TRENTON—Today, NJPIRG, NJ Citizen Action and Public Citizen—a coalition of consumer advocacy organizations—announced their submission of intervention filings in Chicago-based Exelon's proposed buyout of Newark-based Public Service and Gas (PSEG). After reviewing Exelon's filing, the groups fear the buy-out will diminish energy competition further in the region and substantially limit state regulatory authority, leading to higher rates and worse reliability and safety.

The consumer groups called on state regulators to commit to using a 'positive benefit' standard in making its decision on whether or not to approve the proposed acquisition. They also want a BPU commitment to holding public hearing statewide to allow ratepayers to voice their concerns.

"New Jersey ratepayers should not be for sale to the highest bidder. We're counting on the NJBPU to reject this buy-out request if no consumer benefits can be demonstrated," said Suzanne Leta, NJPIRG Energy Associate.

PSEG is New Jersey's last state-based energy company. The BPU has already allowed out-of-state energy companies--FirstEnergy, PEPCO and Consolidated Edison-to buy out the rest of the state's energy market. The Exelon buy-out of PSEG is even riskier to ratepayers than in the past because it will create the largest, most powerful energy company in the nation.

If the acquisition is approved, Exelon will own additional generating plants, primarily in New Jersey and Pennsylvania. Exelon would also have the largest power marketing business in the United States. This concentration of generating assets and marketing power within the regional wholesale electricity market will lead to higher prices across the board for consumers. And, acquisition of PSEG by out-of-state holding company will severely limit the ability of New Jersey regulators to protect consumers.

Ratepayers will also bear the costs associated with the proposed buy-out. According to PSEG's most recent 10-K annual report filing to the Securities and Exchange Commission (SEC), PSEG and Exelon expect to incur $70 million in transaction fees. In addition to these fees, the report estimates that integration costs are approximately $700 million over a period of four years, with approximately $400 million being incurred in the first year.

"Exelon's buy-out bid offers no evidence that this merger is in the public's interest," said Ev Liebman, NJCA Program Director. "Synergies for CEO's do not translate into positive benefits for the millions of ratepayers who could end up footing the bill," she added.

The groups also noted that FERC may have violated federal open government laws when it held a series of private meetings with top Exelon and PSEG executives just prior to the companies' filing for permission to merge. The groups ask that FERC commissioners and company executives provide sworn statements for the public record, detailing what was discussed during the secret meetings.

"Consumer groups call on FERC to block the Exelon-PSEG merger because it will result in higher prices and poorer service," said Tyson Slocum, research director of Public Citizen's energy program. "Deregulated energy markets are already uncompetitive. This merger will make a bad situation even worse for consumers."

NJPIRG, Public Citizen, and NJ Citizen Action documented, among other things, that:

- Exelon's study of how the proposed buyout will effect competition is fatally flawed because it relies on an analyst hired by the company. This reliance on industry-supplied analysts stands in stark contrast to the independent investigations provided by the U.S. Department of Justice and the Federal Trade Commission.

- The regional electricity grid is already uncompetitive, so the buyout is likely to result in increased market power, allowing the new company to price-gouge consumers.

- Exelon's mitigation plan is inadequate because it ignores their energy trading activities. As we have seen with recently released Enron tapes, companies can just as easily control power prices through energy trading than by actually owning power plants.

- Exelon's reliability record is poor compared to that of PSEG, and the track record of recent multi-state mergers shows that electric reliability suffers.

- Ratepayers will bear the costs associated with the acquisition. There is no guarantee that any savings will go to ratepayers. No short-term fix, such as a rate freeze or rate credit will solve the long-term, systemic problems inherent in this buyout.

- The BPU's regulatory authority over PSEG would be effectively dismantled. PSEG, currently exempt from federal regulations because it is state-based, will instead be regulated by the federal Public Utility Holding Company Act (PUCHA). As a result, the NJBPU, a state agency most understanding of the needs of New Jersey residents, will loose its regulatory oversight of PSEG to a federal agency.

- Exelon has consistently put profits before safety in their nuclear plant operations. If the buyout is approved, Exelon will have full ownership and control over additional plants in New Jersey and Pennsylvania, putting the safety and security of millions of nearby residents at risk.

The BPU and FERC have regulatory jurisdiction to block the proposed buy-out on the grounds that it would be of no benefit to the public. Several states have rejected similar energy acquisition proposals; earlier this month, the Oregon Public Utility Commission unanimously denied an application by Texas Pacific Group to buy Portland General Electric and in December, the Arizona Corporation Commission rejected a proposed takeover of Tucson Electric by an out-of-state consortium. If either the BPU or FERC decides Exelon's proposal is not in the public interest, the buyout will be effectively stonewalled.

"While shareholders and corporate executives exercise stock options, it's not clear that ratepayers will get anything out of this deal except vulnerability to higher electricity bills, decreased quality of service, and less protection from New Jersey regulators. When it comes to meeting the needs of New Jersey's consumers, bigger has nothing to do with being better. BPU President Jeanne Fox and our federal officials should put the interests of New Jersey residents first when deciding whether or not to approve Exelon's proposal," concluded Leta.

Statement by Suzanne Leta, NJPIRG

Statement of Principles: Say No to Exelon's Energy Empire

NJPIRG Motion to Intervene

NJPIRG is a statewide, non-profit, non-partisan public interest advocacy organization with 25,000 citizen members. For the past thirty-three years, NJPIRG has advocated for clean, safe, reliable and affordable energy for New Jersey's consumers.

New Jersey Citizen Action is the state's largest independent citizen watchdog coalition representing 60,000 family members and more than 100 affiliated labor, tenant, senior citizen, faith-based, environmental, and community organizations.

Public Citizen is a nonprofit, nonpartisan consumer rights organization based in Washington, DC with 17,034 individual members in Illinois, New Jersey and Pennsylvania. Public Citizen's Energy Program does extensive work at the federal and state levels to promote energy policies that best protect consumers.

Ev Liebman, NJ Citizen Action 609/234.2741
Tyson Slocum, Public Citizen 202/256.3152