Shattuck is sideshow to shortfalls in electricity

August 02, 2006|By JAY HANCOCK | JAY HANCOCK,SUN COLUMNIST

Of course Mayo Shattuck would rather get paid for thinking about luxury boxes and cheerleaders and TV revenues than electricity futures.

Of course he wants to be National Football League commissioner. Of course Baltimore frets about what that might mean for BGE parent Constellation Energy, which Shattuck runs.

But it's the wrong thing to worry about. Partly because he probably won't get the job. Partly because it would make little difference to Constellation's future, even if he did. But mainly because there are bigger factors in Baltimore's energy future than whether Shattuck gets to hand out the Lombardi trophy.

Maryland should assume Shattuck would leave Constellation - if not for the NFL then somewhere else. It should assume Constellation would merge with some other company - if not FPL Group of Florida, as planned, then someone else. Then it should get down to the business of ensuring that the state will have enough affordable kilowatts to power its future economy, no matter who's delivering them.

Shattuck's role at Constellation is that of a turnaround guy, a fireman. An investment banker who was an outside board member, he signed on as CEO in late 2001 when the company's plan to reinvent itself as a pure-generation outfit was cratering and the stock had sunk from $50 to $22 in six months.

When crises are over, crisis managers go do something else. Constellation's stock is back up to $58. Shattuck has engineered a "strategic combination" with another energy company, which was probably always part of the plan.

What's next? If a stretch pumpkin with a football logo can take Shattuck's Ravens-cheerleader wife, Molly, to the NFL ball, maybe there's room for him, too.

He is said to be a long shot. There are five finalists, one of whom is front-runner and league insider Roger Goodell. Another is Robert Reynolds, the No. 2 guy at mutual fund powerhouse Fidelity Investments, who steals some of Shattuck's financier thunder in the contest.

But if it's not the NFL, it'll be something else. Shattuck has given up tens of millions in pay to improve the FPL merger's chances of getting approved, so he has less incentive to stick around. (So much for the "dual headquarters" in Florida and Baltimore that FPL and Constellation have promised for their combined operation. It was always a mirage, but Shattuck's exit would put the Florida folks even more firmly in control.)

And if it's not FPL that Constellation merges with, it'll be another company. There are substantial reasons to doubt whether the FPL deal will happen, although Wall Street seems to be betting on it. The deal probably would face a reconstituted Public Service Commission, possibly a new governor and a legislature that may or may not retain its activist stance on electricity markets once elections are over.

But consolidation in the energy business will continue. Deregulation was a mistake, but it can't be undone without violating property rights or costing taxpayers and ratepayers even more than they're spending now.

Maryland's biggest energy need is investment in infrastructure - transmission lines and generation plants. Forever blocking outside operators from taking equity stakes in Maryland energy companies is probably not the way to make that happen.

Instead, policymakers ought to focus on making Maryland a national model for how to accept Wall Street's energy money while minimizing risk to ratepayers and taxpayers.

This means first reforming the process by which the Baltimore Gas and Electric Co. and other utilities buy wholesale electricity. They need to be able to spread out purchases over time rather than being required to buy in bulk on a fixed schedule, which caused BGE to lock in when prices were sky-high. The legislature has commissioned a study on this due in December.

Before the FPL-Constellation merger or any other combination is approved, Maryland needs to install better legal firewalls - called "ring-fences" - to prevent outside investors from draining regulated utilities. This is particularly critical because of a lapse of federal controls over interstate utility relations.

Policymakers need to look much more closely at smoothing the way for energy investment. One big reason for high Maryland kilowatt prices is a transmission bottleneck for getting cheap, coal-generated electricity piped from the Appalachians. The legislature should also carefully examine letting towns and counties buy electricity in bulk for residents the way they do for government agencies.

People worry that Maryland's growing economy may get crimped for a lack of housing and workers. Well, there's a kilowatt shortage, too. Solving it will require more than wondering where Shattuck gets his next paycheck.

jay.hancock@baltsun.com

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