Constellation, governor at odds over deal

O'Malley said no to company's counteroffer

Wednesday, July 22, 2009

Gov. Martin O'Malley turned down a settlement offer from Constellation on Friday that would have provided rate relief and rescinded an $87 million payment to the company's current chief executive officer.

The dueling lawsuits stem from the state's desire to have the final say in a proposed $4.5 billion deal to sell half of Constellation's nuclear assets to Electricite de France, a sale that could have a major impact in the development of a third reactor at Calvert Cliffs Nuclear Power Plant. The Maryland Public Service Commission is currently reviewing the deal to determine if it benefits the public.

While the counter-proposal meets some of the goals outlined by state officials in May, it does not go far enough in some areas, O'Malley (D) said. In a statement, the governor said Constellation's offer fails to address both long and short-term rate relief, pursues green energy investment only at ratepayer expense, lacks transparency related to the compensation of CEO Mayo A. Shattuck III and does not specify how Baltimore Gas & Electric, a wholly-owned subsidiary of Constellation, will be protected.

"Based on our initial review, Constellation still has a long way to go to fully address the needs of Maryland ratepayers and the public interest," the statement said.

O'Malley's rejection prompted a sharp rebuke from Constellation officials.

"The governor can't have it both ways," Vice President of Corporate Communications Robert L. Gould, said in an e-mailed statement. "What we're trying to do is make multi-billion dollar private investment in clean energy and conservation programs that will provide significant near and long-term benefits for BGE customers and the State of Maryland, which is why we find the Governor's position so very puzzling."

In its offer, Constellation said it would hold off seeking an increase in the electricity delivery rate for BGE customers until at least next January and limit that rate hike to 2.5 percent, half its initial ceiling. Any efforts to increase the natural gas distribution rate will not occur until after filing the electricity distribution rate case.

O'Malley has stepped up his efforts of late to ensure Constellation gives ratepayers a break. In recent weeks, he has laid out his case in a published statement and filmed an online video message in an effort to gain public support.

In his statement, O'Malley said the state is "always willing to talk with Constellation about ideas in connection with a settlement of the issues in the regulatory proceedings." But he gave no indication that state regulators would halt their evaluation of the proposed merger.

"Any such agreement that is reached must do significantly more to protect ratepayers than what is now on the table," O'Malley said.

The state made an initial settlement offer in June that included one-time credits for residential ratepayers that would save them about 10 percent in annual electricity charges. It also sought a pledge from Constellation to provide about $20 million a year to a program that helps low-income residents pay their utility bills.

It's appropriate that the state be allowed to sign off on the proposed merger to ensure it benefits the public, said Sen. Thomas "Mac" Middleton, who chairs one of two state legislative committees that oversee utility issues.

"There may be potential implications for BGE customers and if there are, the PSC should know it and should put the necessary safeguards on there so BGE customers know about it," he said.

But Middleton (D-Charles) also cautioned that the state has no jurisdiction over energy supply and should not intervene in the transaction if it is found to be in the public interest.

He does not think the standoff will endanger the development of the third reactor at Calvert Cliffs.

"The governor knows the short and long-term energy needs of the state and Calvert Cliffs is a very integral part of that," said Middleton.

"I don't think you're going to find this governor doing anything to jeopardize that from moving forward."

Staff writer Jeff Newman contributed to this report.

abrody@somdnews.com