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Md. PSC reopens hearing on Constellation-EDF deal

Maryland energy regulators reopened hearings Wednesday on Constellation Energy Group Inc.’s deal with a French firm with a dispute over the purported tax benefits to the state.

Constellation has said that closing the transaction will bring Maryland $129.3 million in tax revenue, but expert witnesses for the Public Service Commission and the Office of the People’s Counsel refuted the amount of the benefit.

The witnesses also disagreed with one another about how much tax money would stem from the $4.5 billion deal for 49.99 percent of Constellation’s nuclear assets in year one.

The PSC extended hearings on the pending deal between Constellation and Electricite de France because of changes to the tax structure of their transaction that would save the companies $1.2 billion in federal taxes over 15 years.

The changes were submitted at the end of scheduled hearings in September. Lawyers for the state argued that the added information required more time to review the deal.

The Office of People’s Counsel’s expert, William N. D’Onofrio, founder and principal consultant for the rate regulatory firm D’Onofrio & Associates LLC in Ohio, said the state would get an increased tax payment of $42.1 million. D’Onofrio said in his testimony that Constellation may have claimed tax depreciation for its nuclear plants or other investments on an accelerated basis.

That practice is allowed by the Internal Revenue Code to stimulate investments in tangible property, but according to D’Onofrio, the lump sum that Constellation would pay at the close of the deal would just be the state “truing-up the appropriate amount of tax to be paid since the assets were placed into service.”

A witness for the PSC staff, Howard Lubow, with Overland Consulting in Kansas, said the state would gain $60 million. He said the new tax structure of the deal would be beneficial to Constellation and indirectly benefit its regulated subsidiary Baltimore Gas & Electric Co.

Constellation and EDF officials said Wednesday that they did not agree with the assertions that tax benefits to the state would decrease under the new terms of their deal.

The PSC will likely continue its review of the deal Thursday.