BG&E chooses Pa. company as power source

March 12, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

In a sign of the changing utility industry, Baltimore Gas and Electric Co. announced yesterday that it has selected neighboring utility company PECO Energy Co. of Philadelphia to provide it with 140 megawatts for the next 25 years.

The award marks the first time in BG&E's 178-year history that it has selected a power source through competitive bidding rather than by building the plant itself or negotiating an arrangement with another company.

It also is a harbinger of the new utility market, in which utilities and independent power producers will be competing fiercely to provide the cheapest electricity.

Approval of the selection of PECO by the Maryland Public Service Commission, which ordered BG&E to hold the competitive bidding, is required. BG&E said the proposal would be made final April 22 and submitted to the PSC in late spring.

"It appears the process has resulted in BG&E obtaining the source of the lowest-cost electricity to the benefit of BG&E customers," said PSC Chairman Frank O. Heintz. But he added that a final judgment must await the PSC's analysis of the bid.

"If approved, this contract will provide our customers with a guaranteed supply of power at a very competitive cost," BG&E President Edward A. Crooke said.

Neither BG&E nor PECO would provide details of the contract, citing confidentiality agreements and the competitive nature of the independent power business.

In winning the bid, PECO beat out 27 other proposals, which included 26 plans to build new plants in Maryland or neighboring states and one to provide excess capacity from another utility, BG&E spokesman Arthur J. Slusark said.

"This demonstrates that we will be a major factor in the bulk power market," said PECO spokesman Neil McDermott.

PECO has about 799 megawatts of excess capacity in its system, Mr. McDermott said. The excess stems from a 1990 ruling by the Pennsylvania Public Utility Commission that the company could not charge customers for part of the capacity at the company's Limerick 2 nuclear power plant near Pottstown, he said.

The PECO award comes as the Philadelphia utility is enmeshed in a PSC case in which the Cecil County government is trying to force a PECO subsidiary, Conowingo Power Co., to buy cheaper electricity from neighboring utilities.

County officials say Conowingo, which buys its power from PECO, charges the 35,000 Cecil County customers 15 percent more for electricity than utilities such as BG&E, Delmarva Power & Light Co. and Pennsylvania Power and Light Co. charge.

"Once the details of the contract are released, we will know how cheaply PECO can sell power and still earn a profit," said Paul S. Buckley, deputy people's counsel. "We would expect that Conowingo will be extended a similar offer."

Mr. Buckley, whose office represents ratepayers before the PSC, said the PECO offer must be particularly attractive, since the grading of bids subtracted points for proposals in which power is produced in another state. "We are getting the cheapest supply of energy while providing service to the customers," he said.

"I don't see any relationship to the [Conowingo] case," said Mr. McDermott of PECO. "Those facts will be aired before the commission."

If the PECO proposal is approved, it will end a process that started more than four years ago when BG&E sought to add 880 megawatts of capacity to its Perryman power plant in Harford County.

In the end, the scope of the project was cut to 280 megawatts -- providing BG&E's needs through 1997.

Besides ordering the competitive bidding, the PSC allowed BG&E to build a 140-megawatt combustion turbine generator at Perryman.

The runner-up in the bidding was a joint venture of Duke Energy Corp. of Charlotte, N.C., and J. Makowski Associates of Boston.

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