BGE merger: a blow to Baltimore Headquarters to Annapolis: PEPCO link helps region's competitiveness but at a cost

September 26, 1995

A MERGER involving the Baltimore Gas and Electric Co. was only a question of time. Since the enactment of the 1992 Energy Policy Act, the whole electric utility industry has been undergoing rapid transition. The same kind of deregulation that opened up telephone markets to cut-throat competition is now happening in the electricity business. Yesterday's utility monopoly must become nimble and innovative to survive and thrive.

From a strict economic perspective, the marriage between BGE and Potomac Electric Power Co. makes sense. The new entity will be America's ninth-largest electric utility, with more than $15 billion in assets and approximately $5 billion in annual revenues. With those kinds of resources it can embark on aggressive diversification projects -- like developing a wireless, high-speed data transfer system.

The BGE-PEPCO union is America's largest merger of electric utilities to date. BGE's franchise in the Baltimore metropolitan area and PEPCO's foothold in the Washington, D.C., region are different enough to be complementary. That ought to enable the new company to produce power at rates low enough to make it less likely that outside competitors will lure away profitable industrial customers.

To further improve its edge, the new company wants to transfer its headquarters to the Annapolis area and reduce its total work force of 12,000 by 10 percent. While distressing to the District of Columbia, those moves seem particularly harmful to Baltimore City, which has been steadily losing its few corporate headquarters in recent years, along with thousands of well-paying jobs.

Because the number of home-grown companies in Baltimore is so small, BGE has been a pivotal sponsor of local civic and charity activities. That was the company's way of thanking the city that gave it birth in 1816 and secured its prosperity through good times and bad.

BGE Chairman Christian H. Poindexter said yesterday that "the bulk" of the new company's "operations" will remain in Baltimore and Washington even after a new headquarters is built in the Annapolis area for "100-200" employees after the merger in 1997.

"The economic growth of an area depends on efficiency and low cost," PEPCO Chairman Edward F. Mitchell declared.

Those are undeniably key factors, but they are not the only ones. The well-being of an area also depends on the readiness of its corporate citizens to exercise a civic role that goes beyond mere bottom-line considerations.

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