What Part Of The Law Don't You Understand, Governor?

July 01, 2009|By JAY HANCOCK | JAY HANCOCK,jay.hancock@baltsun.com

You don't need to be a lawyer to understand how Gov. Martin O'Malley's Public Service Commission is flouting the law. Rarely is the difference so bright between what is permitted and what is perpetrated.

The law, signed by O'Malley in April 2008, lets the commission review deals by electric utility owners only if a transaction would give somebody at least a fifth of the shares or a fifth of the board seats at the owner corporation. The red, octagonal "STOP" sign at the end of my street is a similar example of clear legal language.

But the commission claims the power to reject Electricite de France's plan to invest in BGE parent Constellation Energy even though the French company would get only one out of more than 10 board seats and owns fewer than 10 percent of the shares. The decision demonstrates stunning bad faith by Maryland as well as O'Malley's increasing desperation to be seen as keeping campaign promises to lower electric prices.

EDF wants to put $4.5 billion into Constellation's nuclear electricity operation, a promising venture for the companies, Maryland and the planet as the need for carbon-free power becomes obvious. EDF would be the junior partner, owning 49 percent of the nuclear venture and less than 10 percent of Constellation's overall stock.

Baltimore Gas & Electric buys juice from the nuclear operation, which owns the Calvert Cliffs plants in southern Maryland. But the deal wouldn't give EDF "substantial influence" over BGE - the critical test for PSC review. The French couldn't dictate policy at Constellation, let alone its Baltimore utility. The 2008 law says so, specifying that substantial influence doesn't exist unless a deal exceeds the board-seat or stock ownership triggers.

The language is no accident. Constellation asked for it last year, the last time O'Malley went after the company. In return for half a billion in rebates to BGE customers and the assumption of more than a billion in BGE liabilities, Constellation got assurance that the PSC wouldn't intervene if the company wanted to seek minority partners for its nuclear operations.

At least it thought it got assurance. Suing to block the commission's power grab, it seems to have come to realize the follies of appeasement. There's a hearing on the lawsuit Wednesday. Still, don't bet against another negotiated settlement.

But what about the obscene pay of Constellation boss Mayo Shattuck? What about expensive electricity, which for households buying BGE's standard product has hit its highest-ever level?

They're big problems. So are Iran's nuclear-weapons program and asteroids that might hit the Earth. But that doesn't mean state policymakers can do much about them.

Shattuck's pay is game for severe criticism, but setting it is a matter between him and his shareholder bosses or Congress, not state politicians. By emphasizing a potential $87 million Shattuck payout, O'Malley has personalized the battle and may end up getting less than he thought.

Anyway, Shattuck's pay has a negligible effect on consumer prices. Attorney General Douglas F. Gansler's decision to pile on by investigating Shattuck's package as potential unlawful compensation is amazing.

Market flaws that inflate electricity prices are largely interstate in nature and beyond the grasp of state officials. Attempts to "re-regulate" Maryland electricity will involve charging customers to build new plants, which will push prices up, not down. In any event, the long-term direction of energy prices is up as we start paying the bills for cutting carbon emissions.

O'Malley can and will improve Maryland's energy policy. He got the rebates for BGE customers. He wants to protect BGE and other utilities so they're less susceptible to raiding by owners. He'll set a course for building needed new power generation.

But voters expect more. By double-crossing Constellation, the governor who campaigned on stopping the BGE rate increase is only drawing attention to his inability to do so.

By massaging the law till it screams, O'Malley's PSC adds to Maryland's reputation as an unreliable negotiating partner for business. When the torrent of government spending dries up, policymakers will remember they need private corporations to help drive the economy.

Look out for consumers? Sure. Ensure adequate energy for Maryland's economy? Absolutely.

But obey the law. And keep your promises. O'Malley made commitments to Constellation and consumers. It doesn't look like he's honoring either one.

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