In the Matter of the Joint Petition of Public Service Electric and Gas Company And Exelon Corporation For Approval of A Change in Control of Public Service Electric and Gas Company, And Related Authorizations
04.26/06
Executive Summary
The provision of electricity service has long been recognized as a natural monopoly. Integrated utility companies have historically held complete control over defined service territories, and in the absence of regulation, these companies would possess unmitigated power to dictate energy prices and terms of service to their customers. Thus, government oversight has been essential to protecting the public interest in affordable, safe and reliable electricity generation and service.
During the past decade, however, there have been massive changes to the electric power business serving New Jersey. In 1999, policy makers restructured the electric industry on the assumption that market forces would lead to lower costs, and at the same time, reaffirmed the goal of providing safe, affordable and reliable electricity to all consumers. The Board of Public Utilities (the “Board”) also created a bulk wholesale auction, called the Basic Generation Service (BGS) auction, with the notion that electricity suppliers would be encouraged to compete for the right to serve groups of customers in each major service area within the state.
Unfortunately, this restructuring has not led to increased competition in New Jersey’s electricity market. Out of state holding companies have acquired three of New Jersey’s four electric utilities. Public Service Electric and Gas Company (“PSEG”) continues to control the vast majority of electric supply in the state and a significant portion of the supply in the PJM East regional electricity grid. And despite the efforts of the BGS auction, consumers have experienced annual rate increases since rate caps were lifted in 2003.
The Joint Petitioners’ request for approval of Exelon Corporation’s (“Exelon”) acquisition of PSEG and its affiliated utility, PSE&G, would drastically exacerbate this trend. Combining the two companies operations and assets would create the single largest utility entity in business today, with more than 7 million electric customers and 2 million natural gas customers in a service territory comprising of 18 percent of the entire population in the PJM region, $79 billion in assets, a gross annual revenue of $27 billion and a net annual profit of $3.2 billion. The size of the acquisition is about two and a half times the size of the Unicom acquisition of PECO which formed Exelon—the next largest energy utility acquisition and predecessor to the currently proposed acquisition of PSEG.
If this petition is approved, one behemoth company would be allowed to dominate the regional electricity market by controlling the lion’s share of electricity supply, creating a stranglehold over rates for New Jersey consumers. The same company would also have incredible control over the regional natural gas markets. And to make matters worse, the Board would loose a significant amount of regulatory authority and the public would have to bear the burden of worse reliability, service quality and safety.
In order to protect the public, this Court must ensure that there will be 1) no harm and 2) positive benefits to rates, competition and the provision of safe, adequate and proper service. There is no question that Exelon’s proposed acquisition of PSEG does not meet the Board’s standard. The Joint Petitioners’ request, therefore, should be rejected.
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