Baltimore Gas and Electric (BGE), the electric and gas utilitysubsidiary of Constellation Energy Group, filed a comprehensiveelectric restructuring settlement last week with the MarylandPublic Service Commission (PSC) that will lead to system-wideelectric customer choice on July 1, 2000. It also would provide a6.5% base electric rate decrease (about $54 million a year) for upto six years for residential customers who continue to buy powerfrom BGE. Electric distribution rates for BGE’s commercial andindustrial customers will be frozen for four years, while rates forgeneration will depend 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— plus a hydroelectric plant in Pennsylvania and partialownership of two coal/diesel plants in Pennsylvania, to anunregulated subsidiary of the 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.

People’s Counsel Michael J. Travieso said based on what hasoccurred in other states that have restructured, such asCalifornia, Massachusetts and Pennsylvania, “we thought that it wasimportant to fight for up-front rate reductions and price stabilityfor a substantial period of time as the electric supply marketmoves toward competition. We were also successful in negotiating apricing structure which will permit customers to shop forelectricity in a meaningful way.” That pricing structure will meanresidential customers will see a separately identified competitivetransition charge, which will start at 0.8 cents per kilowatt hour(kWh) during the first year and gradually shrink over the followingsix 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.

Rocco Canonica

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