Critics of the Constellation Energy Group-Exelon Corp. merger called Monday for doubling the rate credit for utility customers to $200, even as the companies offered other concessions, including building a new downtown Baltimore headquarters.
The companies, whose $7.9 billion merger largely hinges on approval by state energy regulators, sweetened their incentive package to make the deal more palatable to the Maryland Public Service Commission, the state and consumer advocates. The PSC, charged with ensuring that the deal is in the public interest and will benefit ratepayers, is expected to make a decision by Jan. 5.
The companies offered more commitments Monday, in filings that amount to final arguments on the merits of the proposed deal. The incentives now total more than $515 million, up from the initial $250 million package, the companies said.
"We think we have brought forth a good package that will benefit BGE customers, result in a stronger, better-protected BGE, and provide an infusion of thousands of jobs and hundreds of millions of dollars into the Maryland economy," Exelon President and Chief Operating Officer Christopher M. Crane said in a statement.
Still, critics such as the Maryland Energy Administration and the Office of People's Counsel say evidence shows the proposed merger would harm customers of Baltimore Gas and Electric Co. without additional concessions — some of which exceed the companies' latest offer.
State officials and consumer advocates want to ensure the deal would preserve local control of BGE, produce more clean energy and put more money in consumers' pockets.
The PSC staff said the commission should not approve the merger without requiring at least a $200 rate credit for each of BGE's 1.1 million residential customers. Constellation and Exelon have offered $100 per residential customer.
The People's Counsel also endorsed the $200 amount to "ensure that the proposed merger provides reasonable benefits to customers."
When asked whether the companies considered a larger rate credit, Exelon spokeswoman Judith Rader said they believe the "enhanced package of commitments provides the best balance of benefits to the State of Maryland, City of Baltimore and BGE customers."
Rader added that the new commitments reflect "input we received in the Maryland PSC hearings, and the rate credit was not among the major issues discussed by the other parties."
The People's Counsel also reiterated an earlier recommendation for BGE to agree to a three-year rate freeze, a move that the two companies oppose.
The state consumer advocate believes the proposed merger would significantly harm low-income customers. As a result, the People's Counsel said in its brief that the two companies should make several payments to assist low-income ratepayers, including a five-year, $4 million contribution to the Baltimore Community Foundation's BGE Heating System Fund, which provides new, energy-efficient furnaces.
On Monday, Constellation and Exelon committed to building a new headquarters building, eliminating the option of renovating a "green" building in the city.
The companies expect the new building to house Constellation's power-selling and renewable energy businesses. Up to 250 Exelon workers from its Pennsylvania energy-trading operations are expected to transfer to Baltimore to join Constellation's 1,030 employees in those two business units, according to the companies.
While Exelon and Constellation expect the new combined company's operations in Baltimore to grow and create new jobs, the merger would lead to the elimination of about 600 positions across both companies, according to Exelon officials. The job reductions are expected to be felt mainly in Constellation's legal, information technology, financial and other corporate departments.
BGE would not be affected by the corporate consolidations and transfers. Constellation and Exelon have pledged not to lay off utility workers for at least two years after the merger is completed.
The companies pledged Monday to build new power plants in Maryland, which hasn't seen a new plant in many years. The proposal would generate jobs, and help to ensure an energy supply to meet demand.
The companies said Monday that they would increase their commitment to energy generation in Maryland sevenfold — to 175 megawatts. That would include 120 megawatts produced mainly from new natural gas plants as well as 55 megawatts of wind or solar energy. Initially, the companies had promised 25 megawatts of green energy.
That higher offer was not enough for the state.
"Appreciate their efforts," said Raquel Guillory, spokeswoman for Gov. Martin O'Malley, in an email.
The Maryland Energy Administration renewed its call for the companies to develop 375 megawatts of energy generation from windfarms and plants fired with poultry manure. That would "help alleviate real concerns that the transaction as currently proposed is not in the public interest."
Renewable energy is a priority for O'Malley, who has set ambitious green energy goals for Maryland. State law requires electricity suppliers to generate 20 percent of their power from renewable sources by 2022.
To address concerns over BGE's finances and corporate governance, Constellation and Exelon said that the utility would not pay dividends to the parent company through 2014 and that a majority of BGE's board of directors would reside or own a business in Maryland.
The companies' previous commitments include $4 million for Maryland's EmPower energy efficiency efforts and $15 million for low-income and other energy efficiency programs.
The two companies also agreed to maintain Constellation's annual charitable giving of about $7 million for at least 10 years.
Meanwhile, merger opponent EDF urged the commission to reject the deal, saying it would harm Marylanders and ratepayers as well as the French utility. EDF, which owns half of Constellation's nuclear power plants in New York and Maryland, fears that the joint nuclear power venture would lose autonomy if Constellation were bought by Exelon.
"The evidence at the hearing further established that the merger's so-called benefits for Maryland and Exelon's commitments to Maryland are both woefully inadequate and totally illusory," EDF wrote. "Maryland jobs will be lost, Maryland tax revenues will decline and Maryland's ability to influence its electric generation facilities will be severely limited."
Last month, the Public Service Commission held 11 days of regulatory hearings; more than 40 witnesses testified. The commission also has held three public hearings in the past two weeks, with the final one scheduled for Monday night in Annapolis.
At a hearing last week in Baltimore, opponents of the merger outnumbered supporters among those who spoke. Community activists and others cited concerns over jobs, electricity rates and local control over BGE.
New commitments from Constellation and Exelon:
•Build 175 megawatts of new generation, including 55 megawatts of wind or solar.
•Construct a new Constellation headquarters in Baltimore.
•BGE agrees not to pay dividend to Exelon through 2014.
•A majority of BGE's board of directors will be Maryland residents or own a business in BGE's service territory.
•$4 million for Maryland's EmPower energy efficiency efforts.
•$15 million for low-income and other energy efficiency programs.
•Maintain Constellation's annual charitable contribution of about $7 million for at least 10 years.
•Maintain BGE's capital and operating spending for 2012 and 2013 at $1.3 billion and $1.5 billion.
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