- The Washington Times - Tuesday, April 4, 2006

ANNAPOLIS — Baltimore Gas & Electric Co. (BGE) executives say state lawmakers are “overplaying their hand” by trying to negotiate lower electric bills with threats to block the company’s multibillion-dollar merger with a Florida utility.

“They understate the value of our proposal and overstate the value of their leverage,” said Robert L. Gould, communications director for Constellation Energy Group Inc., the parent company of BGE. “The legislature needs to be more realistic.”

Gov. Robert L. Ehrlich Jr., a Republican, and leaders of the Democrat-controlled General Assembly have rejected the power company’s offer to phase in a 72 percent increase in electricity rates over two years.

“It’s the utility company versus the people. Ultimately the people will prevail,” Senate President Thomas V. Mike Miller Jr., Prince George’s Democrat, told reporters yesterday.

Delegate Dereck Davis, a Prince George’s Democrat at the forefront of the negotiations, said lawmakers would not back down.

“We are not going to enter into a bad deal just to get a deal,” he said.

The negotiations appear stalled with less than a week remaining before the General Assembly adjourns Monday and laws take effect that would block Constellation Energy’s $11 billion merger with FPL Group Inc.

Mr. Gould said the merger legislation would end the rate-reduction talks.

“There wouldn’t be anything to negotiate over,” he said. “That’s simply a non-starter.”

The governor opposes the bill and could veto it before the legislature adjourns, but the General Assembly likely would override his veto.

Regulatory lawyers say blocking the merger is illegal, and the power company has vowed to sue.

The litigation could take years, effectively blocking the merger but also potentially triggering an immediate 72 percent rate increase that lawmakers are trying to avoid.

The talks are further hampered by the possibility that the legislature will block the merger regardless of an agreement to lower energy prices.

Paul E. Schurick, the governor’s communications director, said neither Mr. Miller nor House Speaker Michael E. Busch, Anne Arundel Democrat, have given assurances that the merger legislation will die if the company sufficiently lowers rates.

Mr. Ehrlich is expected to resume negotiations with utility executives today.

Since the increases were announced March 7, staving off “rate shocks” has become the hottest issue in a year in which Mr. Ehrlich is seeking re-election and every General Assembly seat is open in November.

BGE is not the only company set to increase rates this summer. Potomac Electric Power Co.’s rates will increase 39 percent, and Delmarva Power’s will go up 35 percent.

BGE’s rate increase has resulted, in part, from deregulation legislation in 1999 that capped energy rates at artificially low levels for six years.

The deregulation bill was approved by the legislature and signed into law by Gov. Parris N. Glendening, a Democrat who appointed the panel that crafted the legislation.

A higher, worldwide demand for energy — mostly driven by the emerging economies of China and India — has been cited for increasing electricity rates.

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