Timing is everything

March 09, 2006

One wonders what Constellation Energy Co. honchos were thinking when they cooked up their merger with Florida's FPL Group just as more than 1 million Maryland customers of their subsidiary, Baltimore Gas & Electric Co., were about to get crushed by a 72 percent increase in their electric bills. Perhaps all the money clouded their sense of timing.

Technically speaking, there's little, if any, connection between the rate increases, which go into effect this July, and the proposed merger, to be consummated before the end of this year. But politically speaking, there's all the connection in the world.

"BGE bill to increase $743," read the scary headline across the front page of yesterday's Sun, referring to one of the largest one-year utility price increases in U.S. history. If that doesn't set the juices flowing in the General Assembly, nothing will. Already, there are all sorts of legislative proposals to dampen the impact of the rate increases.

Trouble is, in one way or another, most are efforts to put the deregulation genie back in the bottle six years after it was set loose in Maryland under a settlement between the state and Constellation - a highly improbable rollback. They would also involve forcing BGE to absorb some of the cost of buying power on the open market, another questionable notion. Taken in isolation, it's hard to see how the legislature could simply force a rewrite of a 6-year-old deal with a private company now that it is turning out not very favorably for Marylanders.

But wait, there's this merger, and it's a very real opportunity for the Assembly to exert some pretty powerful leverage on Constellation. Want the merger? Eat some of the almost $1 billion in added costs to Marylanders in the first year. Where's the money for that? For starters, how about the $200 million to $250 million that Constellation says it will save from the merger? Or even the $40 million, and perhaps more, in bonuses that Constellation CEO Mayo A. Shattuck III could derive from the merger? Or the $500 million that BGE customers paid for Constellation's paper losses in taking over BGE power plants - losses that never actually materialized?

No wonder Constellation insists that the state Public Service Commission may hold hearings on the merger but has no real jurisdiction over it. It doesn't want to be forced into renegotiating any of the terms of deregulation. So here's Job 1 for the legislature: Clarify by law that the PSC does, indeed, have jurisdiction over this deal. Job 2: Threaten sufficiently tough conditions to hold the merger hostage to PSC approval - and gain at least a measure of rate relief for Maryland consumers. It could be done.

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