...Exelon Merger: The 2016 acquisition of Potomac Electric Power Co. (Pepco) and its affiliates by Exelon Corp. (EXC) provides Pepco with a stronger, better-capitalized parent company with far greater financial flexibility that supports current ratings. Fitch Ratings expects Pepco to benefit from improved operating efficiency and lower costs as a result of the merger. The current ratings assume EXC will provide equity to support capex and to maintain the authorized capital structure. Revenue Stability: Pepco's regulated electric transmission and distribution operations have minimal commodity and revenue decoupling mechanisms in Maryland and the District of Columbia (D.C.) eliminate the revenue impact of weather and changes in usage patterns providing better predictability to earnings and cash flow. The significant presence of state and federal government customers in the service territory, which tends to reduce economic volatility, also contributes to revenue stability. Persistent Regulatory...
