The Maryland Energy Administration and the administration of Gov. Martin O’Malley are opposing Constellation Energy Group’s $7.9 billion acquisition by Exelon Corp. unless changes are made in the deal.
MEA Director Malcolm Woolf said in sworn testimony filed with the Maryland Public Service Commission on Friday that the deal would harm customers of Constellation, the parent company of Baltimore Gas & Electric Co. Woolf said the deal posed “significant risk of harm to BGE customers.” He said BGE would lose its independence after 195 years and would become a small cog in a much larger company.
“[Constellation and Exelon] have not presented any intrinsic benefits of the transaction either to BGE customers or to the citizens of Maryland, apart from synergy savings estimates that have not been verified by the Applicants’ own integration teams,” Woolf said in his testimony.
Woolf also said that the O’Malley administration believed the deal was not in the best interest of BGE customers.
“We think it doesn’t, as proposed, meet the statutory requirements and doesn’t protect ratepayers,” said Raquel Guillory, spokeswoman for Gov. Martin O’Malley. “If they adopt what is proposed in our filing, we would be amenable.”
Woolf and the administration want the companies to commit more to EmPower Maryland, a program funded by utilities that subsidizes energy efficiency upgrades for homeowners. The Exelon and Constellation have proposed to pay $4 million annually, but Woolf pointed out in his testimony BGE is projected to pay $58.7 million this year alone.
Woolf also said the companies need to increase the amount of renewable energy in their power portfolio and pay more into the low-income energy fund. While Woolf did not address the proposed $100 rate credit for each BGE residential customer, he said it should not be considered an endorsement of it either.
Guillory declined to say if administration views the amendments as major changes to the proposed deal.
“If they’re not adopted, we don’t support it,” she said. “They’re significant to us.”
Constellation officials said they would look at the state’s criticism and file their response prior to the start of PSC hearings on the merger, which are scheduled to start Oct. 31. The company though did defend the benefits the merger would have on Maryland customers.
“We know many stakeholders have an interest in the merger and that’s appropriate; we look forward to their input,” Constellation spokesman Lawrence McDonald said in a statement. “The Maryland package we announced at launch is in excess of $250 million. And it offers significant benefits for Baltimore and Maryland.”
Exelon officials declined to comment on Woolf’s criticisms while defending the merits of the deal.
“Exelon and Constellation welcome input from stakeholders as we continue to work toward completing our planned merger — a combination we strongly believe will benefit the State of Maryland, the City of Baltimore and BGE customers,” Exelon said in an e-mailed statement on Monday.
Maryland Senate Finance Committee Chairman Thomas M. “Mac” Middleton, D-Charles, said he was not surprised by the governor’s stance on the merger.
“Times are very tough right now,” he said. “People are looking for a break wherever they can get it. If there’s an opportunity here for some rate relief, you can’t blame the governor for trying.”
The $7.9 billion all-stock deal with Chicago-based Exelon was unveiled on April 28 and is expected to close in early 2012. The PSC has said it expects to rule on the merger on Jan. 5, after seven full days and two half-days hearings that are scheduled to end on Nov. 10. The public will get a chance to weigh in on the proposed deal at three evening hearings: Nov. 29, Dec. 1 and Dec. 5.
Constellation and Exelon said the deal would mean a direct investment in the state of more than $250 million. The companies also say the acquisition would create nearly 900 jobs in the state related to projects associated with the deal, such as the development of a new or renovated headquarters building for the new company’s energy marketing and renewable development businesses, as well as the development of new renewable energy projects.
“While [Constellation and Exelon] assert that the commitments they have proposed provide benefits to BGE customers, these commitments, as currently proposed, do not negate the potential harms and do not ensure that the proposed merger transaction is consistent with the public interest, convenience, and necessity,” Woolf said in his testimony.
Woolf also criticized the companies’ plan to build 25 megawatts of renewable energy generation as being “insignificant” given the size of the merged company. He called for more renewable energy projects, or for the merged company to accelerate its efforts to have 20 percent of its energy portfolio come from renewable sources by 2022.
Middleton said the renewable energy piece was also in character for O’Malley. Middleton’s committee, which oversees utilities, has held two workgroups during the legislative offseason on the governor’s proposal to spur development of a wind farm off Maryland’s coast. The legislation was shelved earlier this year after lawmakers’ balked at the cost of guaranteeing a market for power generated by offshore wind farms.
“The governor has an agenda for offshore wind, these renewables,” Middleton said. “He’s been a very, very strong green governor.”
O’Malley has been at odds with Constellation during two prior merger attempts and political opposition was cited in the Exelon deal as a potential major obstacle to the deal.