October 27, 2009
The conflict between Gov. Martin O'Malley and Constellation Energy Group over the $4.5 billion sale of half its nuclear assets to Electricit? de France ratcheted up a notch this week with the filing of a legal brief calling on the Maryland Public Service Commission to force the company to make all the concessions the governor has been seeking in private talks for months.
That isn't how the PSC will necessarily see things - one hopes the agency remains the independent regulatory body it's supposed to be - but there are some troubling aspects to the administration's effort that look no better when viewed on the printed page.
Not the least of these is Mr. O'Malley's position that the sale of 49.99 percent of Constellation's nuclear operations causes harm to Baltimore Gas & Electric customers. Yes, there are risks, but there are also rewards - 4,000 construction jobs, 400 permanent jobs and a source of power for 1.3 million homes if the deal makes possible the planned expansion at Calvert Cliffs Nuclear Power Plant.
Make no mistake, some of the administration's proposals to mitigate risk to ratepayers are sound and entirely appropriate. Chief among them is the so-called "ring fencing" around BGE so that the Constellation subsidiary would have a measure of independence.
If Constellation's priority is to maximize profits from power generation (or the more risky energy trading) and BGE's is to provide affordable and reliable service to its customers, the interests of the two entities are going to sometimes be at odds. The substantial involvement of EDF in Constellation only underscores the necessity of ring fencing.
Less compelling is Mr. O'Malley insistence that BGE customers should receive a 10 percent rebate on annual gas and electricity bills (an average $200 per household) as part of the deal. Why? The administration argues that the law requires it because the sale of nuclear properties represents a loss to BGE ratepayers (if only because it reduces a potentially beneficial revenue stream to the company).
Even if there is a financial advantage in which ratepayers ought to share, why give it in the form of a one-time rebate? Might the interests of ratepayers be better served if the money is plowed into BGE (something the administration is also seeking) or simply put into reducing the costs of Calvert Cliffs III?
The administration's brief compares the rebate to the $187 million in rate relief Constellation provided to BGE customers last year. But that was the result of a $2 billion settlement over legal obligations including the cost of eventually retiring Calvert Cliffs. This appears far more arbitrary.
Strong-arming Constellation into handing out a $200 rebate in an election year looks suspiciously political - especially from a governor who made the previous governor's failure to resist BGE rate hikes a key talking point in his 2006 campaign.
It contributes to an aura about the administration's efforts that has all the subtlety of an organized crime protection racket. Between BGE rate increases and the energy trading losses that nearly bankrupted the company (and proved particularly costly to local shareholders, many of them BGE retirees), Constellation doesn't seem to have a lot of friends in the State House.
At some point, a Maryland-based Fortune 200 company seeking to pursue one of the largest industrial developments in state history deserves better. Perhaps there's a need for ring fencing between the governor's office and the PSC, as the interests of BGE ratepayers and Mr. O'Malley aren't necessarily aligned.
Readers respond
If you read Constellation's brief filed Monday you'll see now even CEG is claiming they will give BGE customers $22.5 million in rate relief. I'd like to thank the governor for having the guts to stand up to these guys.
BGE Customer
That works out to about $22.50 per customer total. I should thank the governor for that? Incredible.
Big Will
