Florida Power & Constellation Merger Gets Political

Florida Power and Light has agreed to acquire the Constellation Energy Group for $11 billion but Maryland lawmakers are working to delay or reject the merger proposal because they want to protect ratepayers from Constellation's Baltimore Gas and Electric Company’s proposed 72% rate increase (about $700 annually per customer) when rate caps expire later in 2006. The measure would require the General Assembly, not just the utility-regulating Public Service Commission, to sign off on a utility merger. BGE has offered to phase in about half of the increase over 15 months -- 13 percent in the first six months, 15 percent starting in January and another 15 percent in June 2007. The rate increase comes from 1999 deregulation legislation that capped rates at artifically low levels for six years.

The new company will be called Constellation Energy and maintain headquarters in Juno Beach, Fla., and Baltimore. The merger would create a company with operations all along the U.S. East Coast with more than 30,000 megawatts of power generation and give FPL access to Constellation's merchant energy plants. The deal would expand FPL’s nuclear and coal power assets because about half of the electricity at Constellation's plants is generated by nuclear and about a third by coal. The deal would also broaden FPL's geographic reach because, in addition to its base in Maryland, Constellation controls power plants in New York, California, Illinois and Pennsylvania.

The utility companies will probably sue if the legislature intervenes to prevent the merger. Critics of the legislature's plan describe it as 'ex post facto' regulation, laws that are applied retroactively and penalize action that was legal when originally taken. The merger was initiated under existing law.