Calvert Cliffs: a game of 'hot potato' Issue of paying for repairs

September 30, 1990|By Kim Clark

Although it has been shut and cold for most of the last 18 months, the Calvert Cliffs nuclear power plant has become the subject of an unprecedented game of financial "hot potato."

This is no small potato, either: The customers and owners of Baltimore Gas & Electric Co. are in the midst of a regulatory contest in which each side seeks to force the other to pay millions of dollars for repairs to the troubled nuclear plant.

BG&E, whose earnings have been eaten away by expensive nuclear repairs and the resulting electricity shortages, has asked for state permission to raise its rates by 12 percent, or $194 million, starting January 1. And several hundred million dollars more in nuclear-inspired rate increase requests will likely be decided next year.

If the Maryland Public Service Commission gives BG&E what it has asked for this year, an average residential customer's bill would increase by $7.25 a month, and the company's profits would return to their pre-shutdown luster.

But many of the area's biggest developers and industries have banded together with consumer representatives to argue that BG&E's profits should suffer.

Customers, they say, should not have to pay for problems they say are caused by BG&E's poor management of its nuclear power plant, which has been cited repeatedly for safety violations by the Nuclear Regulatory Commission and was closed in April 1989 for repairs to the reactors' cooling systems.

Attorneys representing steel plants, building managers and consumers have warned the PSC that the utility is using accounting tricks and financial "sleight of hand" in much of its rate-increase argument.

Despite the increasingly fierce rhetoric, even BG&E's harshest critics concede that at least some of the utility's increase request is reasonable.

In interviews last week, people on both sides said they expect the PSC to award the company some kind of rate increase in the current case, which will be decided before the end of the year.

The remaining question, however, is how the regulators will decide to split the financial burden.

The PSC will be holding public hearings on the BG&E rate case at:

* Southampton Middle School in Bel Air tomorrow night Oct. 1 ;

* Randallstown Senior High School in Randallstown Tuesday night Oct. 2 ;

* Hampstead Hill Middle School in Baltimore Thursday night Oct. 4 .

At those hearings, as well as at daytime sessions to be held at the PSC's downtown Baltimore offices occasionally in the next several weeks, the state's regulators will take testimony on BG&E's claim that it needs:

* $44 million for improvements and repairs to Calvert Cliffs.

* $45.4 million as an advance payment for the continuing construction of a new generator at the Brandon Shores plant ` a precedent-setting claim, since the state has a policyof insisting that a utility wait until a plant is finished before it charges customers for it.

* $24 million for an accounting change.

* $21 million to pay BG&E's costs of financing several hundred million dollars in power purchases to replace Calvert Cliffs' electricity.

* $60 million to pay for some new power purchase contracts, advertising campaigns, executive bonuses and general wage increases.

In addition, the company has asked the PSC for permission to change the way it bills residential customers by adding $1.50 to the monthly flat service charge of $3.50 and by adding a 10 percent surcharge to additional power use when households use more than 500 kilowatt hours in a summer month.

The fundamental reason BG&E needs a rate increase, Edward A. Crooke, the company's president of utility operations told the commission, is that its profits are plummeting.

BG&E's earnings have in fact tumbled since its best year, 1988, when the company earned $303.4 million. In 1989, when the troubles at Calvert Cliffs began, BG&E earned $276.3 million.

And this year when BG&E's power supply was so short it had to institute rolling blackouts for the first time in a generation analysts estimate the company probably will earn only $190 million or so.

As a result, the company's stock, once a blue-chip investment appropriate for widows and orphans, has floundered. The stock has fallen from $31.125 on Jan. 1, 1989 to $26.50 on Friday.

"They desperately need the money," said Alan Berro, manager of a Fidelity Inc. mutual fund with large holdings in the Baltimore utility.

"These guys are not complete angels. Nobody's perfect," said Mr. Berro, "but I think they've taken their share of pain."

Mr. Berro said he hopes the PSC, realizing that customers will have to pay in the long run for any short-term rate savings, will give the company what it needs now.

BG&E is in the midst of raising more than $500 million this year to pay for new construction projects, Mr. Berro noted.

A defeat in the PSC case probably would push the utility's interest costs up, he said.

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