Vive la France?

Our view : A French-owned utility's decision to invest in Constellation Energy Group may prove a positive development, but local BGE customers have reason to be skeptical

December 23, 2008

This has proved to be a memorable year for Constellation Energy Group, but not often for the better. From the company's disastrous financial downturn this summer to its rescue by Warren E. Buffett's MidAmerican Energy Holdings to its apparent rescue from its rescuer last week by state-owned Electricite de France, it's getting difficult to know who is winning and losing in all these transactions.

Aside from the only obvious winner - the celebrated investor from Omaha doubled his company's initial $1 billion payout in a mere three months - the rest of the picture looks muddled. Are Constellation investors better off? Probably, at least eventually. It's hard to see how EDF's purchase of half the company's nuclear assets isn't getting shareholders a better value than MidAmerican's offer to buy the whole kit and kaboodle for about the same price.

Certainly, that's how Constellation leadership is portraying the deal. Company officials see this not only as a jobs-, profits- and prestige-saver for Maryland (by keeping a Fortune 500 company intact and headquartered here) but also as the start of a potentially beautiful friendship as EDF launches its North American ambitions from a Baltimore headquarters.

That's great if the French government's dreams of leading a U.S. nuclear power revival are realized, but here's a question too easily overlooked in all these billion-dollar financial moves: What does all this mean for Baltimore Gas and Electric ratepayers? That's no academic question. The sale of such a big chunk of the company's assets to EDF is certain to have an impact on BGE, a regulated utility.

This is a deal that deserves to be scrutinized by the Maryland Public Service Commission, and its regulators should be focused on exactly what has happened to Constellation's finances.

The company may question whether the PSC has much standing in a matter that boils down to the sale of assets independent of BGE (as opposed to an outright takeover of the company). But this is no trivial investment decisionas it involves the future of the Calvert Cliffs nuclear power plant in Southern Maryland.

In crafting these deals, did senior executives put their interests ahead of other stakeholders? Was Constellation mismanaged, especially in regard to its ill-fated energy trading? Why did Mr. Buffett receive such lucrative termsif the company was aware of EDF's interest?

While Constellation officials offer reasonable justifications, their word alone isn't good enough. The PSC and its financial experts need to sieve through the evidence, reconstruct events and offer the public some thoughtful, independent analysis.

The sale to the French may prove to be the best possible outcome. Federal authorities will be looking at issues of foreign investment and safety. But it's up to the PSC to act in the interest of Maryland ratepayers, a group too easily ignored in all the financial tumult.

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