Gov. Parris N. Glendening yesterday urged the state's Public Service Commission and two of Maryland's dominant utilities to fashion a compromise in the wake of statements that the companies might scuttle their merger because of regulators' demands.
But critics of the Baltimore Gas and Electric Co. and the Potomac Electric Power Co. merger, including the state Office of the People's Counsel, reiterated that the PSC's demands were sound.
Glendening, who has endorsed the merger, said the corporate union was of critical importance in light of changes unfolding in the utility industry.
"I think it's crucial that we all recognize that in the world today, utility mergers and industry consolidation is a reality," Glendening said. "To be competitive, this merger must move ahead. We do not want to put Maryland-based companies at a disadvantage."
The governor said Maryland residents also would benefit from the merger.
"I would urge the parties to sit down and do whatever is necessary to make this work and, at the same time, protect the consumer," he said.
Michael J. Travieso, head of the state's Office of the People's Counsel, a state citizens advocacy group, contends that the PSC's conditions on the merger are reasonable.
"I think [the PSC] balanced the benefits of the merger so that customers would get a share of those benefits," said Travieso. "This is a good result."
His office had argued against the merger, saying it could create the potential for "market power abuse" by the planned Constellation Energy Corp.
On Wednesday, the PSC, in approving the merger, ordered BGE and Pepco to slash customers' utility rates by $56 million a year and make other concessions when the merger is completed. The OPC had asked for rate cuts of more than $60 million.
But BGE and Pepco, which hope to create a company with assets of roughly $15.5 billion, balked at the order, and Thursday they threatened to kill the deal if the decision wasn't amended.
Wall Street reacted yesterday as if the $2.9 billion merger had already died, sending Pepco's shares down $1.75 per share and increasing the value of BGE shares by 75 cents per share.
The spread in value between the common stock of the two companies, which had been just 3.6 percent at the start of the week, rose to nearly 16 percent yesterday. That spread is important because BGE intends to pay Pepco shareholders a slight premium to complete the merger. If the value spread becomes excessive, analysts say, BGE might be forced to rework the structure of the deal.
Others offered harsher analyses.
"I think the probability that the merger goes through at this point is less than 50-50 at best," said Ronald S. Tanner, a Legg Mason Wood Walker Inc. utility analyst.
Tanner said that even if the Maryland PSC friction is resolved -- which he believes would be difficult -- BGE and Pepco might still face onerous conditions from the District of Columbia, which also has the power to approve or reject the deal.
Glendening said that his personal intervention in the PSC matter would be "inappropriate," and that he had not talked to PSC Chairman H. Russell Frisby Jr. since the utility's statements were released. Frisby has said he would wait to comment at least until a formal BGE-Pepco appeal is filed, which is expected next week.
Lawrence Crocker, the acting general counsel at the Washington PSC, said the commission there would not take the BGE-Pepco statement of Thursday into account.
Pub Date: 4/19/97