BGE gets OK to sell bonds backed by customer fee

Baltimore Gas and Electric Co. has won approval from state regulators to sell $630 million in bonds backed by a fee charged to consumers for the next 10 years, the company and the Maryland Public Service Commission said yesterday.

Consumers already had been warned about the fee, which should show up in bills during the next three months - estimated at about $2 a month per household after credits are factored in. It was a result of emergency General Assembly legislation passed after the power company said it would raise rates by 72 percent once long-held rate caps expired.


The size of the increase had caught ratepayers and lawmakers by surprise and caused an election-year furor that resulted in a deal to limit 2007 increases to 15 percent and stave off the big rate increases for another year.

The legislature included all consumers in the deferral plan, leaving the power company with a gap in revenue from supplying more expensive electricity.


BGE has already taken a short-term loan to offset its costs, which harmed its credit rating. The bond sale, approved this week by the PSC, will pay off that debt and provide funds to the company at a much lower interest rate.

BGE expects that because the debt will be secured by consumer fees, the bonds can be sold in the first quarter of 2007 with an AAA bond rating, said Mark Case, a vice president of regulatory affairs for the utility.

Specific consumer fees won't be known until the bonds are sold, Case said.

The bond fee alone would likely be close to $5 a month for BGE's 1.1 million residential customers, but consumers are due credits that could reduce the fee to about $2, he said. The fees could vary widely by household because they will be based on consumers' power use. And after the bond sale, BGE also might seek to renegotiate the credits. The credits were offered by BGE when it was seeking approval for a merger with FPL Group Inc. of Florida, a deal abandoned in the fall because of regulatory delays. In any case, the full 72 percent increase will take effect in January 2008.

Bethany M. Gill, a spokeswoman for the PSC, which regulates utilities, said the bonds will save consumers money - possibly more than $140 million over 10 years - because the cost of borrowing is lower than if BGE got a loan that was not backed with special fees.

She said the commission would be monitoring the process to ensure financing costs are kept low. Fees should appear on BGE bills immediately after the bonds are sold during the next three months.