The Baltimore Gas and Electric Co. yesterday announced the creation of a subsidiary to provide energy services to large commercial and industrial customers, the latest in a series of efforts to improve profits through unregulated entities.
By creating BGE Energy Projects & Services Inc., the $8.1 billion company is signaling its desire to keep pace with the changing utility industry, which is moving toward aggressive competition as a result of federal government mandates.
"The traditional energy business is unraveling fast, and the concept of customer choice is changing the marketplace," said Stephen F. Wood, BGE's vice president for sales and marketing. "Customers are asking for more. We're going to provide full, customized energy packages to meet their needs."
Mr. Wood has been tapped to become president and chief executive of the new subsidiary.
As the utility industry becomes more competitive, utilities are expected to place greater emphasis on nonregulated subsidiaries as a means to generate profits. Through energy services, investing or real estate subsidiaries, power concerns will be able to offset anticipated cuts in electric and natural gas rates, analysts say.
Unlike the company's Home Products & Services Inc. subsidiary, which sells and repairs appliances, electronics and heating and air conditioning equipment, and which competes mainly against small operators, BGE's new energy group is expected to face stiff competition from other large utilities with similar operations.
Most recently, Entergy Systems & Services Inc. in August established an office in Linthicum in Anne Arundel County. Entergy Systems, a 6-year-old firm with more than 6,000 customers nationwide, is a subsidiary of New Orleans-based Entergy Corp., a utility company with $22.6 billion in assets.
"Our program is different in that we're offering a maintenance package that focuses primarily on lighting," said John C. Enselein, Entergy's district manager.
Entergy intends to expand its local services in the coming months to include heating, ventilation, air conditioning and refrigeration equipment.
Unlike Entergy and other competitors, BGE's Energy Projects & Services subsidiary will serve as an umbrella organization for numerous BGE activities, ranging from a planned $60 million centralized air conditioning system downtown known as BGE Comfort Link to BNG Inc., a natural gas brokering firm.
But mainly, Energy Projects & Services will attempt to capture contracts with large BGE customers, such as Westinghouse Electric Corp., the University of Maryland, the Social Security Administration's Woodlawn headquarters and the U.S. Army at Fort Meade. Combined, those entities account for more than 5 percent of BGE's total retail electric sales.
Most notably, Energy Projects & Services is expected to take charge of the company's negotiations with the Johns Hopkins University and Hospital for energy and construction services. The proposed 10-year contract is valued at $150 million.
Mr. Wood, a 19-year BGE veteran, said the company has already succeeded in securing contracts with the General Motors Corp.'s automotive plant in East Baltimore and the U.S. Postal Service's main operation downtown. Together, those two energy contracts are worth $1.2 million.