Less than a month ago, analysts expressed major doubts that the merger between utility giants, Exelon Corporation and Pepco Holdings, would be approved. Hours later, as a surprise to many, District of Columbia Public Service Commission (PSC) regulators approved the $6.8 billion merger, creating the largest publicly-held utility in the country. This hardly comes as a surprise to us, as this is another one of the many lives of today’s modern energy company.
There is now a noticeable trend where utility companies are finding ways to increase their competitiveness, and are adapting to the rapid transformation to advanced energy production. When their core energy divisions slump in growth under price pressures, utilities end up acquiring or merging with another to gain the upper hand. We’ve seen it happen a dozen times over. In this mega merger, Pepco now provides Exelon a major play into energy efficiency, adding significant generation systems to an already major powerhouse and driving efficiency in the market by combining resources. While U.S. utilities have typically resisted the movement, it's exciting to now see the American energy market evolve in this direction. The Exelon-Pepco merger is without a doubt a win for renewables, with the unified company bringing their customers more sustainable solutions.
While the merger was a long drawn saga, the hardest part isn’t over yet— it’s only just begun. The real challenge is going to be how well the two can integrate their teams and systems. Combining companies means more than combining names—they must fully integrate their two businesses to be successful. Sounds obvious enough, but it’s all too common to see one organization acquire another, yet still run them as separate entities. The synergy required to function as a whole does not come about from separate organizations. Synergies are created only when teams look beyond themselves to new problems that they can solve for others, together. While there is a lot that executives can do to build a unified cultured, the requirement for company collaboration is often overlooked.
Newly unified companies, like Exelon and Pepco, must combine not only teams and clientele bases, but software systems as well. Otherwise, they will suffer from the miscommunication of systems and lose efficiency. So in order to compete in today’s highly competitive renewable market, energy producers need to have a strong IT platform to execute these renewables strategies, and embrace digitalization in the workforce to have a nimbler and faster organization. As David Crane, former CEO of NRG said best, “Having a good technology platform like energy investment management (EIM) is key if a company wants to be successful in a highly distributed energy industry.” European utility companies are already ahead, and seeing great success in digitizing their tactics and operations.
In the case of this merger, Exelon and Pepco have a major opportunity to combine energy efficiency, solar and storage in an efficient way to give their customers a solid solution. If business development has a unified software toolset for pricing, proposal and investment decisions, then the newly combined company will gain greater agility in decision making and competitive advantage to gain market share. The technologies they need to quickly unify are CRM and ERP systems, document management and email servers. To do this effectively, they need to consider implementing an energy investment management system. Mercatus’ EIM software eliminates these efficiencies by offering a comprehensive solution that seamlessly integrates with other major systems and reduces the number of operational steps.
However, software and IT investment is only 20% of the solution. The 80% majority will come from changes from management and executive leadership. Lack of attention to detail and inadequate budget are major risks. However, most IT projects fail when management fails to drive the behavioral changes required. How quickly the Exelon- Pepco duo can implement strong, unified system that can package their solutions together in a compelling manner to their customers will determine the success of this merger. While most American utilities have reorganized and merged various businesses into a single, unified renewable energy group, one has yet to emerge to harness their full potential, and offer a seamless energy solution for the residential or retail commercial customer. Ultimately, for all utilities, comprehensive strategy is essential to successfully addressing new growth in the era of distributed generation.