(Breaking news) PSC approves Constellation, EDF deal

$4.5 billion deal clears the way for Calvert Cliffs, includes half of the rate relief sought by O'Malley

Friday, Oct. 30, 2009

The Maryland Public Service Commission approved on Friday a $4.5 billion sale of half of Constellation Energy Group's nuclear assets to Electricite de France, which includes a one-time rebate to customers of Baltimore Gas & Electric that had been sought by Gov. Martin O'Malley.

The $110.5 million in rate relief amounts to a $100 credit to customers--half the total sought by O'Malley (D).

The approval also hinges on Constellation taking steps to protect BGE from any financial fallout if Constellation, its parent-company, were to declare bankruptcy or see its credit rating tank.

It clears a big regulatory hurdle needed for the proposed construction of a third reactor at Calvert Cliffs Nuclear Power Plant in Lusby. Its development would create thousands of construction jobs and several hundred permanent jobs, while helping to address Maryland's long-term energy needs.

In a statement issued Friday afternoon, O'Malley called the order "fair and reasonable."

"By ordering certain conditions as part of the approval, the PSC clearly addressed the core issue the State has pursued in this matter from the start – to protect the 1.1 million BGE ratepayers by upholding a law that requires this deal to provide ‘benefits and no harm' to ratepayers," he said.

He commended the PSC for issuing an order four days after final briefs were submitted "to accommodate the two companies' deadline to conclude the deal."

"Although this has been a contentious proceeding at times, the process and the law worked--and ratepayers and BGE are better off because of it," O'Malley said.

In briefs filed with the PSC on Monday, the O'Malley administration outlined a series of demands it sought to win from Constellation for months that supported the sale if the conditions were met.

Constellation and EDF released a joint statement on Friday saying that they are reviewing the order.

Constellation has argued that the EDF deal was necessary for the company to be able to finance the third reactor.

The PSC's 54-page order said that the proposed new nuclear generation station at Calvert Cliffs is "in our view, too contingent" to have played a major role in its approval.

"The law requires something more, and the Transaction as proposed does not deliver it," the order said.

However, the PSC also said, "We have not ignored the broader value, and thus the public interest, in the good things that the Transaction could accomplish for CEG and the State as a whole."

The order calls for a $250 million investment in cash into BGE by June 30 and prohibits Constellation from receiving dividend payments from BGE should BGE's equity fall below 48 percent or should BGE's credit rating fall below investment grade. It also delays the utility's request for rate increases.

Critics of the merger said that those conditions help to safeguard utility customers from paying higher rates once the new reactor comes online.

"While it is disappointing that the PSC has left the door open for construction of an expensive and unnecessary new nuclear reactor in Maryland that diverts resources from faster, cheaper and safer ways to meet our state's energy needs, the conditions outlined in their brief would take some steps to protect ratepayers from having to assume the project's risks," Chesapeake Safe Energy Coalition Spokeswoman Johanna Neumann said.

Staff writer Alan Brody contributed to this report