BGE parent to build, buy plants

Deregulation plan OK'd, Constellation to market nationwide

2 new power subsidiaries

Electricity will be sold to utilities as well as to new customers

November 12, 1999|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

Now that BGE Co.'s electric deregulation plan has been approved, Constellation Energy Group, its parent, said yesterday that it will build and acquire additional power plants as it focuses on becoming a major national power provider.

To kick off the strategy, Constellation Energy said it would shift its 13 power plants -- 10 in Maryland and three in Pennsylvania with total capacity of 6,200 megawatts -- from BGE to two nonregulated subsidiaries once Maryland's electric market is fully deregulated July 1.

BGE's 12 hydroelectric and fossil fuel plants will become part of Constellation Power Source, which was set up in 1997 to sell energy and related services to the wholesale market and municipalities throughout the country. It also wants to become a major supplier to other electric companies, a business known as merchant generation.

Calvert Cliffs Nuclear Power Plant will become part of a new holding company, Constellation Nuclear. The soon-to-be created Constellation Nuclear will also include the country's first nuclear power plant relicensing consultant firm, which began operating in August.

"Our stated goal of business is to grow Constellation Power Source into a national merchant generation business," said Charles W. Shivery, Constellation Power president and chief executive. "We clearly have to have a certain amount of power behind that."

"Transferring the assets from the regulated to the competitive side gives us a base to try and grow the power marketing business faster than we could otherwise," Shivery said.

The company could possibly build an additional 3,000 and 5,000 megawatts of electricity in the next three to five years, he said. Targeted regions include the Northeast and Midwest. The company most likely will not build a plant in Maryland, he said.

Last month, Columbia Electric Corp., a subsidiary of Herndon, Va.-based Columbia Energy Group, said it plans to build a 550-megawatt natural gas-fired power plant on 70 acres in Charles County to take advantage of the deregulation of the electric industry.

Construction is to begin in 2001 and would last two years.

"How we grow the business and the regions we're involved in will drive the amount of power we will actually build ourselves," Shivery said.

While Constellation Power Source will build and acquire power plants, Constellation Nuclear will look to buy nuclear plants, company officials said yesterday.

Calvert Cliffs is the first nuclear power plant in the country to seek renewal of its operating license. The Nuclear Regulatory Commission is expected to rule on the license in April. The licenses of nearly half of the country's 103 nuclear plants will expire in the next 15 years.

Transferring the assets is the "next logical step," Shivery said, in the company's strategy. Regulatory filings will be made by the end of the year to obtain final approvals for the moves.

Constellation's strategy was developed in anticipation of electric deregulation, which it said will cut BGE's rates, raise its expenses and expose it to competition. A plan approved Wednesday by the Maryland Public Service Commission guarantees residential customers a six-year, 6.5 percent rate cut and opens its territory to other suppliers.

During the same period, the utility would collect $528 million from all customers in "stranded" costs -- partial repayment for what the utility spent to build power plants to furnish electricity to its 1.1 million customers.

After July, BGE will become a transmission and distribution company, responsible for delivering electricity to 1.1 million customers and natural gas to 570,000 customers.

It will also sell electricity and gas to Maryland customers who choose not to go with a new supplier.

BGE Home, an unregulated subsidiary that is a retail marketer of natural gas in Maryland, will also market electricity starting in July.

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