Exelon, NJ Regulators Remain Far Apart On PSEG Merger

MarketWatch — Thursday, August 31, 2006

By Christine Buurma

NEW YORK — Recent correspondence between Exelon Corp. (EXC), Public Service Enterprise Group (PEG) and New Jersey regulators regarding the Chicago electric and gas utility's proposed $16 billion acquisition of PSEG lends further credence to the view that the companies are approaching a stalemate with the state's Board of Public Utilities, according to a consumer advocacy group that has seen the confidential letters.

"The parties are very far apart," said Ev Liebman, program director for New Jersey Citizen Action, which opposes the deal. "As of last Friday, it appeared as if there was not going to be an agreement."

Liebman couldn't elaborge on the nature of the sticking points citing a confidentiality agreement with New Jersey. Spokespeople for Exelon and PSEG declined to comment.

In a filing with the U.S. Securities and Exchange Commission Wednesday, Exelon suggested said the acquisition is no longer "more likely than not" based on the status of settlement discussions with New Jersey regulators.

"There is a serious gap on a number of levels, including competition and market power issues," Liebman said. "The (Board of Public Utilities) staff's proposal seems to go beyond what the companies seem to be willing to do." One sticking point is the extent of rate relief that will be passed onto consumers, she said. The companies haven't indicated a timeline for deciding whether to terminate the deal, however, Liebman said.

New Jersey's Board of Public Utilities set tougher conditions on Aug. 17 for its approval of the deal, requiring $220 million more in refunds to consumers and two more power plant sales than what the companies had offered. Doyle Siddell, a spokesman for the board, said Thursday that negotiations with the companies are ongoing, but he declined further comment.

Exelon disclosed in the Wednesday filing that it will record a $55 million pre-tax charge in the third quarter related to the decreased likelihood of completing a deal with PSEG.

Exelon and PSEG, which announced their intentions to merge in December of 2004, had said they would abandon the multi-billion-dollar deal if the BPU did not make a decision by Aug. 4 but negotiations continued after the deadline passed. The Federal Energy Regulatory Commission and the U.S. Justice Department have already signed off on the proposed merger, making the New Jersey BPU the last regulatory hurdle for the companies.

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