The merger of Baltimore Gas and Electric Co. and the Potomac Electric Power Co. will not harm consumers by restraining competition in the electric market, according to the Maryland Public Service Commission.

The commission approved the merger provided Baltimore Gas and Electric lowers its customers' electric rates by $43.876 million and PEPCO lowers its Maryland customers' rates by $12.101 million. The competitive effect of the merger was still under examination at the federal level.

The PSC said the newly merged utility would not have market power over wholesale generation services. It rejected claims that the combined utility would be so large and powerful that it would bar competitors from entering the local generation market. The commission concluded that neither utility has excess generating capacity, and both are parties to long-term purchase agreements with other utilities in the region. It also concluded that since both companies are "sizable enterprises in their own right," the merged company will not likely possess increased purchasing power.

Finally, the commission found that the Federal Energy Regulatory Commission's open-access and comparable pricing initiatives will mitigate wholesale market power possessed by a combined company.

The commission said it was too soon to determine the effect the merger might have on the retail generation market because "there is no retail competition in Maryland at present." It said the type of competition that might result is not yet apparent. Nevertheless, the commission said it was only approving the merger with the understanding that it would retain jurisdiction to moderate any future impacts the merger might have on a newly competitive market. Re Baltimore Gas & Elec. Co. et al., Case No. 8725, Order No. 73405, April 16, 1997 (Md.P.S.C.).

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