BGE-Pepco merger clears a legal hurdle Judge rejects union's contention that public's interest not served


October 29, 1997|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

A Baltimore County Circuit Court judge yesterday agreed with state regulators that Baltimore Gas and Electric Co.'s pending merger with a Washington utility is in the public's interest.

In ruling in the company's favor, Judge James T. Smith Jr. rejected arguments by the International Brotherhood of Electrical Workers that BGE's $3 billion merger with the Potomac Electric Power Co. would fail to create substantial benefits for consumers.

"The PSC [Public Service Commission] concluded that the merger would result in benefits to the public, without overriding detriment, and this determination was supported by the record," Smith wrote in his 17-page ruling.

For BGE and Pepco, the Circuit Court case represented one of the biggest obstacles to forming Constellation Energy Corp., which would become the nation's ninth largest power concern. The case is likely to either go back to the state PSC for review, or be appealed by the union to the state's Court of Special Appeals.

An appeal would delay the merger -- scheduled to take place in April -- by many months. BGE and Pepco have stated that the delays are costly to the merger, and could force them to call off the deal. Combined, BGE and Pepco have spent $108 million in preparing for the merger, according to documents filed in the court case.

IBEW officials said they have not decided whether to take the case to the higher court.

"From the beginning, we stated the case was without merit and clearly a delaying tactic," said Arthur J. Slusark, a BGE spokesman. "Their motivation is simple -- there will not be a union on Day One at Constellation Energy Corp. We now look forward to resolution with the state's PSC, and we're anxious to get about the business of Constellation."

Despite the court defeat, IBEW officials said the outcome could be positive for Maryland residents.

"The one thing he did do was he said the merger is in the public interest as proposed by the PSC," said Jim Hunter, president of the IBEW's Local 1900, which represents Pepco workers and had petitioned the court to consider the case last summer. "That's going to make it difficult for the PSC to change anything substantially."

In approving the merger, the state's PSC decided that Constellation should reduce electric rates by $48 million a year for three years, and that it couldn't recoup roughly $100 million in purchased energy costs.

BGE and Pepco rejected the order, however, claiming that shareholders didn't sufficiently benefit from the merger under the PSC conditions.

In court in the months since the order, however, the PSC has said it made mathematical mistakes in reviewing BGE and Pepco's merger application, implying that it would compromise in favor of the two companies.

"There's nothing standing in their way now except economic issues," said Michael J. Travieso, head of the state's Office of People's Counsel, a citizen watchdog agency.

"They're done with all regulatory impediments. But it's ironic because the judge's order affirmed a PSC ruling that the companies said they didn't like and couldn't live with. We'll see what happens."

Last week, the District of Columbia's PSC approved the merger on the conditions that Constellation freeze electric rates for four years, rebate roughly $100 million to Pepco customers and that the new company could not pass costs associated with the Calvert Cliffs nuclear power plant to District residents.

Pub Date: 10/29/97

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