Baltimore Gas and Electric (BGE), the electric utilitysubsidiary of Constellation Energy Group, filed a comprehensiveelectric restructuring settlement yesterday with the MarylandPublic Service Commission (PSC) that will lead to system-widecustomer choice on July 1, 2000 and a 6.5% base rate decrease(about $54 million a year) for up to six years for residentialcustomers who continue to buy power from BGE.

Distribution rates for BGE’s commercial and industrial customerswill be frozen for four years, while rates for generation willdepend upon the service options selected.

The settlement also calls for BGE to spin down 10 Maryland-basedpower plants-including its nuclear facility at Calvert Cliffs-plusa hydroelectric plant in Pennsylvania and partial ownership of twocoal/diesel plants in Pennsylvania, to an unregulated subsidiary ofthe Constellation Energy Group on July 1, 2000.

In return, BGE will be allowed to recover $528 million instranded costs through a competitive transition charge applied tocustomers’ bills. Residential customers will pay this charge forsix years. Industrial and commercial customers will pay in a lumpsum or for a 4-to 6-year period, depending on the service optioneach customer selects. BGE had requested recovery of $897 million.The company also will accelerate the depreciation of its generationassets by $150 million over the next year.

The agreement settles two cases currently before the PSC, onedeals with transition costs, customer price protections andunbundled rates and a second stems from a petition filed by theOffice of People’s Counsel to reduce BGE’s rates by up to $141.7million annually. It was signed by 12 parties, including the PSCstaff, the Maryland Office of People’s Counsel, Enron, the MarylandIndustrial Group, Amtrak, and a host of consumers, marketers andassociations. But it still must be approved by the PSC.

“This agreement represents a balanced outcome of all the viewsat the negotiation table, settles the major issues related toderegulation, and moves the company one step closer to competing ina deregulated marketplace,” said Robert S. Fleishman, BGE’s generalcounsel.

“Based on what has occurred in other states which haverestructured, like California, Massachusetts and Pennsylvania, wethought that it was important to fight for up-front rate reductionsand price stability for a substantial period of time as theelectric supply market moves toward competition,” said People’sCounsel Michael J. Travieso. “We were also successful innegotiating a pricing structure which will permit customers to shopfor electricity in a meaningful way.” That pricing structure willmean residential customers will see a separately identifiedcompetitive transition charge, which will start at 0.8 cents perkilowatt hour (kWh) during the first year and gradually shrink overthe following six years.

“We have avoided a costly litigation process and were successfulin reaching a compromise which will guarantee that the little guyactually receives some tangible benefits from electric utilityderegulation,” said Travieso. The OPC is an independent Stateagency representing the interests of residential customers.

BGE provides service to more than 1.1 million electric customersand nearly 570,000 natural gas customers in Central Maryland. In1998, Constellation Energy Group reported combined revenues of $3.4billion and assets of $9.2 billion.

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