Legislation that would allow Baltimore Gas and Electric Co. to form a holding company cleared a major hurdle in Annapolis yesterday when it was unanimously approved by the Senate Finance Committee.
Supporters urged the General Assembly to make quick passage of the bill a positive statement about Maryland's business climate.
The committee approval came after a hearing at which BGE's top executives said the company needs a holding company to stay viable in the increasingly competitive electric power industry.
"This will be a really strong signal to Wall Street that Maryland is serious about enabling Maryland-based businesses to compete in a competitive marketplace," said Christian Poindexter, BGE's chairman. To give added emphasis to the utility's desire for the measure, Poindexter was joined at the hearing by Chief Financial Officer David Brune.
Earlier in the day, the bill was reviewed by the House Environmental Matters Committee, where House Speaker Casper R. Taylor Jr., an Allegany Democrat, urged prompt action so the emergency measure can be signed into law "in a very few days."
The bill would roll back a 99-year-old state prohibition on public service companies forming holding companies, which effectively makes BGE the only utility in the country barred from restructuring in that way.
BGE executives said that a holding company would make it easier to raise capital for new ventures without first seeking regulatory approval from the Public Service Commission.
The measure cleared the House last year, but died in the Senate when it became entangled in wrangling over deregulation of the electric power industry.
Intent on having a holding company, BGE took steps to move its charter to neighboring Delaware. Faced with that threat, Gov. Parris N. Glendening and legislative leaders publicly pledged to push the bill through. "We saw what happened to our credit-card industry in the 1980s," said Richard C. Mike Lewin, state secretary of business and economic development, referring to the exodus of bank card firms from Maryland over state restrictions on interest charges.
"We must not let that happen again," he said. "Give our local enterprises the tools to compete and grow here."
Investor anxiety over the unsettled regulatory climate for electric utilities in Maryland already has hurt BGE's stock, Chris Budzynski, an analyst with Legg Mason, told both panels. He blamed uncertainty over holding companies and over how the company might be affected by deregulation in part for the 14 percent decline in BGE stock in the past year. By contrast, electric utility industry stocks overall rose 10 percent, on average.
Poindexter said that if the bill passes, BGE would seek approval from federal regulators and from shareholders to set up a holding company. To be named Constellation Energy, it would seek to raise capital for the booming power trading business.
BGE already has a power trading subsidiary, Constellation Power Source. The Baltimore-based firm bought and sold 116 million megawatt-hours of electricity last year, more than three times the 31 million megawatts BGE generated at all of its power plants combined.
Poindexter said the company has financed that activity from retained earnings, but a holding company would open the door to raising much larger sums.
Aiding BGE's prospects this year, even the Office of People's Counsel -- a frequent adversary at PSC rate-setting proceedings -- has dropped its opposition to the bill.
People's Counsel Michael J. Travieso said he remains concerned about the potential for residential power customers to be harmed by utility holding companies. He cited examples in other states of holding companies subsidizing their unregulated subsidiaries through sweetheart deals with the regulated utility. His concerns were echoed by the Maryland NAACP.
But Travieso urged lawmakers to let BGE have a holding company, as do two other utilities operating in Maryland -- Potomac Edison and Delmarva Power -- and to deal with potential abuses by all holding companies when they address electric deregulation later in the session.
While the holding company bill had no official opponents, BGE's lobbying apparently alienated at least one legislator. Del. Daniel Morhaim, a Baltimore County Democrat, complained about receiving "hundreds" of form letters from BGE shareholders.
But Poindexter defended the letter campaign, saying he believed that stockholders "have legitimate reasons to communicate with their legislators if they're so inclined."
Pub Date: 1/20/99