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Rate storms catch BGE off its balance


Baltimore Gas and Electric Co. is learning that political storms can strike as suddenly as those Mother Nature serves up.

hours after it posted instructions for how its residential customers could "opt out" from a plan that would spread out, with interest, the 72 percent rate increase effective July 1, the company learned of Gov. Robert L. Ehrlich Jr.'s call for a special legislative session to address the issue - bringing new uncertainty.

"I think our customers are basically fatigued," Robert L. Gould, a spokesman for BGE's parent company, Constellation Energy Group, said last night of the political developments.

The utility will keep working to implement the rate deferral plan the state Public Service Commission proposed last March and revived last Friday. By yesterday afternoon, 14,000 of the company's 1 million electricity customers had contacted BGE to opt out of the program, Gould said.

"It changes nothing," he said of the governor's call for a special session. "We must continue with the process given that July 1 is fast approaching. We're going to continue to focus on this plan at this time in the absence of any other direction from the PSC."

Planning for the rate increase and finding the right tone for a political response have become logistical minefields for the utility. Company officials have become fixtures in local radio, TV and newspapers as fears about the end of six years of rate caps and the 72 percent increase, which BGE has attributed to soaring energy costs, have reverberated through state politics. The rate caps were implemented as part of the 1999 state law that deregulated electricity generation and shifted ownership of BGE's power plants to Constellation, which will continue to supply BGE most of its power.

At a luncheon for reporters and editors last week, Constellation CEO Mayo A. Shattuck III said he would not object to a special session if the legislature developed a reasonable plan before returning to Annapolis. Although a proposal that died before the end of the session would have required the company to take on more debt, it would have been more beneficial to BGE in some ways, he said.

That plan included a legislative guarantee of the revenue stream that secured the debt, a measure that would have allowed the company to borrow more money at lower interest rates without hurting its credit rating.

During the legislative session this spring, Constellation officials said the company would not accept any plan that involved firing the members of the PSC, but last week Shattuck took a softer stance on the issue.

He said maintaining a predictable regulatory environment is important to the company but he stopped short of saying that a one-time replacement of the PSC members would kill his company's planned merger with FPL Group of Florida. Some legislators have contended the governor "lobotomized" the PSC with leadership changes and made it unable to prepare for the rate-increase jolt facing thousands of Central Marylanders.

"If that happens, we'll deal with it, but we don't want that over and over again," Shattuck said. "We want to get to a point where the regulatory regime is something we can predict."

Shares of Constellation Energy fell $1.06, or 2 percent, to close at $52.19 yesterday, as news spread of Shattuck's acknowledgement last week his company has ceased merger planning with FPL in light of the political unease.

BGE's main Web page last night didn't reflect yesterday's jump start for a special session, only instructions for how customers could "opt out" of the so-called Residential Electric Rate Stabilization Plan.

"This plan is not designed to save money because you will pay more in the long run," the company said on its site. "While you will experience a lower increase initially, your bills will rise more significantly from March 2007 through May 2008 ... as you pay back the deferred amount.

"You can choose not to participate in the plan and pay the full increase in your electricity bill immediately."

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