Thursday's Annapolis briefing on the takeover of Maryland's most important energy company produced all the controversy of a whist game at Leisure World.
Only a few of the Senate Finance Committee's 11 members even showed up.
"I'm sure some of them are just rolling out of bed at this time," joked Chairman Mac Middleton, a Charles County Democrat. (It was 8:50 a.m.)
In fact, nobody in state government shows signs of doing anything about the merger between Baltimore's Constellation Energy and Florida's FPL Group, except acting concerned, getting minor concessions and letting it sail through.
Which is a mistake.
In an era of soaring utility rates, proven misdeeds by other energy players and the flimsiest federal regulation in 70 years, Constellation wants to surrender control to a Florida-dominated board and entangle its Baltimore Gas and Electric utility in an even deeper financial thicket.
The legislature, the governor and the Public Service Commission should rake these companies over the fire, try to replace the federal lapse with state safeguards and attempt to block the merger if they can't. (For model rules, see how Oregon protected Portland General Electric from former owner Enron.)
But the political response so far has been hand-wringing and arguments about gay marriage.
This week marks the end of a Depression law that ensured communities kept control of power companies and prevented electricity customers from subsidizing harebrained investments in other industries in other places.
After Wednesday's demise of the Public Utility Holding Company Act of 1935, little stands in the way of, say, IBM buying up Constellation and BGE after they merge with FPL, says Sue Kelly, general counsel for the American Public Power Association, which represents municipal utilities.
Or Nestle. Or "the House of Saud," she suggests, half-jokingly. "Those are all theoretically possible now."
OK, extreme examples. But the point is cross-country and non-energy buyers are possible now for electricity utilities, which - let's remember - are still economically essential monopolies that need to be heavily regulated. (The 1935 law also would have banned the FPL/Constellation deal.)
At the same time, limits on shifting unrelated costs onto electricity consumers and funneling ratepayer revenue into completely different businesses have become unacceptably low, she says.
Federal regulations replacing the 1935 protections are too weak "to afford consumers a complete, permanent and effective bond of protection from excessive rates and charges," the Public Power Association says in a petition seeking to revisit the rules.
In public statements, Constellation and FPL bosses seem to admit that steady cash from electricity consumers, especially FPL's greater portion of these clients, will bolster the combined company's credit rating and support trading, generation and other unregulated ventures.
Kelly chronicles these boasts in the Public Power Association's complaint, in which the FPL/Constellation deal stars as a virtual "Exhibit A."
Mayo A. Shattuck III, Constellation's chairman and chief executive officer, "explained that Constellation was financially `constrained' by the concerns of credit-rating agencies about Constellation's reliance on its nonutility business," the complaint says, quoting Energy Daily. "Mr. Shattuck said that the merger `would provide the steady cash generation and financial ballast needed to satisfy the credit rating agencies and Wall Street.'"
(How could electric consumers subsidize unrelated businesses? A million ways. A holding company might sneak unregulated overhead into regulated costs, jacking up rates. Regulated utility assets could secure debt used to gamble in power markets. And so forth.)
Constellation officials say existing regulations protect ratepayers. "Simply put, BGE is prohibited from passing through any charges that would subsidize any non-utility regulated businesses," says spokesman Rob Gould.
But the Public Power Association comes to a more depressing conclusion.
"It is no exaggeration to say that the merger is intended to enlist Florida and Maryland regulated utility ratepayers together in funding the expansion of the merged company's non-utility businesses nationwide," it says in its filing to the Federal Energy Regulatory Commission. "The possibility of cross-subsidization is therefore very real."
That is damning. So is analysis by Tyson Slocum, energy research director at Public Citizen, the consumer group founded by Ralph Nader. While a Constellation/FPL marriage would shift significant new risk onto ratepayers, he wonders, what reward do they get if the unregulated business hits the jackpot? It will all go to the executives and shareholders, of course.
"But when things go sour in those unregulated markets," Slocum says, "you bet that Baltimore Gas and Electric is going to feel some pain."
Fighting words, but nobody in a position to do anything about it looks likely to fight.
Maryland Public Interest Research Group has gotten interested. So has ACORN, the community organization.
But not Gov. Robert L. Ehrlich Jr., despite having expressed concerns about rising electric rates. Not Ehrlich's Public Service Commission, although it's early for them. And not the feared, liberal Maryland General Assembly, which successfully attacked the CareFirst/WellPoint health insurance merger with far less provocation. (And it's late for the Assembly, whose session ends in two months.)
In an election year, no less. With Shattuck standing to make scores of millions of dollars in merger-related and other booty. With electric rates likely to spike as much as 50 percent next July. With Constellation's Maryland plants belching pollution and the company saying it can't afford to fix them.
Am I missing something? What more does a politician need? Go raise hell.
jay.hancock@baltsun.com
