BGE, Pepco say merger will keep rates lower Poindexter tells PSC electric bills would rise without alliance

June 06, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

The top executives of Baltimore Gas and Electric Co. and Potomac Electric Power Co. told the state's Public Service Commission yesterday that their pending $2.9 billion merger would result in lower utility bills for customers than if the two remained independent.

"Without the merger, we would probably be in a position to have to raise electric rates," BGE Chairman and Chief Executive Christian H. Poindexter said. "By virtue of the rate freeze we've proposed, customers will pay less than if we were each stand-alone companies."

The proposed Constellation Energy Corp., which expects to begin operations in March 1997, included in its PSC application in early April an electric base-rate freeze for Maryland and Washington residents through 2000.

Testimony from Poindexter and Edward F. Mitchell, Pepco's chairman and chief executive, marked the first in what is expected to be a lengthy series of hearings by the PSC, the state agency that regulates utilities. The PSC is one of several state and federal regulatory agencies that must approve the merger before it can be consummated.

The testimony also marks the first time the two executives have publicly discussed the merger that will create the nation's ninth largest power concern since it was announced in September.

Under sometimes tense cross-examination, Mitchell said the merger was necessary because of federally mandated changes taking place within the electric utility industry. "The changing structure of the industry has picked up speed faster than anyone thought over the past five or six years," Mitchell said. "Smaller companies will not survive. The only way to compete in that environment is to become more efficient."

Various agencies, companies and others, including Bethlehem Steel Corp., the International Brotherhood of Electrical Workers, the state's Office of People's Counsel and the Maryland Energy Administration, have intervened in the PSC case because they believe the merger will have direct impact on them.

As both companies had in past regulatory filings, the two executives acknowledged that two-thirds of the projected $1.3 billion in savings from the merger through 2007 would come from the elimination of 1,325 positions -- or 10 percent of their combined work forces.

But both also conceded they have not decided issues involving what positions will be terminated and who will make up Constellation's employee base.

"How would you have this commission decide whether this merger is in the public interest when you say that a lot of the decisions regarding the merger have not been decided?" asked Brian Lederer, an attorney representing the IBEW, the union that represents Pepco employees and is trying to organize BGE workers.

Testimony in the PSC case will continue through tomorrow.

Pub Date: 6/06/96

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