MidAmerican talks the talk

Our view : Constellation buyer's shocking strategy: a reasonable attitude toward regulation

October 31, 2008

So this is how Constellation Energy Group's crafty new ownership is going to play it. Appearing before the state Senate Finance Committee this week, a top executive with MidAmerican Energy Holdings was asked whether the company was open to reregulation of electricity in Maryland.

His answer? He's willing to discuss it.

Perhaps it should come as no shock that an Iowa-based power company known for its low-key approach and progressive management is not letting the sparks fly in Annapolis. But add MidAmerican Senior Vice President William J. Fehrman's reasonable attitude about regulatory matters to Constellation CEO Mayo A. Shattuck III's recent decision to forgo $18 million in severance pay, and it's clear somebody has finally picked up on the Maryland consumer's post-utility-rate-hike Zeitgeist.

Mr. Fehrman is likely being genuine. After all, MidAmerican operates in plenty of regulated markets. There are even some potential advantages for an energy company if it means reducing risk and ensuring a certain rate of return, particularly in the midst of a global recession. This peculiar dynamic only underscores the need for the Maryland Public Service Commission to scrutinize MidAmerican's takeover bid as closely as possible. PSC Chairman Douglas R.M. Nazarian says his agency will spend $2.5 million on consultants to help eyeball the deal. That's a lot for bean-counting, but it's money well-spent if it allows the state to avoid a misstep such as the woeful 1999 deregulation law that made Constellation's creation - and subsequent downfall by undercapitalized energy trading - possible.

The $4.7 billion purchase by MidAmerican has enormous ramifications not only for those employed by Constellation and subsidiary Baltimore Gas and Electric but also for Maryland's economic future. That's not something to be taken lightly.

Whatever the outcome, MidAmerican executives have proved more adept at dealing with Annapolis than Mr. Shattuck, who this year decried the state's unstable regulatory environment and overzealous PSC. Whether that's anything more than savvy public relations remains to be seen.

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