- The Washington Times - Friday, March 24, 2006

BALTIMORE — A Baltimore Gas and Electric Co. executive yesterday warned that lawmakers’ attempts to block a multibillion-dollar merger could force the utility to more quickly implement a 72-percent increase in energy rates.

“Without the merger there is no room to lower rates,” said Robert L. Gould, communications director for BGE parent company Constellation Energy Group. “We have gone right to the edge of how much we can tolerate on the balance sheet.”

He also said if lawmakers make good on their threat to block Florida Power & Light’s $11 billion purchase of Constellation Energy, they likely would derail plans to gradually phase in a 72-percent increase in electric bills.

“One of the benefits of the merger is you have a bigger balance sheet,” Mr. Gould said. “You take that away, and it will be tougher and our credit rating will be thrown into question.”

As proof, he said Moody’s Investor Service has already put Constellation on a watch list because of uncertainty about the regulatory environment taking shape in Maryland’s legislature.

A spokeswoman for Gov. Robert L. Ehrlich Jr., a Republican, said the governor is wary of government interference in business but “still believes that more can and should be done” to keep electricity affordable.

“He does support the merger, and he is aware of the negative impact that interfering in the merger could have on Maryland business,” said spokeswoman Shareese N. DeLeaver. But “the governor believes that we should put the customer first.”

Staving off “rate shocks” for BGE’s 1.2 million customers 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.

Since the increases were announced March 7, several bills have been introduced to prevent or postpone Maryland’s higher energy rates, including plans to cap rates, to give the legislature authority over utility mergers and even to return to a public utility system.

Miss DeLeaver said the legislature’s attack of the energy issue was “like a cat swatting a ball of yarn,” while the governor was crafting an alternative rate-reduction plan to be presented to the power company in coming weeks.

The power company has proposed gradually phasing in higher rates over a 15-month period, beginning with a 13-percent increase in July. The average BGE electric bill would increase from $81.65 to $92.60 a month, according to the company.

Rates would increase 15 percent in January and 15 percent in June 2007, then increase to market rates by fall 2007. At that time, the average electric bill would have increased from $81.65 to $140.50. Customers also would pay a monthly charge of $4.40 for the next eight years — a total of about $422 — to pay for the loan BGE would need to cover the cost of the deferred rate increase, according to the company.

“We have put a very aggressive package on the table already,” Mr. Gould said.

He said the proposal also included $150 million to reduce electric rates in the future. The money, he said, would come from cost savings resulting from the merger.

“That’s a true subsidy,” Mr. Gould said. “We would actually reach in our pockets and lower rates that much.”

The increases are partly the result of the 1999 deregulation plan approved by the Democratic-controlled General Assembly and signed by Gov. Parris N. Glendening, a Democrat.

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

The caps expire in July, when rates are set to increase 72 percent to market levels for BGE customers. Rates also are increasing 39 percent for Potomac Electric Power Co. and 35 percent for Delmarva Power.

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

Last summer, residential customers paid an average of 11.72 cents per kilowatt-hour in the mid-Atlantic region, according to the Edison Electric Institute, an electric utility association.

However, BGE customers paid an average 9.251 cents per kilowatt-hour last summer, according to the Maryland Public Service Commission, which regulates utilities.

BGE’s planned increase to 14.834 cents per kilowatt-hour should bring its prices up to current market rates, said Jason Cuevas of the Edison Electric Institute.

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