O'Malley: Benefits of Exelon-CEG merger go beyond rate credit

While Maryland business, labor and environmental groups backed a $1 billion settlement between Gov. Martin O'Malley and Exelon Corp. related to the Chicago company's buyout of Constellation Energy Group, not everyone was satisfied.

Merger opponent EDF Group renewed calls on Thursday for Maryland energy regulators to reject the proposed $7.9 billion deal. The French utility, which voted against the merger as Constellation's second-largest shareholder, has expressed concern that the proposed merger would hurt local management and autonomy of its nuclear joint venture with Constellation.

And two Maryland state senators said the settlement does not go far enough to protect customers of Baltimore Gas and Electric. Sens. E.J. Pipkin and Jim Rosapepe reiterated their proposal for the Maryland Public Service Commission to order the spinoff of BGE as a separate company as condition of the merger. The PSC must approve the proposed deal.

"The proposed settlement is not in conflict with our proposal to spin off BGE," the two lawmakers said in a statement.

Still, one analyst said Thursday that the settlement bodes well for the proposed merger.

"Although this merger needs to be approved by the PSC, this will probably go a long away to address some of the concerns raised by some of the parties in the case," said Paul Patterson, an analyst at Glenrock Associates in New York.

Under the settlement, Exelon agreed to increase its investment in green energy, weatherization aid, consumer credits and other Maryland projects to more than $1 billion, up from its last offer of $515 million. Initially, Exelon and Constellation had offered a $250 million incentive package to make the deal more palatable to the state, consumer advocates and electricity customers.

In the latest offer, Exelon agreed to develop up to 300 megawatts of new energy generation in Maryland, with more than half coming from renewable resources such as solar and wind. That commitment would create the first significant natural-gas power generation in the state in at least a decade.

In announcing the settlement at a news conference at the State House, O'Malley noted that Exelon agreed to develop 10 times as much new generation as the companies' initial offer of 25 megawatts of renewable energy.

Exelon also committed to $10 million for Maryland's Empower energy efficiency efforts, up from $4 million; $10 million for a program to help low-income electricity customers with their bills; and $50 million to support weatherization efforts of low- to moderate-income homes.

The rate credit for each of BGE's 1.1 million residential customers remained at $100 under the settlement. Merger critics, such as the Maryland Office of People's Counsel, recently recommended that the two companies double the credit to $200 per customer.

O'Malley said Thursday that BGE customers would benefit more from the creation of new power in Maryland than just the immediate $100 rate credit they would receive.

"There are short-term benefits, and there are long-term benefits," O'Malley said. "The $100 credit will no doubt be as appreciated by a lot of families as the last $100 credit."

O'Malley said the settlement has the "potential to be far more beneficial to families over the long term." Administration officials say the development of new power plants could help drive down electricity prices.

"The renewable energy, the effect that has on our state — the water of the bay and the air we breathe — it's hard to put a price tag on that," he said.

The settlement with O'Malley is separate from the deal's review before the Public Service Commission.

The Public Service Commission, which has held 11 days of evidentiary hearings and three public comment sessions, is expected to make a decision by Jan. 5. The commission does not comment on pending cases, said spokeswoman Regina Davis.

On Thursday, the PSC announced that it will hold a conference Friday morning to consider adjusting the schedule for the merger's review because of the settlement. That could mean adding additional time for the PSC to review the transaction, potentially pushing back the Jan. 5 deadline, said Exelon spokeswoman Judith Rader. The PSC must also approve the settlement.

Even with the potential extension, Rader said, the companies still expect to close the deal in early 2012.

Exelon Chief Operating Officer Christopher M. Crane said in a statement Thursday that he was "hopeful that other parties will review this offer and join in the settlement."

Besides the state and the Maryland Energy Administration, parties to the settlement include Baltimore City and the AFL-CIO building trades union.

"We recognize that addressing the reasonable interests of the state of Maryland is an important element of the merger approval process," Crane said.

Separately on Thursday, Exelon announced that it had satisfied another regulatory hurdle.

The New York State Public Service Commission issued a ruling that it did not need to further review the proposed merger, Exelon said.

The Public Utility Commission of Texas approved the deal in August, while shareholders of both companies endorsed it in November.

Besides Maryland, the merger still requires approval from the Federal Energy Regulatory Commission, Nuclear Regulatory Commission and Department of Justice.