Seeking to alleviate concerns that its planned split into two independent companies will lead to California-like power failures in Maryland, Constellation Energy Group Inc. has offered to sell electricity to Baltimore Gas and Electric Co. at current rates through 2006.
The offer was made in a filing requested by the state Public Service Commission to address concerns about the separation, which would create two publicly traded companies later this year.
Under the split, Constellation would become a wholesale nationwide power seller and BGE Corp. would serve as a regional retail and energy distribution company that would include BGE.
Regulators are concerned that the deal would leave BGE too financially weak to meet its obligations in the state and that BGE would end up paying more for power than it could charge its customers, putting it in a financial squeeze.
Under the terms of the Maryland deregulation agreement, BGE cannot pass on higher costs to customers until residential rate caps are lifted in 2006.
In California, the state's two largest utilities accumulated billions of dollars in debt because they were unable to pass on sharply higher costs for power to customers. One filed for bankruptcy last month, rate increases were imposed on consumers and the state has taken over the buying of electricity on the wholesale market.
"We can't stress enough that BGE Corp. will be a strong financial company after the separation," said Robert S. Fleishman, general counsel for Constellation. "But we wanted to move quickly to allay any concerns that anyone had."
Constellation said it complied with the PSC's request for the filing Wednesday evening in an effort to cooperate with the regulatory agency and to answer questions about the separation. But the company maintains that it is not seeking - nor does it need - PSC approval to complete the split.
Currently, BGE has a fixed rate contract for power until July 2003, with what is now its affiliate, Constellation Power Source.
BGE's power plants were transferred to Constellation on July 1, when deregulation took effect in Maryland. After 2003, under terms of the deregulation agreement, BGE is obligated to solicit bids for power on the wholesale market.
Constellation said in the filing that for BGE to avail itself of the proposed offer, the PSC would need to delay the implementation of contract bidding until after June 2006. "New CEG is not willing to lock up its generation assets without this assurance," the filing stated.
Constellation's offer comes with a limited time period and is subject to certain conditions that the company said it would detail in subsequent filings.
The PSC and Constellation are expected to meet May 22 to discuss the filing.