Merger threat draws BGE ire

Company warns of suit if lawmakers block deal with FPL

General Assembly

March 25, 2006|By KELLY BREWINGTON | KELLY BREWINGTON,SUN REPORTER

Constellation Energy Group officials warned yesterday of possible legal challenges and said they would withdraw a plan to phase in rate increases if legislators halt an $11.4 billion proposed merger with FPL Group of Florida.

Gov. Robert L. Ehrlich Jr. also said yesterday that he wants the power company merger to proceed and that he was "not enthusiastic" about an Assembly proposal to intervene in the transaction as a way to gain leverage to reduce a planned 72 percent electric rate increase scheduled to hit this summer.

"There are benefits to be derived from this merger," Ehrlich said in an interview. "It's a fact, it will allow them to put down more dollars on the table as we negotiate. Just stopping the merger is not an option. The merger is good for the state."

With the power company hardening its stance against the bill, the House of Delegates is expected today to continue to debate legislation that would grant the Assembly the authority to block the merger if an independent investigator determined it would not benefit Maryland customers. House leaders say they expect to pass the bill next week and send it to the Senate.

The measure illustrates the frustration many Democratic lawmakers feel toward the state Public Service Commission, which has come under fire in recent days as being too cozy with business interests.

Critics say the agency has not done enough to protect consumers from impending rate increases, while Republicans have responded that a 1999 deregulation plan that created the impending higher rates was pushed by Democratic leaders.

Electricity rates for the 1.2 million customers of Baltimore Gas and Electric Co., a Constellation subsidiary, are expected to rise an average of $743 per household after price caps are lifted this summer. Ehrlich has promised that the 72 percent increase "will not stand" but has not offered a specific proposal for reducing it.

Lawmakers say one way to negotiate lower rates is to review the merger of Constellation and FPL, which is awaiting federal and state Public Service Commission approvals.

Many lawmakers in both chambers have predicted that the merger would hurt customers while creating more wealth for executives and shareholders. They warn that the company will relocate to Florida, despite Constellation's promises to remain in Maryland for five years, and that rates will remain high.

House lawmakers said yesterday that they were not daunted by the possibility that Constellation could take the state to court.

"It hurts them no matter what the outcome," said Del. Dereck E. Davis, a Democrat from Prince George's County and chairman of the Economic Matters Committee, which passed the merger bill. "If they happen to win, we will appeal. Either way, they have to deal with us. They still have to do business in the state of Maryland."

Last-minute scramble

With a little more than two weeks remaining in the General Assembly, the merger bill has been the legislature's latest step in a scramble to help consumers. Electricity rate increases have dominated the final stretch of the General Assembly, with lawmakers expressing anger and frustration while they eye the November elections.

Some lawmakers and Ehrlich's Democratic challengers for governor have taken aim at the Public Service Commission and its head, Kenneth D. Schisler, who have been under fire since unveiling a rate mitigation plan that would charge customers interest.

E-mails between Schisler and a lobbyist for a utility company drew ire from lawmakers who said the commission leans pro-business. The House plan to set up an independent counsel to review the merger would circumvent the Public Service Commission. Four of five commissioners were appointed by Ehrlich.

Baltimore Mayor Martin O'Malley, who has criticized Ehrlich for not doing enough to help customers, delivered to Annapolis yesterday a petition with 4,000 signatures asking for Schisler's ouster and for a plan to use the merger as leverage to decrease rates for customers.

Ehrlich scoffed at the petition, calling it "silliness."

Meanwhile, the governor has blamed Senate President Thomas V. Mike Miller and other lawmakers for approving deregulation in 1999, which legislators said would encourage competition.

Widespread residential competition has not occurred since the law took effect, and six-year rate caps imposed as part of a transition to a deregulated market will expire July 1.

Ehrlich said yesterday that legislators have yet to come up with a solution to the price increases even though they have discussed the issue with energy executives for more than a year. He said he has confidence in the Public Service Commission to review the merger and does not want politics to interfere.

"Kenny Schisler was approved by Mike Miller, and just two months ago they were a fine group of commissioners who were doing a great job," the governor said. "It's all politics."

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