House nears OK of BGE bill

Delegates are set to approve veto power on Constellation merger

General Assembly


Voicing doubt about whether a merger between Baltimore Gas and Electric Co.'s parent company and a Florida utility will benefit consumers, members of the House of Delegates yesterday neared approval of a bill granting the General Assembly veto power over the $11.4 billion deal.

BGE officials have threatened to sue if the legislature attempts to exert control over the merger, and they have said they would immediately withdraw a proposal to phase in this summer's 72 percent rate increase. Gov. Robert L. Ehrlich Jr. has endorsed the merger as good for consumers, but delegates said yesterday that they're dubious.

"What we want is to have an extra set of eyes on behalf of the General Assembly to review all the relevant facts to make sure it's a good deal for the citizens of Maryland," said Del. Dereck E. Davis, the chairman of the Economic Matters Committee.

If that means BGE is going to sue, he said, "Let 'em."

Last night, BGE spokesman Robert L. Gould warned that "any action on the part of the legislature to put a roadblock in the way of the merger would likely have a negative impact on the proposed plan for rate relief for BGE customers."

Time is running short for the General Assembly to take action dealing with the merger and the rate increases - estimated to average $743 a year for the company's 1.2 million residential customers. Tomorrow is the deadline for bills passed by one chamber to be guaranteed a hearing in the other, and because of a quirk of election-year law, any bills passed after Friday can be killed by the governor with no legislative recourse.

Ehrlich has said the 72 percent increase "will not stand," but he has not provided specifics of what recourse he favors nor said whether he would veto any of the legislature's ideas.

Ehrlich Chief of Staff James C. "Chip" DiPaula Jr. said he spent the day yesterday working through options to soften the rate increases for consumers and that conversations continued with legislative leaders in an effort to find a solution before the General Assembly adjourns in two weeks. He said it could take time for a consensus to develop on the best option for consumers and could not yet offer a timetable for when the administration will present a plan.

"We have several promising alternatives that we are reviewing for discussion over the next two weeks," DiPaula said.

Both the House and Senate are considering several bills directly aimed at reducing the coming rate shock, and Davis said the chambers will continue to move them to preserve their options in case the negotiations fail.

The price increase is a result of a 1999 law deregulating Maryland's electric industry, a measure supported at the time by the top leaders in the General Assembly. The bill called for six-year rate caps on BGE customers, which are due to expire June 30.

Because of recent shocks to world energy markets caused by Hurricane Katrina, increased demand and other factors, BGE was forced to buy electricity contracts this spring at sharply higher rates than it had previously, resulting in the planned 72 percent increase.

Last week, Constellation Energy, BGE's parent company, floated a plan that would spread half the first year's estimated $750 million increase over eight years. The company would borrow money to make up the difference and would charge consumers $4.40 a month to cover the interest costs. Consumers would see a 13 percent increase in July and another 15 percent hike in January. More rate increases would follow in 2007.

The proposal got a cold reception in the General Assembly, where legislators said it would do little to help consumers in the long run.

"It's a 15-month plan," Davis said. "What happens to the state of Maryland when the merger goes through and this rate-mitigation plan has expired?"

Lawmakers have suggested plans that would make the rate increases even more gradual. They also have suggested the state try to recoup $528 million that BGE customers paid over the past several years to compensate Constellation for the expected drop in value of power plants it took over as part of the deregulation deal. Instead of losing value, the plants, particularly the Calvert Cliffs nuclear facility, have appreciated rapidly in recent years.

The merger bill, which is up for final passage in the House tomorrow, does not directly address the rate increases. Instead, it calls for the appointment of a special counsel, to be selected by Attorney General J. Joseph Curran Jr., to investigate the proposed merger between Constellation and FPL Group Inc. of Florida. The counsel would have subpoena power and would be required to report back to the governor and General Assembly by the start of the 2007 legislative session in January.

The bill would bar the companies from merging until the General Assembly reviews the report and gives its approval.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.