As a public utility, Baltimore Gas and Electric Co. is obligated to get the lowest price possible for customers. By contrast, its corporate owner, Constellation Energy Group, has a duty to stockholders to sell the power it produces for as much as it can get.
This disconnect is highlighted by the fact that Constellation, which assumed ownership of BGE's former power plants when Maryland adopted electricity deregulation, is the state's biggest seller of power and BGE is its biggest buyer. But what some consumer advocates call a conflict of interest is getting more scrutiny now, as Constellation's profits and stock price soar along with the rates that BGE's 1.1 million customers are paying.
In its May 23 order approving a 50 percent rate increase for BGE residential customers, the Public Service Commission said it plans to study whether the utility's relationship with Constellation works to the detriment of Maryland consumers. The probe would coincide with a series of studies that lawmakers ordered as part of a comprehensive review of utility regulation in Maryland.
As an example, the commission noted that BGE is opposed to owning power plants again - an idea the commission says could help reduce rates but also could cause the utility to buy less power from its corporate parent. The commission also questioned whether at least one Constellation officer has a conflict of interest when doing certain types of work for both BGE and Constellation.
"The commission will examine whether this affiliate relationship impacts the manner in which BGE satisfies its statutory obligations to customers in this state," the commission wrote.
BGE and some industry analysts dismiss the concern, saying the utility's relationship with Constellation gives it lower borrowing costs, less corporate overhead and other advantages it wouldn't have as a smaller, independent company.
Constellation replies
Constellation says it welcomes the scrutiny and will cooperate with the commission.
"Although we are confident that the interactions between Constellation and BGE are entirely appropriate, we are studying the commission's order to understand its concerns and consider whether there are alternatives that balance the need for corporate governance while preserving the benefits to consumers," said Rob Gould, a Constellation spokesman.
