CEG may juice up 2 power plants

Maryland expansion would raise utility's capacity nearly 10%

April 24, 2007|By Laura Smitherman | Laura Smitherman,Sun reporter

Constellation Energy Group is considering expanding two Maryland power plants, in what would be the company's first new power generation since 1995 and potentially a way to mitigate future electricity price shocks.

The company, parent of Baltimore Gas and Electric Co., revealed its plans during a hearing yesterday at the Public Service Commission, the state's utility regulator.

The hearing is examining an impending 50 percent electric rate increase for BGE customers. About 1.1 million residents are scheduled to pay the higher prices in June unless they take part in a deferral plan that the commission is considering.

State officials are scrutinizing electricity rates - and supply - after rate increases became an issue in last year's governor's race. Gov. Martin O'Malley won the election and reconstituted the PSC, which under former Gov. Robert L. Ehrlich Jr. had decided not to examine the increase. O'Malley has appointed a new chairman and two new members to the five-member PSC.

"A lot of questions have been raised regarding Constellation and their role ... in where we are today," said Steven B. Larsen, the commission's new chairman. "This thing has been characterized by unbelievable policy choices along the way," he later added, "and the ratepayers are the ones being asked to pay."

The rate increases can be traced to energy prices spiking after Hurricane Katrina and to the end of price caps built into a 1999 state deregulation plan. Industry experts warn that Maryland is facing an energy crunch because electricity reserves on the regional grid are forecast to dip to historic lows in the coming years.

New generating capacity at Constellation could help lower prices because the plants would be less likely to rely on more costly generation during peak demand times, said John R. Collins, the company's chief risk officer who testified at the PSC hearing.

Collins also said the company continues to pursue a possible wind-energy project on Backbone Mountain in Garrett County.

The plant expansions, which are still in the planning stages, would take place at the Riverside facility in Baltimore County and Perryman in Harford County. They would boost the generating capacity that Constellation owns by nearly 10 percent.

Those expansions could be complete in three years. By comparison, the new nuclear unit that the company wants to add at its Calvert Cliffs plant in Southern Maryland would not come online until at least 2015.

Constellation recently asked PJM Interconnection, which operates the power grid and manages the wholesale market for Maryland, whether the expansions would require upgraded transmission lines. The company also must obtain various permits.

Constellation sells much of the power it generates on the wholesale market. Several commissioners asked yesterday if it would be cheaper for power generated in the Baltimore region to be sold to BGE customers, as was the case before deregulation.

Collins said that wouldn't necessarily be the case. He also said that Constellation has an obligation to its investors to sell the power it generates at the highest price possible.

In an exchange, Larsen asked if the commission could order Constellation to offer lower-cost power generated locally to BGE customers. Collins said he thought it would be "difficult" for the commission to make such a move. Besides, Collins said, "We would object strenuously."

The commission must sign off on a plan proposed by Constellation under which customers could agree to take about half of the rate increase in June and the remaining half in January, and to pay interest charged on the amount deferred. When rates were unfrozen last year, they were projected to increase by 72 percent. The General Assembly stepped in to limit that increase to 15 percent, with the remainder deferred until this summer.

Commissioner Susanne Brogan, another recent O'Malley appointee, asked if Constellation would consider forgoing the interest charges, which she said could lead to more customers signing up.

But Collins said interest costs have been more than covered by customer credits that the company has been paying in recent months. Those credits, which total nearly $40 million a year, were promised in an effort to get the General Assembly's approval of a proposed merger with FPL Group, a Florida utility. The deal later fell through.


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