Good evening, Ladies and Gentlemen.

My name is Debra Robinson. I am an attorney with the New Jersey Division of the Ratepayer Advocate. As you may know, our office represents the interests of all utility ratepayers in proceedings before the Board of Public Utilities. The subject of tonight’s public hearing is the proposal to merge Conectiv, the Potomac Electric Power Company, known as "Pepco," and New RC, Inc., which is a newly formed subsidiary of Pepco located in Washington D.C. If the merger is approved, New RC, Inc. will become a registered public utility holding company and the owner of both Conectiv and Pepco. Conectiv was formed pursuant to a New Jersey Board of Public Utilities ("the Board") Order dated January 7, 1998, which approved the merger of Atlantic Electric, Inc., the New Jersey based parent company of the Atlantic City Electric Company ("Atlantic City Electric"), and the Delmarva Power & Light Company ("Delmarva"), which resulted in Conectiv as their parent company. Based in Wilmington, Delaware, Conectiv continues to serve New Jersey ratepayers as Atlantic City Electric, but commonly does business as "Conectiv." If this merger is approved, Conectiv would continue to own Atlantic City Electric, Delmarva, and Conectiv Communications, Inc., and Pepco would continue to be an operating utility company.

On May 11, 2001, the Petitioners, which are Atlantic City Electric, Conectiv Communications Inc., and New RC, filed a merger petition with the Board. The case is pending at the Office of Administrative Law before Judge Diana C. Sukovich. Four days of evidentiary hearings were held before Judge Sukovich from November 13 to November 16 in Newark.

The Ratepayer Advocate has reviewed this proposal and concludes that the Administrative Law Judge ("ALJ") should recommend that the Board of Public Utilities not approve the merger as it is presently filed.

The Ratepayer Advocate considers specifically quantified and defined ratepayer benefits as necessary components of any merger prior to approval. The Board should not approve this merger unless the Petitioners can demonstrate that the merger will provide benefits to New Jersey customers. The Petitioners have not provided a comprehensive accounting of what, if any, benefits ratepayers would receive from this proposed merger. A reliable calculation of expected financial benefits for New Jersey ratepayers should be provided as a condition of merger to ensure that Conectiv’s New Jersey customers get their fair share of any cost savings, such as having their rates reduced by the full amount of the cost savings.

The Petitioners have also not supplied a comprehensive accounting of any additional potential costs resulting from the merger that might eventually be charged to New Jersey customers in the longer term. Our office has concern that the Petitioners’ request that the Board establish a cost accounting mechanism for the purpose of deferring merger costs confuses the calculation of the true impact to ratepayers. To recognize non-recurring merger costs in future rates is improper, and our office wants to ensure that this does not happen. The Ratepayer Advocate urges that the ALJ and the Board require the Petitioners to calculate in a comprehensive manner all of the expected costs that either could be charged to customers or subtracted from the merger savings. Conectiv’s New Jersey ratepayers have the right to know about any additional costs that could be incurred due to this merger and how these costs would impact rates now and in the future.

Any merger of a New Jersey utility with an out-of-state company presents the issue of whether the new out-of-state management team will place enough emphasis on the New Jersey issues of providing high quality service and affordable rates to New Jersey customers. In the same vein, the Ratepayer Advocate believes that the Petitioners must demonstrate that New Jersey ratepayers will benefit and not be harmed by the proposed disproportionate under-representation of Conectiv on the New RC Board of Directors. Petitioners must prove that they will be able to maintain safe, adequate and proper service quality even though the new parent company will be headquartered in Washington, D.C. Also, the Petitioners have not yet committed to a system-wide Reliability and Service Quality Index program that will prevent deterioration of system-wide service levels and also compensate customers on a system-wide basis if significant deterioration in service quality did occur.

Regarding the effect on the New Jersey workforce of the proposed merger, the Ratepayer Advocate proposes that the Petitioners should guarantee that the merger will not negatively impact the New Jersey employees of Atlantic City Electric and Conectiv. Petitioners state that the only expected terminations due to the proposed merger would be that of certain redundant corporate management positions. However, as a condition of merger, the Ratepayer Advocate recommends a contractual promise that New Jersey employees will not be disproportionately impacted if the merger is approved.

Since the new parent company will be headquartered in Washington, D.C., an additional issue as a condition of the merger is a guarantee to maintain a corporate presence in New Jersey, with in-state decision-makers available so that the New Jersey utility operates in a safe, adequate and proper manner. Also, a commitment is needed from the potentially merging entities for additional assistance with bill payments for New Jersey customers suffering from financial hardship. Finally, the Ratepayer Advocate is concerned that market concentration and market power issues have not been adequately addressed by the Petitioners’ filing.

However, the real purpose of tonight’s hearing is for you, the consumer, to voice your opinion, relate your experiences and offer comments about the proposed merger and how it may affect you. This hearing is being transcribed, and you comments will become part of the official record in this case. It is important that you express your view because this official record is a tool that the Administrative Law Judge and Board of Public Utilities will use to help make their decisions.

The Ratepayer Advocate also wants to hear your opinions. We strongly encourage your participation, which helps us to evaluate the merger proposal. On behalf of the Ratepayer Advocate, thank you for attending this evening.

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