After months of political posturing, legal maneuvering, strong-arm tactics and heated rhetoric, Constellation Energy Group and Electricite de France on Monday moved toward accepting the conditions imposed by Maryland's Public Service Commission on the proposed sale of half of Constellation's nuclear business, resulting in an agreement that looks like a good deal for Baltimore Gas and Electric customers - and the $100 rate credits they are to receive are the least of it.
Gov. Martin O'Malley, in an effort to make good on his campaign pledge to fight for ratepayers, has focused much of his rhetoric on two issues: attempting to get cash for BGE customers out of the deal, and seeking to force Constellation to cut Chief Executive Officer Mayo A. Shattuck III's paycheck. In the context of the politics of utility rates, that threatened to quash a deal that, with the right conditions, could be beneficial to the state. Fortunately, the PSC focused instead on the more substantive, if less sexy, concessions the O'Malley administration sought from the company in the deal, provisions the commission said "will yield more for ratepayers in the long term than any rebate."
The deal includes measures to protect BGE from harm should Constellation again risk bankruptcy; restrictions on the dividends Constellation can extract from BGE; an infusion of cash to help shore up BGE's books; and a delay in requests for rate increases.
In terms of BGE's long-term stability and the reliable supply of power in Central Maryland, those provisions may be the most important. In fact, Standard & Poor's immediately raised BGE's credit rating upon news that Constellation and EDF would accept the PSC's conditions. The agency said the new restrictions give it confidence that "BGE will operate as a lower-risk, stand-alone utility capable of earning a fair return on its investments." That's exactly what its customers deserve. Simultaneously, S&P; downgraded Constellation, though it deemed the PSC's requirements on Constellation "not unduly onerous."
A less certain benefit of the deal is the strong possibility that Constellation and EDF will move forward with a third nuclear reactor at Calvert Cliffs. That would substantially increase the amount of power generated in Maryland and, the laws of supply and demand being what they are, help hold down rates in the long term. Plus, it would help alleviate an energy shortage in the state and do it without adding greenhouse gases to the atmosphere. And even if Calvert Cliffs 3 doesn't happen soon - or ever - Maryland will still get the U.S. headquarters for EDF, which is seeking to start building nuclear plants across the country. The close of the transaction also means a tax windfall for Maryland at a time when it's badly needed.
The deal offered some reassurance that the Public Service Commission is able to act independently despite significant political pressure from Mr. O'Malley and others. The commission ignored some of the governor's demands, including that it limit Mr. Shattuck's compensation - a worthy goal, perhaps, but not the PSC's business - and modified others to make them more reasonable. Particularly heartening was the PSC's rejection of an O'Malley administration request to quash the testimony of the PSC's own expert who concluded that the deal offered substantial potential benefits to BGE customers.
Finally, there's the $100. Rather than seeking to squeeze as much as possible from Constellation, as the O'Malley administration had appeared intent on doing, the PSC took the money already on the table for items such as the construction of a Calvert Cliffs visitors center - an idea one Sun reader aptly compared to a bad storyline from "The Simpsons" - and redirected it toward rate relief. It doesn't begin to soften the rate shocks we've seen over the last few years, but at a time when family budgets are tight, $100 isn't so bad.
Now that O'Malley has extracted his pound of flesh from Constellation, maybe he and the legislature can just leave electricity alone. Every year that they flirt with re-regulation is another year that out-of-state energy providers stay away from offering true competition to Maryland. If the politicians would stop mucking around with energy policy, we'd finally get competitive rates.
Do we know where we are going to put all the nuclear waste that will ensue from EDF building reactors across the lower 48 and beyond? Have we forgotten Three Mile Island? We should conserve energy, send EDF back to France and give Mayo Shattuck the heave ho.
Skeptic to the Core