Utility, legislators not close on rates

Neither side budges in talks on increase

General Assembly

April 04, 2006|By ANDREW A. GREEN | ANDREW A. GREEN,SUN REPORTER

Legislators and Constellation Energy officials are digging in their heels in negotiations over the utility's pending 72 percent rate increase, with the utility executives saying the lawmakers need "a dose of reality" and General Assembly leaders saying they could have asked for even steeper concessions.

Gov. Robert L. Ehrlich Jr. acted as a go-between in separate meetings yesterday with legislators and the executives. But according to participants, neither side budged from its demands despite a series of bills that lawmakers passed last week in an effort to establish leverage over the company.

Legislators want $750 million in concessions from the utility, but Constellation stuck with its offer of about $350 million in aid and deferments.

"We need the legislature to be realistic with their expectations, and at this point they seem to be looking for more of a political victory rather than a solution to the problem at hand," said Constellation spokesman Robert L. Gould.

But House Speaker Michael E. Busch said the $750 million figure is justifiable based on anticipated savings from Constellation's proposed merger with FPL Group Inc. of Florida and $528 million in fees that Baltimore Gas and Electric Co. customers paid to Constellation over the past six years to compensate it for the expected decline in value of its power plants that instead rose in value.

"We think that's a reasonable offer," he said. "It could have been as high as $1 billion."

Legislators rushed last week to pass legislation aimed at BGE, including bills to fire the five members of the Public Service Commission and force the utility to return the $528 million to customers. Another bill would establish a special counsel to investigate the proposed merger between Constellation and FPL, and gave the legislature veto power over the deal.

Lawmakers acknowledge that the legislation is not perfect and does not directly address rates. But they said they need the bills as a bargaining tool.

Ehrlich, who favors the merger, has hinted that he would veto the legislation. But a spokesman, Henry Fawell, said the governor has not established a timeline to announce his decisions.

Because the legislature acted on the bills last week, the state constitution requires Ehrlich to act by Saturday, leaving the General Assembly time to override him before adjourning for the year Monday night and putting more pressure on the power company.

Legislators said they decided yesterday to give Constellation officials time to contemplate the bills and left the governor's office without meeting with the executives. Ehrlich then met separately with Constellation Chief Executive Officer Mayo A. Shattuck III.

"Mayo's not a happy camper," said Paul E. Schurick, Ehrlich's communications director.

Gould said the company has made a fair offer. "What is extremely troubling is that you reach a point where you're not dealing with reality," he said.

The increase -- an average of $743 a year per BGE customer -- is due to begin in July after the expiration of rate caps instituted as part of Maryland's 1999 deregulation law.

Constellation offered a plan last week that would allow for a 15 percent initial increase in the bills, with more increases over 18 months to bring customers up to market rates. Constellation would charge customers about $8.54 a month to recoup the deferment.

The next week holds the potential for intense gamesmanship among the governor, legislators and utility executives. Constellation officials have said their offer is off the table if the bills passed last week become law.

Legislators and the governor have scheduled another meeting for tomorrow.

"There are difficult days ahead, but I'm confident we'll reach an equitable solution," said Del. Dereck E. Davis, a Prince George's County Democrat and chairman of the House committee that handles utility legislation. "Obviously, the closer we get to next Monday, the more tense things are going to become."

andy.green@baltsun.com

Sun reporter Kelly Brewington contributed to this article.

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