BGE and Pepco apply to key regulator FERC's nod sought for planned merger

Baltimore Gas and Electric Co. and the Potomac Electric Power Co. have filed a joint application with the primary federal regulatory agency charged with approving the two utilities' planned merger.

Approval by the Federal Energy Regulatory Commission (FERC) is perhaps the most important federal regulatory hurdle for the expected March 1997 formation of Constellation Energy Corp., a $15.1 billion power concern that would be the nation's ninth-largest utility.


FERC approval is important because the commission is largely responsible for directing and implementing fundamental changes in the electric utility industry, changes that have touched off a flurry of mergers and that are expected to result in significant deregulation.

An FERC blessing would also likely influence the decisions of other federal regulatory bodies that must rule on the merger, such as the Nuclear Regulatory Commission and state Public Service commissions.


"The commission's main priority is to review the application to see if it is in the public's interest, so that customers' rates don't skyrocket after a merger," said Barbara Connors, an FERC spokeswoman. "It will also look to see that the merged utility won't be too dominant to the point it could keep other companies out, competition the commission has been working to encourage."

The five-volume application includes testimony from BGE and Pepco officials and consultants outlining the $1.3 billion in savings Constellation is expected to achieve by 2007. It also discusses how the new entity will deal with proposed industry changes.

BGE and Pepco also asked FERC to approve the merger without holding public hearings, which could add several months to the approval process. Under a typical approval process, FERC will review documents, invite public commentary, make a tentative ruling or seek additional information from the merging utilities.

Although Ms. Connors declined to speculate on a time frame for FERC's decision, most utility merger applications have required several months of review.

"There's no statutory time frame by which FERC has to issue a decision," Ms. Connors said. "The commission is in the process of changing several rules, relating to open access and transmission, so that too has an impact on how long a decision will take."

The FERC application follows by a little more than a month a similar document submitted for approval to the Securities and Exchange Commission, the federal agency with primary responsibility for publicly traded companies and securities issues.

In the case of Constellation, BGE and Pepco plan to swap stock in a $2.9 billion transaction to complete their merger, a move that requires an SEC green light.

BGE has scheduled a special shareholders meeting on March 15 for stockholders to vote on the proposed merger.