Keep power on, prices down; that’s what people want

July 18, 2014

Gary Stockbridge and Dick Webster stopped by our Nassau offices last week. Gary is region president of Delmarva Power and Dick is vice present of Philadelphia Electric Company (PECO). Armed with sheaves of paper printed with maps and graphs, bullet points and fine print, they came to talk about the pending merger between Exelon Corporation, which owns PECO, and Pepco Holdings, which owns Delmarva Power.

Based in Chicago, Exelon, according to some of the sheets the men brought, is one of the nation’s leading competitive energy providers. Pepco, which stands for Potomac Electric Power Company, owns Delmarva Power and provides electricity for 340,000 customers in Delaware, Maryland and Virginia on the peninsula. Pepco also provides much of the electricity for Baltimore and Washington, D.C.

If the merger is approved, as expected, by the Delaware Public Service Commission and other regulatory agencies involved, Exelon’s three electric and gas utilities - Baltimore Gas and Electric, ComEd in Chicago and Philadelphia Electric - will join Pepco Holdings’ three electric and gas utilities - Atlantic City Electric, Delmarva Power and Pepco - to create the largest single mid-Atlantic electric and gas utility.

For those of us who get our power from Delmarva Power, we won’t see much difference. What differences we do see, Stockbridge and Webster said, will be positive. For example, Exelon has pledged to Delaware’s Public Service Commission that it will exceed current reliability standards, and by 2020 it pledges that Delmarva Power’s average outage duration in its Delaware operational area will not exceed 122 minutes, which they say will be a 24 percent improvement over the 2011-13 period.

They also say Delaware customers will profit by joining a family of utilities with “distinguished emergency-response capabilities.

“The crews and resources located in the mid-Atlantic area will benefit Delmarva Power and its customers during major storms, while helping to reduce costs.”

Retaining Delmarva identity

Exelon will maintain the Delmarva Power name for its Delaware customers, will retain all of its employees and offices in Delaware, will be increasing charitable giving in Delaware which in 2013 was $699,000, and - as a result of anticipated cost savings it expects in the first five years of the merger from efficiencies and consolidating corporate functions - will be giving the Delaware Public Service Commission $17 million, if the merger is approved, to use as it sees fit for Delmarva Power customers.

Stockbridge and Webster agreed that they support taking that money and giving it back to the customers. “They know best how to use their dollars,” said Stockbridge.

Webster said he expects Delaware’s Public Service Commission to keep the pressure on keeping rates down. “We’re finding that Delaware is a little different than other areas that place the highest premium on reliability,” said Webster. “Delaware is more interested in OK reliability and reasonable rates.”

He said lower levels of service mean lower spending by the utility and lower rates. “We advocate higher levels of reliability, but we have to have rate levels that justify the investment in infrastructure. We don’t want to be just one event away from having to recover to accepted reliability. But we’ll do what’s right for Delaware.”

Translation: our outages may be a little longer than in other areas, but we won’t be paying as much.

Maybe Delaware is parlaying its small size to keep the pressure on lower rates, figuring the big company will shoot for a consistently high level of reliability in all of its areas, including Delaware.

Sounds kind of risky, but as Stockbridge said, the general belief in Delaware - as opposed to our more paternalistic neighbors surrounding us - is that the people know best how to use their money.

With the money they save on rates from this strategy, people can buy generators to cover themselves when the grid does go down.

A couple more gleanings from last week’s meeting:

• Stockbridge said Delmarva planners - thinking about infrastructure - project a flat to slightly rising economy over the next few years.

• Webster said Exelon has several nuclear reactors in its generating fleet but no coal-fired plants. He added that the natural gas boom in our nation is pushing down power prices and putting pressure on nuclear plants. “Some are being shut down,” he said.