A hectic day for executives of BGE, Constellation

Utility

June 14, 2006|By TRICIA BISHOP | TRICIA BISHOP,SUN REPORTER

Two hours before a hearing on electricity rates was to begin in Annapolis yesterday morning, the proposed legislation popped up on the Internet - and launched a frenetic day for Baltimore Gas and Electric Co. executives.

They scrambled to review it, fine-tuned their testimony for later that morning and assigned a team back at headquarters in Baltimore to work on the details.

The conclusion they reached between 8 a.m. and 10 a.m.: If passed as proposed, the bill would ruin the company's credit rating, create a financial crisis and cause energy rates to skyrocket further.

"This special session ... needs, quite frankly, to be on notice," Paul J. Allen, senior vice president for corporate affairs at Constellation Energy Group, BGE's parent company, told legislators. "The outcome could quite possibly be opposite of what you intend."

State lawmakers had assembled to discuss a plan to remedy the 72 percent electric rate increase due to take effect in a few weeks for BGE residential customers and to replace the state Public Service Commission and people's counsel. The legislature's objective of fixing what's widely considered a flawed system differed some from BGE's goals - trying to make clear that it is not at fault for the rate increase, and that it should have the right to recoup its costs.

The company's message: We are not the bad guys.

"There's been a lot of misinformation and confusion," BGE President Kenneth W. DeFontes Jr. told the legislators. "This is a fair deal, straight up."

The company has repeated that refrain since last fall, when it first began running advertisements explaining that electricity rate caps were being lifted and that Marylanders would soon pay much higher market rates. They said it again during the 2006 legislative session that was virtually consumed by the issue, and yesterday prepared to do it again.

"We haven't treated this any differently than we did during the session," Constellation spokesman Robert L. Gould said. "Obviously, we're hopeful that we'll be able to provide input into the process."

The company came armed with two economic studies backing the planned rate increase, copies of their advertisements and a sizable contingent, including Constellation Chief Executive Officer Mayo A. Shattuck III, in the packed audience.

Testifying for the company were DeFontes, Allen, senior regulatory affairs officer Lisa Decker and William L.Massey, a former member of the Federal Energy Regulatory Commission, who was there as a paid consultant.

"Massey is one of the gurus of our industry," Allen said in an interview later. He said the company also retained Gerard E. Evans, a lobbyist who worked with BGE in the late 1990s when deregulation was being crafted in Annapolis. Evans returned last year as a top lobbyist after serving time in prison for defrauding clients.

The main message BGE wanted to get across, DeFontes said in an interview, was that deferring the move to full market rates for electricity through as late as June 2008 could have a devastating impact on the company. Two credit-rating agencies have already downgraded its debt.

"We weren't the ones that caused energy prices to rise," DeFontes said.

During the hearing, Sens. Leo E. Green, a Prince George's County Democrat, and E.J. Pipkin, an Eastern Shore Republican, said they were annoyed at what they perceived as the company playing the victim. The company said it didn't intend that message.

"I kind of take umbrage at that," Allen said in an interview. "We don't want to be made a victim."

Executives just want to make legislators and the public aware of "very bad, unintended consequences" of certain rate remedies, he said.

When yesterday's hearing concluded, utility executives headed back to their offices to pore over the 59-page bill and its accompanying 24-page fiscal note to retool today's game plan.

"I literally don't know what happens next," Allen said. "This is not a simple situation and has not been a simple situation for a long time. It isn't going to be a simple answer."

tricia.bishop@baltsun.com

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