posted on Tuesday, June 06, 2006 9:54 AM
by
Tracy Davis
Constellation Merger and Rate Increase in Jeopardy
Constellation Energy Group announced on May 31 that it has stopped the planning and integration process that it had undertaken to prepare for its proposed merger with FPL Group. Constellation cited as reason for the delay the political climate in Maryland, where consumer advocate groups, members of the Maryland General Assembly, and others have voiced strong opposition to the merger that would occur at the same time Constellation-affiliate Baltimore Gas & Electric (BG&E) and other Maryland utilities implement significant retail rate increases. See Constellation-FPL Merger Snags in Maryland. Constellation did not give any indication when or if the merger integration process would begin again, which may signal the beginning of the end for the Constellation-FPL alliance.
In a related development, on June 2, a Maryland Circuit Court rejected a plan to phase in BG&E's proposed 72% rate increase over a 12-month period, as proposed by the company and Maryland Governor Robert Erhlich. Rejecting the Maryland PSC's April 28 order, Circuit Court Judge Albert Matricciani ruled that the PSC had failed to consider the plan and had not allowed sufficient time for interested persons to intervene. He sent the plan back to the PSC for a full administrative hearing. It is unlikely that the PSC will be able to conduct a full hearing by its July 1 deadline for the rate increase. In place of the rejected phase-in plan, Judge Matricciani directed that the PSC could either extend the retail rate cap or enforce its March 6 order, which would limit BG&E's increase to 21% and allow the company to recover any under-collected revenue over a two-year period. In response, the PSC indicated it would not defer the end of the rate caps past July 1, which it viewed as ultimately more expensive for consumers and more likely to lead to protracted legal battles. Its only option is thus to enforce its March 6 order.