Industry analysts say Constellation needed to make peace with lawmakers if it is to invest up to $5 billion in a new nuclear reactor and other generation projects in Maryland and elsewhere.
"In this kind of environment, the market hates uncertainty," said Paul Patterson, an analyst with Glenrock Associates, referring to the settlement.
The stakes were equally high for O'Malley, who could ill afford to be at war with the state's largest energy producer at a time when Maryland needs more electricity. Utility regulators estimate Maryland faces potential blackouts in three years unless new power plants or transmission lines are built to increase supply.
Senate President Thomas V. Mike Miller said negotiators worked "around the clock" for two weeks and that the atmosphere was "very testy, with much anger on both sides." In the end, he said, they were able to reach a "fair and equitable" agreement.
Miller and other lawmakers said the Public Service Commission, which regulates utilities, will continue to study the possibility of re-regulating the energy industry, as the General Assembly ordered it to do last year. But he said Constellation might avoid some scrutiny by regulators, who were not given subpoena power, which lawmakers had threatened to grant to the PSC.
The General Assembly must ratify most elements of the settlement, and legislative leaders said they plan to have a bill ready for passage before the session ends in a little more than a week.
Origins of the fight date to early 2006, when the transition to a deregulated power market sent BGE rates up 72 percent. The resulting political fallout scuttled Constellation's merger with FPL Group Inc. and led to a series of legislative and regulatory actions aimed at mitigating the rate increase. Those efforts peaked in January when the PSC issued a report deconstructing the 1999 deregulation deal, concluding it was bad for consumers.
Angry Constellation executives, who argued the 1999 deal was agreed to by both sides, responded by suing the state to recover $386 million in credits given to BGE customers in legislation passed last year. O'Malley countersued but later called Shattuck to discuss a "global" settlement.
Some lawmakers were skeptical of the settlement and whether state negotiators got the best deal for consumers. Sen. E.J. Pipkin, an Eastern Shore Republican, said he would examine any costs stemming from the 1999 deal for which ratepayers would still be on the hook.
