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BGE, 12 Parties File Restructuring Settlement

BGE, 12 Parties File Restructuring Settlement

Baltimore Gas and Electric (BGE), the electric and gas utility subsidiary of Constellation Energy Group, filed a comprehensive electric restructuring settlement last week with the Maryland Public Service Commission (PSC) that will lead to system-wide electric customer choice on July 1, 2000. It also would provide a 6.5% base electric rate decrease (about $54 million a year) for up to six years for residential customers who continue to buy power from BGE. Electric 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 counsel.

People's Counsel Michael J. Travieso said based on what has occurred in other states that have restructured, such as 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. 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.

Rocco Canonica

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