This week has brought a stunning reversal of fortune for Constellation Energy Group, its shareholders and employees. Seven days ago, the company was trading at more than $55 a share. Now, it may be scooped up by a Warren E. Buffett company for a mere $26.50 a share under a tentative deal announced yesterday that may have spared Baltimore Gas and Electric's parent from financial meltdown.
Is the proposed merger of Constellation with Iowa-based MidAmerican Energy Holdings Group in the best interests of its owners, workers and BGE customers? Constellation executives say yes, but a great deal more will need to be known before the rest of us can accept that judgment.
The Maryland Public Service Commission is one of the various government agencies that will review this deal. We would urge state officials to hire qualified investment bankers and others with appropriate expertise to explore every aspect of the transaction with far greater care than was given the state's deregulatory efforts nine years ago.
This much is clear: It wasn't BGE or the electricity generating end of the business that forced Constellation's sale. Rather, it was a credit crisis stemming from the company's energy trading. With the financial markets in turmoil, investors were nervous about Constellation's liquidity and market speculators may have made matters worse.
More needs to be known about all of this. Constellation is a pillar of Baltimore's business community and one of the largest private, for-profit companies headquartered in the state. That matters - but so do the energy needs of Maryland. Key decisions by whoever owns Constellation's assets will be critical to averting a possible power shortage forecast for as early as 2011.
Two years ago, a planned merger between Constellation and FPL Group was met with considerable skepticism in Annapolis and ultimately fell through. This time, the stakes are much higher, and PSC Chairman Douglas R.M. Nazarian and his fellow commissioners will have to tread carefully in a highly volatile market if they are to act in Maryland's best interests.
Whether the company will be in a position to expand its Calvert Cliffs nuclear power plant, for instance, should be high on the list of PSC questions.
BGE residential customers may find it peculiar that all this is happening even as the company is handing out $170 credits on September bills, part of a recent $2 billion settlement with the state over deregulation. The timing may be coincidental but it's probably also fortuitous: It's hard to believe Constellation would be in a position to afford such a thing now.
MidAmerican may prove to be the best possible partner for Constellation one day (as Mr. Buffett once observed, in the business world, the rearview mirror is always clearer than the windshield). But now it's up to well-informed, attentive state and federal regulators to act in the public interest and offer the kind of scrutiny that was so often absent during the run-up to the nation's credit crisis.
