The Federal Energy Regulatory Commission and the Maryland Public Service Commission have approved the merger of Baltimore Gas and Electric Co. and Potomac Electric Power Co. to form Constellation Energy Corp.
However, the stiff terms for approval (em including mandatory rate cuts (em have prompted the utilities to claim they might abandon the merger.
In mid-April, the FERC found the merger consistent with the public interest, upon an examination of the merger's three-fold effects on competition, rates and state and federal regulation, as required under the FERC's recent merger policy statement in Order No. 592. Docket Nos. EC96-10- 000 and ER96-784-000, April 16, 1997 (F.E.R.C.).
At the state level, however, the Maryland PSC directed the new company to reduce rates by $56 million: a decrease of $44 million for BG&E's Maryland customers and $12 million for PEPCO's Maryland customers. It ordered Constellation's base rates frozen for three years, and required that one-half of any earnings of more than a 11.4-percent return on equity be returned to customers. Case No. 8725, Order No. 73405 (Md.P.S.C.).
The utilities have filed a request for reconsideration of the order. The companies want a review of allocation of merger savings between shareholders and ratepayers, and of how the PSC would treat long-term purchased power contracts.
On the same day, the FERC identified the relevant geographic market as the Pennsylvania-New Jersey-Maryland power pool region. It found a general agreement among the parties that the merger will not have an adverse impact on long-term and short-term wholesale capacity markets.