A merger short-circuited

October 26, 2006

Yesterday's announcement that Constellation Energy Group and Florida's FPL Group have decided not to merge may be bad news for shareholders in the two companies, but it's hard to know for certain whether it's bad for Baltimore Gas and Electric customers. Clearly, the people who run Constellation think it is. The company has long touted the potential savings and efficiencies that a merger with FPL would create, and there was ample evidence that this was absolutely true.

But the absorption of the only Maryland-based Fortune 500 company by a Florida energy company also raised troubling questions that deserved thorough regulatory scrutiny. Would BGE customers have to subsidize the costs incurred by Florida hurricanes? How many local jobs were going to be lost? What would it mean for the long-term financial health of BGE? The answers to these and a boatload of similar questions might still have favored the merger. But they needed to be asked, and the information reviewed by people who understood the industry and held the interests of BGE ratepayers at heart.

That's the job of the Maryland Public Service Commission. But the current PSC is not an agency in which state residents can put their faith. It has demonstrated neither the impartiality nor the competence to handle the job. It was bad enough when the PSC's chairman fired several of the agency's top technical experts in 2003, or when e-mail uncovered this year revealed a too-cozy relationship between Kenneth D. Schisler and an industry lobbyist. But the agency's abbreviated review of BGE's 72 percent rate increase was the final straw.

FOR THE RECORD - An Oct. 26 editorial misstated the number of Fortune 500 companies headquartered in Maryland. There are five. The Sun regrets the error.

Constellation officials blamed uncertainties over regulatory and judicial matters in Maryland and the "potential for a protracted and open-ended merger review process." The company didn't deserve a protracted and open-ended review, just a fair and complete one. That's why a majority of lawmakers (with significant Republican support) endorsed a plan to replace the current PSC. The Maryland Court of Appeals' decision to reject that proposal proved to be the merger's coup de grace.

Much remains unsettled, however. Constellation officials are certain to argue that the company's $600 million contribution toward the BGE rate relief plan needs to be revisited, and the matter is likely to wind up in court. But more fundamental questions regarding Maryland's energy future - and how it is to be nurtured and regulated - still must be addressed. Maybe that will be possible after the Nov. 7 election. But it's difficult to see how that will happen without fundamental changes to the PSC no matter who wins.

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