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PSC staff says Constellation deal should be OK’d

As long as conditions including doubling a rate credit to consumers are met, the staff of the Maryland Public Service Commission is backing the planned sale of Constellation Energy Group Inc. to Exelon Corp.

The staff of the PSC, the regulatory agency that has approval power over the deal, said that the deal would be “in the public interest” if the conditions are met. Chief among them is that Constellation and Exelon give Baltimore Gas & Electric Co. customers a $200 rate credit. The companies had proposed giving customers a $100 credit.

“An enhanced rate credit is necessary given the other negative impacts on Maryland such as the job losses and loss of a Fortune 500 corporate headquarters in Baltimore,” the staff wrote.

Chicago-based Exelon is attempting to buy Constellation in a $7.9 billion, all-stock deal. Constellation and Exelon have said the deal would mean a direct investment in Maryland of more than $250 million. The companies initially said 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.

On Monday, the companies increased their list of merger benefits to the state. Exelon said it will spend more than $220 million to build 175 megawatts of new power generation in the state, with 55 megawatts of that from wind or solar sources, according to a filing with the PSC. The company previously had proposed adding 25 megawatts of renewable energy in the state, with an additional $10 million invested in electric vehicles.

Maryland Attorney General Douglas F. Gansler said the state’s concerns with the merger would be satisfied if Exelon committed to developing 375 megawatts of power from renewable sources, more than six times the company’s proposal. The state demanded 350 megawatts of land-based wind generation and 25 megawatts of power generated from poultry litter and other biomass sources.

An investment on that scale would mitigate the public harm of the merger, including job losses, “many of which could be erased through green jobs associated with the development and maintenance of the new renewable energy projects,” Gansler said in a filing made on behalf of Gov. Martin O’Malley and the Maryland Energy Administration.

Christopher Crane, Exelon’s president and chief operating officer, described the company’s latest offer as a “good package” that will add more than $445 million to Maryland’s economy. The company listened carefully to the concerns of the state and other interested parties before enhancing its offer, Crane said in a statement.

The five-member PSC held 11 days of hearings to review the acquisition last month and will decide whether to approve it by Jan. 5.

O’Malley successfully battled two prior merger attempts by Baltimore-based Constellation and may be one of the biggest political obstacles to Exelon’s transaction. The governor, a strong advocate for wind and solar energy, has been pushing Exelon to boost its investment in clean energy in the state.

Other parties with an interest in the merger continue to raise questions about its impact on power prices in Maryland and customers of BGE, Constellation’s regulated utility.

Paula Carmody, People’s Counsel for the state of Maryland, backed the doubling of the rebate to consumers to $200 and also recommended requiring a three-year rate freeze.

The International Brotherhood of Electrical Workers urged Maryland regulators to deny approval of the merger in a filing to the commission, citing potential job losses.

Electricite de France SA, the partner in Constellation’s five nuclear reactors, reiterated its opposition to the transaction, claiming the merger’s benefits “are both woefully inadequate and totally illusory. Maryland jobs will be lost, Maryland tax revenues will decline, and Maryland’s ability to influence its electric generation facilities will be severely limited.”

Utilities analyst Paul Patterson said the differences may still be reconciled.

“A lot of times a settlement doesn’t happen until they’re on the courthouse steps,” said Patterson, a New York City-based analyst with Glenrock Associates.

Bloomberg contributed to this article.