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Constellation Energy Group warned state regulators on Monday that imposing costly conditions on its deal with a French utility could scuttle the $4.5 billion transaction and jeopardize a multibillion-dollar project to build the first nuclear reactor in the state since the 1970s.
Baltimore-based Constellation has been under pressure by Gov. Martin O'Malley to provide one-time credits to customers that could amount to more than $200 per household and to agree to other concessions. The company owns Baltimore Gas and Electric Co., which serves more than 1.1 million residential customers in Maryland.
"This transaction will not be closed at all costs or under any conditions," Constellation lawyers argued in a final brief submitted to the Public Service Commission, which oversees the state's energy industry.
Constellation is seeking the commission's approval of its deal to sell half its nuclear business to Electricite de France. The company contends that the deal is needed for the third nuclear reactor at Calvert Cliffs to go forward and would yield $129 million in state tax revenue and other benefits.
O'Malley, in his administration's brief, backed PSC approval of the deal for the first time, but only if an extensive list of conditions is met, including the one-time rate credits and measures to put BGE on solid financial footing and to protect the utility from financial problems at Constellation. The governor said Monday that those safeguards are needed to protect consumers.
"My responsibility is to make sure this deal does not turn out to be too expensive for consumers," said O'Malley, a Democrat. "If safeguards are in place, then this merger could be a good thing in the long run."
The final briefs were an opportunity for a range of interested parties to stake out positions in the regulatory case that's also being closely watched by Wall Street analysts and investors.
Consumer advocates such as Public Citizen and the Maryland Public Interest Research Group weighed in against the deal and argued that the Calvert Cliffs reactor would saddle the company with enormous costs and would not reduce electricity rates, while a union representing plumbers and pipe fitters strongly backed the deal and noted that the construction project would create thousands of jobs.
Paul B. Fremont, an analyst with New-York investment bank Jefferies & Co., said he was heartened by O'Malley's qualified support and that his analysis showed the administration and Constellation are closer in terms of what they're seeking than they have been in the past.
"At this point, there should be a middle ground here where both parties can feel like they're getting a lot of what they're asking for," said Fremont. "We went from being fairly uncertain in terms of handicapping the outcome to feeling that the transaction now is much more likely."
The PSC's staff made recommendations for conditions that could be imposed by the commissioners, who will ultimately decide the case in the coming weeks. The staffers suggest that Constellation infuse up to $400 million in equity into BGE to improve the utility's financial standing, but they don't propose ratepayer credits. Some analysts have pointed out that ratepayer credits could adversely affect BGE's finances.
Constellation has offered to invest up to $250 million in BGE, but only if it's necessary. The company has said it would delay requests for rate increases, and is now offering regulators a choice: the utility says it will either forgo $22.5 million in anticipated future rate increases, or give customers one-time credits on their bills totaling the same amount.
But that amount is far lower than the credits sought by O'Malley, which amount to 10 percent of a household's annual bill and could cost more than $200 million. The governor also wants Constellation to contribute $50 million to $100 million to a program that helps lower-income residents pay their utility bills.
The Office of the People's Counsel, which represents ratepayers, opposed the deal, saying consumers wouldn't benefit. But the group did point out in its brief that Constellation could redirect $20 million for a proposed new visitors center at Calvert Cliffs and $36 million in charitable contributions to ratepayer relief instead.
Baltimore-based Constellation has been under pressure by Gov. Martin O'Malley to provide one-time credits to customers that could amount to more than $200 per household and to agree to other concessions. The company owns Baltimore Gas and Electric Co., which serves more than 1.1 million residential customers in Maryland.
"This transaction will not be closed at all costs or under any conditions," Constellation lawyers argued in a final brief submitted to the Public Service Commission, which oversees the state's energy industry.
Constellation is seeking the commission's approval of its deal to sell half its nuclear business to Electricite de France. The company contends that the deal is needed for the third nuclear reactor at Calvert Cliffs to go forward and would yield $129 million in state tax revenue and other benefits.
O'Malley, in his administration's brief, backed PSC approval of the deal for the first time, but only if an extensive list of conditions is met, including the one-time rate credits and measures to put BGE on solid financial footing and to protect the utility from financial problems at Constellation. The governor said Monday that those safeguards are needed to protect consumers.
"My responsibility is to make sure this deal does not turn out to be too expensive for consumers," said O'Malley, a Democrat. "If safeguards are in place, then this merger could be a good thing in the long run."
The final briefs were an opportunity for a range of interested parties to stake out positions in the regulatory case that's also being closely watched by Wall Street analysts and investors.
Consumer advocates such as Public Citizen and the Maryland Public Interest Research Group weighed in against the deal and argued that the Calvert Cliffs reactor would saddle the company with enormous costs and would not reduce electricity rates, while a union representing plumbers and pipe fitters strongly backed the deal and noted that the construction project would create thousands of jobs.
Paul B. Fremont, an analyst with New-York investment bank Jefferies & Co., said he was heartened by O'Malley's qualified support and that his analysis showed the administration and Constellation are closer in terms of what they're seeking than they have been in the past.
"At this point, there should be a middle ground here where both parties can feel like they're getting a lot of what they're asking for," said Fremont. "We went from being fairly uncertain in terms of handicapping the outcome to feeling that the transaction now is much more likely."
The PSC's staff made recommendations for conditions that could be imposed by the commissioners, who will ultimately decide the case in the coming weeks. The staffers suggest that Constellation infuse up to $400 million in equity into BGE to improve the utility's financial standing, but they don't propose ratepayer credits. Some analysts have pointed out that ratepayer credits could adversely affect BGE's finances.
Constellation has offered to invest up to $250 million in BGE, but only if it's necessary. The company has said it would delay requests for rate increases, and is now offering regulators a choice: the utility says it will either forgo $22.5 million in anticipated future rate increases, or give customers one-time credits on their bills totaling the same amount.
But that amount is far lower than the credits sought by O'Malley, which amount to 10 percent of a household's annual bill and could cost more than $200 million. The governor also wants Constellation to contribute $50 million to $100 million to a program that helps lower-income residents pay their utility bills.
The Office of the People's Counsel, which represents ratepayers, opposed the deal, saying consumers wouldn't benefit. But the group did point out in its brief that Constellation could redirect $20 million for a proposed new visitors center at Calvert Cliffs and $36 million in charitable contributions to ratepayer relief instead.
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BEST EMPLOYERS IN MD??? More like the biggest thieves in MD. They claim that the 70% increase was due to having to pay the market price for energy, while failing to mention that THEY OWN THE FRIKKIN POWER PLANTS so they're buying it from themselves! O'Malley needs to come down hard on these jokers that have been fleecing Marylanders for the last 20 years.
surferelf (10/29/2009, 10:57 PM )