Lawmakers, BGE promise lower increases

Constellation merger concessions are discussed


Utility company executives offered concessions and specific proposals to soften the blow of an estimated 72 percent jump in electricity rates for Baltimore Gas and Electric Co. customers this summer, legislative leaders said last night after a meeting with power company officials.

Lawmakers and Gov. Robert L. Ehrlich Jr. met separately with energy executives - including BGE Chief Executive Officer Kenneth W. DeFontes Jr.; Paul J. Allen, Constellation Energy Group's senior vice president for corporate affairs; and Daniel P. Gahagan, BGE's general counsel - as part of negotiations over looming rate increases.

Neither lawmakers nor the governor would offer details on the meetings, but legislators said customers would see increases "much less" than the 72 percent recently announced by the Public Service Commission. They also said Constellation executives agreed to concessions that would give the attorney general's office and the Public Service Commission input into the company's planned merger with Florida Power and Light.

Lawmakers have been considering several merger-related bills as a way to gain leverage in negotiations to lower proposed electricity rate increases.

"This conversation is more encouraging than the last conversation," said Sen. Thomas M. Middleton, a Charles County Democrat and chairman of the Finance Committee, adding he also met with energy executives last week. "Because it's all about the consumer and about defending the consumer." The governor also said that ratepayers would be protected.

The meetings come as the General Assembly session enters its final three weeks, with pressure mounting for lawmakers to avert a crisis when BGE's 1.2 million customers receive an expected average $743 increase in their annual bill beginning in July. Electric prices are rising after the lifting of six-year rate caps imposed as part of a transition to a deregulated market.

With politicians looking ahead to the November election, rate increases have become the most pressing issue in Annapolis. Some lawmakers and Ehrlich's Democratic challengers for governor have been pointing fingers at the Public Service Commission, which they say has become too friendly with industry and has not done enough for consumers. The governor, however, has tried to focus attention on lawmakers who approved deregulation in 1999, including Senate President Thomas V. Mike Miller.

Highlighting the political tensions, aides to Ehrlich complained last night that they had not been invited to a legislative meeting with utility officials. So the governor quickly scheduled a meeting of his own, summoning the officials after they had completed their session with Miller.

After his 45-minute meeting, Ehrlich reiterated his position that the full 72 percent rate increase will not go into effect, and said energy officials have accepted that.

The governor said, however, that any deal would have to safeguard the financial stability of BGE.

"The issue here is getting to `yes' in 21 days," Ehrlich said, referring to the time remaining in this year's General Assembly session. "A `yes' that amounts to a fair deal for Maryland ratepayers and protects this very important company."

Miller said that in his 90-minute session, energy executives offered some concessions concerning the proposed merger between Constellation Energy and Florida Power and Light.

"They were pretty helpful," said Miller. "They were willing to come with specific proposals, and we're going to have our staffs look at them."

Miller said company officials would submit to a review of the merger by the Public Service Commission and said they agreed to a legislative proposal that would allow the attorney general to intervene on behalf of consumers during upcoming hearings on the merger.

"This is a very big step because up until today they were contesting if the Public Service Commission even had jurisdiction over the merger," Miller said.

Many lawmakers have promised to use the $11.5 billion merger as leverage to negotiate a more manageable rate increase for customers.

Of about two dozen legislative proposals concerning the electric industry, two bills would put the fate of the merger in lawmakers' hands. One proposal seeks to undo the 1999 law and return to utility regulation; another would require the General Assembly to sign off on any utility merger.

"When you look at all of the legislation that is on the table, I think what they realize [is] that unless we come up with some softening [of] the rates, there are a couple of pieces of legislation could be very draconian to them," said Middleton, the finance commission chairman.

Constellation spokesman Robert Gould would not discuss specifics of the meetings but said the company has had a "good dialogue" with Ehrlich and House and Senate leaders. "All sides recognize the importance of this issue," he said. "We have to balance the needs of BGE customers with the financial strength of BGE. It's a delicate balance."

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