BGE, 12 Parties File Restructuring Settlement
Baltimore Gas and Electric (BGE), the electric utility
subsidiary of Constellation Energy Group, filed a comprehensive
electric restructuring settlement yesterday with the Maryland
Public Service Commission (PSC) that will lead to system-wide
customer choice on July 1, 2000 and a 6.5% base rate decrease
(about $54 million a year) for up to six years for residential
customers who continue to buy power from BGE.
Distribution rates for BGE's commercial and industrial customers
will be frozen for four years, while rates for generation will
depend upon the service options selected.
The settlement also calls for BGE to spin down 10 Maryland-based
power plants-including its nuclear facility at Calvert Cliffs-plus
a hydroelectric plant in Pennsylvania and partial ownership of two
coal/diesel plants in Pennsylvania, to an unregulated subsidiary of
the Constellation Energy Group on July 1, 2000.
In return, BGE will be allowed to recover $528 million in
stranded costs through a competitive transition charge applied to
customers' bills. Residential customers will pay this charge for
six years. Industrial and commercial customers will pay in a lump
sum or for a 4-to 6-year period, depending on the service option
each customer selects. BGE had requested recovery of $897 million.
The company also will accelerate the depreciation of its generation
assets by $150 million over the next year.
The agreement settles two cases currently before the PSC, one
deals with transition costs, customer price protections and
unbundled rates and a second stems from a petition filed by the
Office of People's Counsel to reduce BGE's rates by up to $141.7
million annually. It was signed by 12 parties, including the PSC
staff, the Maryland Office of People's Counsel, Enron, the Maryland
Industrial Group, Amtrak, and a host of consumers, marketers and
associations. But it still must be approved by the PSC.
"This agreement represents a balanced outcome of all the views
at the negotiation table, settles the major issues related to
deregulation, and moves the company one step closer to competing in
a deregulated marketplace," said Robert S. Fleishman, BGE's general
"Based on what has occurred in other states which have
restructured, like California, Massachusetts and Pennsylvania, we
thought that it was important to fight for up-front rate reductions
and price stability for a substantial period of time as the
electric supply market moves toward competition," said People's
Counsel Michael J. Travieso. "We were also successful in
negotiating a pricing structure which will permit customers to shop
for electricity in a meaningful way." That pricing structure will
mean residential customers will see a separately identified
competitive transition charge, which will start at 0.8 cents per
kilowatt hour (kWh) during the first year and gradually shrink over
the following six years.
"We have avoided a costly litigation process and were successful
in reaching a compromise which will guarantee that the little guy
actually receives some tangible benefits from electric utility
deregulation," said Travieso. The OPC is an independent State
agency representing the interests of residential customers.
BGE provides service to more than 1.1 million electric customers
and nearly 570,000 natural gas customers in Central Maryland. In
1998, Constellation Energy Group reported combined revenues of $3.4
billion and assets of $9.2 billion.