- The Washington Times - Wednesday, March 22, 2006

BALTIMORE — Baltimore Gas & Electric Co. (BGE) officials are willing to lower impending energy rate increases to between 5 percent and 20 percent to keep Maryland officials from interfering with a multibillion-dollar merger, a state lawmaker familiar with the negotiations said yesterday.

“BGE executives have come to the conclusion — fighting all the way — that this is what they have to do,” said Delegate Patrick L. McDonough, Baltimore County Republican.

The utility agreed to reduce a 72 percent increase in electricity rates in negotiations late Monday in separate meetings with leaders of the Democrat-controlled General Assembly and Gov. Robert L. Ehrlich Jr., a Republican.

House and Senate leaders participating in the hourlong meeting said a verbal agreement had been reached. They are expected to finalize the details when they meet again later this week.

The talks hinged upon lawmakers’ threats to stop Florida Power & Light from purchasing BGE’s parent company, Constellation Energy Group, for an estimated $11 billion, Mr. McDonough said.

“The major issue now is the merger,” he said.

BGE also has agreed to negotiate a refund or partial credit to customers of the $500 million ratepayer finance subsidy the utility relieved as part of a 1999 deregulation deal, Mr. McDonough said.

The subsidy was intended to pay the devaluation of assets, such as the Calvert Cliffs nuclear plant, which have instead increased in value.

The energy-rate increases set to take effect this summer — 72 percent for BGE, 39 percent for Potomac Electric Power Co. and 35 percent for Delmarva Power — are partly the result of a 1999 utility-deregulation plan passed by the Democrat-controlled General Assembly and signed by Gov. Parris N. Glendening, a Democrat.

Staving off “rate shocks” has become the hottest issue in this election year in which Mr. Ehrlich is seeking re-election and every seat in the General Assembly is up for grabs.

State officials have been besieged with complaints since the state Public Service Commission, which regulates utilities, approved the increases.

The 1999 deregulation plan included rate caps that kept electric bills artificially low for the past six year and discouraged competition from entering Maryland’s partially deregulated utility market.

Utility executives warn that price controls could bankrupt Maryland power companies and cause power shortages like those in California in 2000.

According to the Associated Press, Senate President Thomas V. Mike Miller Jr. said after Monday’s meetings that BGE consumers could expect to pay “much less” than the 72 percent increase.

“I would say there are significant concessions in terms of saving money to the consumers,” said Mr. Miller, Prince George’s County Democrat.

Mr. Ehrlich, who met with the BGE executives after their talks with lawmakers, would not give details of the negotiations but said: “Anywhere near 72 percent would not stand.”

“We’re talking about extended periods of time [for rate relief],” he said. “We have made a lot of progress in the last couple of days.”

BGE officials who attended the meeting — including company President Kenneth W. DeFontes and Senior Vice President Paul J. Allen — declined to comment on the negotiations.

Sen. Thomas M. Middleton, Charles County Democrat and chairman of the Senate Finance Committee, said the talks were much better than his initial discussion with company officials last week.

Mr. Middleton’s committee is considering several bills dealing with utilities, including proposals to increase regulation of utilities and delay a proposed merger between Constellation Energy Group and Florida Power & Light. Utility officials are strongly opposed to both.

“I think they recognize unless we get some softening of the rate increase, a couple of pieces of legislation could be draconian to them,” Mr. Middleton said.

He said legislative staffers will sit down with BGE representatives to develop a written proposal to which all sides can agree.

The legislative session is scheduled to end April 10.

• This article is based in part on wire service reports.


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