon – whose main business is in generating electricity rather than distributing it – that could work out to the detriment of DC ratepayers. Related: Low Oil Prices: Assessing The Damage So Far In 2015

More to the point, Exelon’s core business is from big centralized power plants, about 80 percent of which are nuclear. A January 2015 report from the Institute for Energy Economics and Financial Analysis (IEEFA) concluded that Exelon is seeking to grow the regulated side of its portfolio – in which stable rates are assured by regulators, and rate increases can be secured to cover rising costs – because its aging power plant fleet is struggling in unregulated markets. In other words, its old nuclear power plants are losing business to competing natural gas-fired power plants and even renewable energy.

To offset those losses, Exelon is building out its regulated assets, which offer more protection. That is why it paid a $1.6 billion premium for Pepco.

But of course, to cover the declining profitability, DC ratepayers could end up paying higher rates, the IEEFA report concludes. DC regulators apparently agree. Backing that up is Exelon’s track record: Prior to the proposed Pepco purchase, Exelon bought Baltimore Gas & Electric and has since raised rates multiple times.

Another problem with the merger is the fact that Washington DC is pursuing more distributed energy, such as rooftop solar. Given Exelon’s heavy reliance on centralized power plants, if Pepco is taken over, the PSC believes that Exelon could slow DC’s move towards more rooftop solar. Renewable energy can push down wholesale power prices, which would hurt cash flows at Exelon’s generating units. As such, the PSC concluded, Exelon has a conflict of interest when it comes to meeting DC’s renewable energy goals. Related: OPEC’s $900 Billion Mistake

This development points to increasing conflict and competition as the shift across the country towards distributed renewable energy gains momentum.

“As the Commission recognized in its decision, the proposed acquisition would have been a substantial step backwards in the District’s efforts to move toward more sustainable electricity generation and greater reliance on local, renewable energy,” Power DC, a grassroots organization that formed in opposition to the merger, said in a statement. “It would have exposed D.C. residents and businesses to the risk of steeply rising electricity bills.”

Exelon and Pepco have 30 days to appeal.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News