The Star-Ledger

Report Adds Fuel To Fire Over Exelon Merger

The Star-Ledger — Saturday, July 22, 2006

Star-Ledger Staff

A new report on Exelon's proposed takeover of Newark-based Public Service Enterprise Group said the combined company's control over energy markets could exceed regulatory targets, even after it sells some of its power plants.

But the analysis, much like the protracted negotiations over the $17 billion deal, is not clear-cut, further clouding a battle that began more than 18 months ago, when Exelon agreed to acquire Public Service, the parent company of New Jersey's largest utility.

Last month, the companies reached a deal with the U.S. Jus tice Department to sell six mostly older power plants to mitigate concerns the combined company could quash rivals and drive up consumers' energy bills. In return, the federal government signed off on the merger plan, moving it towards a final hurdle: approval by the N.J. Board of Public Utilities.

The agreement with the Justice Department prompted the BPU to request a report from PJM Interconnection, a consortium that oversees the regional electricity grid, stretching from Illinois to the East Coast and including New Jersey. PJM has scrutinized the merger several times before at the request of the BPU, the companies and other parties.

In some respects, PJM's latest analysis, released yesterday, was more favorable to the proposed merger than earlier reports. But the earlier reports considered different factors. And the latest analysis did not include Exelon's proposal, dubbed virtual divestiture, to sell power from their nuclear plants to competitors but maintain ownership of the units.

The loudest complaints about the deal have long come from inside New Jersey, including from consumer groups, large users of energy and the BPU's staff. Critics said the Justice Department decision was flawed and should have forced the companies to sell more robust energy facilities, including nuclear power plants.

Those critics said the report is sued yesterday underscored their concerns about the merger.

"This confirms what we've suspected," said Ev Liebman, program director for consumer watchdog group New Jersey Citizen Action. "The (Justice Department) consent decree isn't worth the paper it's written on."

Public Advocate Ronald Chen, who has opposed the takeover of New Jersey's largest utility, said his office is reviewing the latest analysis from PJM and further data from the Justice Department.

Jennifer Medley, a spokeswoman for Chicago-based Exelon, said the company's agreement to sell energy facilities and virtually di vest power provides enough assur ance to critics.

"We have satisfied market power concerns related to the merger," she said.

Exelon and Public Service have made concessions in their bid to close the deal. In addition to the sell-off ordered by the Justice Department, the companies pledged to issue rate credits and delay pending rate increases – a package they say is worth $500 million. Exelon also has said utility customers will benefit from its more effi cient operation of Public Service's nuclear plants.

The companies say they expect to close the merger, pending BPU approval, in the third quarter of this year.

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