FERC Puts Off Energy Merger

FPL-Constellation Delay Expected as 3 Join Commission

Federal regulators said they needed more time to consider FPL Group Inc.'s proposed $11 billion acquisition of Constellation Energy Group Inc., and set a new deadline of Feb. 2 for ruling on whether the deal can move forward.

The Federal Energy Regulatory Commission said it would examine whether the merger would result in a regulated utility subsidizing an unregulated part of the combined company, and whether it was in the "public interest."

Those questions have been political issues in Maryland, where Constellation's Baltimore Gas & Electric subsidiary has raised electricity rates for households, in part to buy power generated by Constellation's deregulated units.

Both companies said they had expected FERC's delay because of the addition of three members to the five-person commission. Those members -- Arizona regulator Marc Spitzer, former Senate energy policy aide Philip Moeller and former Nevada Public Utilities commission counsel Jon Wellinghoff -- were approved by the Senate last week, but do not start until next week. It will be the first time since August 2001 that all five positions on FERC will be filled.

"Given the change in FERC commissioners, today's announcement was not unexpected," Steven Stengel, a spokesman for FPL, wrote in an e-mail. "We do not believe there are any issues that would prevent the merger from being approved by the commission."

Lawrence McDonnell, a spokesman for Constellation, said: "We did expect that this would occur given the new membership. It does not raise any concerns for us about the merger not being on track."

FPL, based in Juno Beach, Fla., had said in filings with the Securities and Exchange Commission that though it hoped to complete the merger by year's end, it recognized that regulators could take more time. The merger agreement does not expire until June 30.

Under the Energy Policy Act of 2005, the merger would have been automatically approved after 180 days if the commission did not take action on the proposal or extend the deadline. That rule went into effect on Feb. 8, the day FPL and Constellation filed their merger plan. The Energy Policy Act also required FERC to examine the issue of "cross-subsidization," which it had been doing without the statutory language.

The FPL-Constellation deal is one of five mergers pending before FERC, which has approved only one this year.

FERC has not rejected a merger in the past 11 years, and has approved 59, according to its Web site. But it has put conditions on five utility deals since 1995 and at least once issued an opinion that led to the withdrawal of a merger application. Five merger plans were withdrawn or terminated during that time.

The most recent conditions were imposed on Exelon Corp. of Chicago, which plans to acquire New Jersey-based Public Service Enterprise Group Inc. Concerned about market concentration, the commission said Exelon had to sell power plants with a total capacity of 4,000 megawatts.