After a long week of grueling testimony on Constellation Energy Group's proposed nuclear joint venture with a French partner, the regulatory review will continue into next week, a hurdle that both companies had not expected when they signed the deal last year.
The state Public Service Commission heard from more than 10 witnesses in late-night sessions on whether the $4.5 billion sale of nearly half of Constellation's nuclear power business to Electricite de France would hurt Constellation's regulated utility, Baltimore Gas and Electric Co., and its customers.
In particular, the proposed third nuclear reactor at Calvert Cliffs in Southern Maryland has become the dominant point of contention between the state and the two companies.
Several witnesses for EDF and Constellation said the deal would create benefits for Maryland and BGE customers, including $1.8 billion to $2.7 billion in savings from lower electricity prices because of construction of the new reactor; $130 million in tax revenue; new jobs and private investment in Maryland's energy infrastructure.
But the state and the Maryland Office of the People's Counsel dispute claims that the deal would create direct benefits for BGE ratepayers, as required under state law.
An outside expert hired by the PSC staff, however, came to the opposite conclusion, finding that the deal would produce benefits ranging from $474 million to $985 million to BGE customers based on several factors, including the completion of the new reactor.
The hearings are to resume Monday, at least a day longer than expected.
Gov. Martin O'Malley said in an op-ed column in The Baltimore Sun this week that "under the right circumstances, a new nuclear unit at Calvert Cliffs could very well be a good thing - but only if ratepayers are protected."
He reiterated concerns expressed by the state and other opponents during the proceedings: that the costs of the Calvert Cliffs project would divert resources away from BGE and that the utility would be exposed to risks associated with the new nuclear development. EDF and Constellation reject such concerns. Constellation said it would not pursue the project at all costs. And neither company has committed to building the third nuclear unit.
Still, an EDF executive testified this week that the French utility would abandon the nuclear project if the PSC blocks the transaction or places excessive conditions.
So far, the proposed nuclear unit has received approval by the PSC and is a finalist for a federal loan guarantee considered critical to financing the reactor.
The Maryland Office of the People's Counsel, which represents BGE ratepayers and opposes the deal, argues the approval of the EDF transaction and the future of the third nuclear unit are two separate issues.
Paula M. Carmody, the Maryland people's counsel, notes that an existing nuclear venture between Constellation and EDF called UniStar had been pursuing the Calvert Cliffs project before they agreed to another deal last year.
"It's the opinion of our expert and our view at present that the proposed transaction is not going to provide benefits to our ratepayers, and based on what we have seen, there is concern about harm," Carmody said.
The state, the people's counsel and the PSC staff have proposed "ring-fencing" measures that would protect BGE against the financial risks of the parent company, including bankruptcy.
Constellation and EDF say they are willing to agree to some safeguard efforts but argue some go too far, including a recommendation for Constellation to make a cash infusion to BGE after the deal closes.
Even with ring-fencing measures, Carmody said, such conditions would only mitigate harm but would not satisfy the benefits test under the law.
Meanwhile, behind-the-scenes settlement talks between O'Malley and Constellation appear to have quieted since the governor rejected the company's proposal in July. The sides had been holding discussions while the regulatory process is under way, with the governor seeking rate relief and other concessions.
Neither Constellation nor EDF anticipated the state regulatory review.
Constellation is appealing a court decision denying that it has a right to challenge the PSC's authority to review the transaction.
Constellation has contended that the PSC has no say in the matter under a settlement between the company and the state last year that raised the threshold that triggers regulatory review of transactions to those that involve at least one-fifth of the voting control or board seats at Constellation.
However, the PSC concluded that the deal requires regulatory scrutiny because EDF would acquire Constellation assets, not voting interests.
The regulatory proceedings have forced Constellation and EDF to miss their deadline to close the transaction by Sept. 17. The two parties have extended the deadline to Oct. 30.
The PSC ruling is expected by Oct. 16.