Gov. Martin O'Malley
plans to announce today a settlement with Constellation Energy Group,
ending a bitter battle between the state and BGE's parent company and
securing $187 million in one-time rebates for more than 1 million
residential customers, according to state officials who have been
briefed on the agreement.
The rebates would amount to $170 per customer and be applied to bills by the end of the year.
The settlement emerged out of dueling lawsuits filed by the state and
Constellation Energy last month over credits to consumers that the
General Assembly ordered in 2006. Animosity between state officials and
the company has been brewing in recent years as many lawmakers have
come to believe that the state's 1999 deregulation settlement was a raw
deal for consumers.
The governor briefed Senate President Thomas V. Mike Miller, House Speaker Michael E. Busch
and other top lawmakers last night on details of the settlement. The
deal is contingent on legislative approval and would mean that both
sides would drop their lawsuits. Rick Abbruzzese, O'Malley's spokesman,
declined to comment on the settlement but confirmed that the governor
is expected to make an announcement today.
"I believe it's a good settlement for BGE ratepayers," said Del. Dereck E. Davis, a Prince George's County
Democrat and chairman of the House Economic Matters Committee.
"Hopefully, with this agreement we're able to move forward in our quest
to provide reliable and affordable electricity."
Busch spokeswoman Alexandra Hughes said the speaker is "pleased we've
come to a point where we can help the ratepayers of Maryland without a
protracted fight with Constellation."
Constellation spokesman Robert L. Gould would not confirm or discuss
details of the agreement. "We continue to hold discussions with the
state in an effort to resolve the issues related to our respective
pending litigation," he said.
The settlement could give Constellation some assurances that the
regulatory environment in Maryland will improve for the company. Under
the settlement, the company also gets expanded flexibility in drawing
investors who would be allowed to own up to 20 percent of the stock.
There are currently restrictions on investments in the company under
state law.
Constellation's clashes with state officials have taken on added
significance as consumers have seen double-digit electric rate
increases in the last few years. O'Malley, a Democrat, campaigned on
promises to tackle soaring electric bills, but his efforts through the
Public Service Commission have been stymied by the complexities of
energy markets and state laws.
Compounding the problem, rate caps that were brokered as part of the
1999 settlement expired at a time when energy prices were rising
nationally. That left many to question the wisdom of deregulation,
which was supposed to lower prices, boost energy production and open
the door for competitors.
"Deregulation was a billion- dollar boondoggle for the utility company,
and it's nice to see some significant funds going to ratepayers," said
Johanna Neumann, state director of the Maryland Public Interest
Research Group.
In addition to the one-time refund, the agreement curbs the liability
of Constellation customers to pay for decommissioning Calvert Cliffs'
two existing nuclear reactors while reaffirming the company's intent to
seek federal permission to build a new third reactor at Lusby in
Calvert County.
Constellation had applied to the federal Nuclear Regulatory Commission
for a license to build a new reactor at Calvert Cliffs, but it has not
formally committed to building there. Earlier this year, company
officials indicated they might build the plant in New York, which would
deprive Marylanders of additional power- generating capacity at a time
when the state is facing potential brownouts within the next several
years.
Under the 1999 deregulation pact, the state had agreed to let
Constellation collect $5.2 billion from ratepayers toward the costs of
closing the radioactive plants in 2036.
That financial burden was at the heart of the dispute between the state
and the energy company. The Public Service Commission asserted in a
report in January that Constellation had informed the Nuclear
Regulatory Commission that the decommis- sioning cost was likely to be
$3.7 billion.
The settlement to be announced today would eliminate ratepayers'
obligation to pay the higher amount - essentially saving Marylanders'
$1.5 billion in future costs.
The agreement settles the lawsuits filed by the state and Constellation
over $386 million in credits the legislature ordered the company to pay
in 2006. The settlement keeps 90 percent of the credits, trimming them
by $40 million.
Ratepayers also would be assured of limits on future increases in their
bills for distribution of electricity over BGE's wires. The company has
agreed to phase-in increases it had asked the Public Service Commission
to authorize.
The amount of the distribution charge increase was not expected to be
large, but it comes on top of the 72 percent increase in rates it
sought from ratepayers for higher fuel costs.
Besides the rate relief, the agreement clarifies the public service
commission's authority to examine the books and records of all
utilities, including those of Constellation and its various affiliated
companies. Lawmakers had been threatening to pass a bill granting the
PSC subpoena power if the company did not reach an agreement with the
state.
BGE also has agreed to add two independent directors to its board, a
move state officials characterized as enhancing the corporation's
governance.
