Gov Martin O'Malley Conditions Attached to CEG/EdF Merger

Gov. Martin O'Malley failed to get concessions from Baltimore-based Constellation Energy Group (CEG) during months of negotiations over CEG's proposal to sell half its nuclear business to Electricite de France for $4.5 billion, but many of the demands he made during those talks are now the conditions he proposes to the Maryland Public Service Commission (PSC) for them to include as part of any approval for the merger.

The governor wants:

1) BGE customers (1.1 million residents) to get one-time credits that could be worth more than $200 per household.

2) To assure that CEG's proposal to sell half its nuclear business to Electricite de France for $4.5 billion is in the public's interest.

3) Constellation to make a $50 million to $100 million contribution to Maryland's Electric Universal Service (Fund) Program, which helps lower-income residents pay their utility bills.

4) BGE to be protected from potential financial calamity at Constellation.

5) Constellation to make a capital infusion into BGE when the deal closes and for a prohibition on dividends paid by BGE to Constellation if those payments hurt the utility's ability to meet its capital needs or affect its credit ratings.

6) Limits on executive compensation.

7) To make a majority of BGE's board independent.

As an independent regulatory body appointed by the governor with the state Senate's consent, the PSC could reject the transaction, approve the deal or allow it to move forward with certain stipulations.

O'Malleys conditions could exceed $600 million. The 10 percent credit for BGE gas and electric customers would exceed $200 million. Add another $50 to $100 million for the Universal Service Fund for lower-income households. Add at least another $400 million infusion for BGE to get its common-equity ratio up to levels that will make O'Malley and the Public Service Commission happy. (Baltimore Sun, 10/26/09, Jay Hancock's Blog, 10/26/09)