Md. Lawsuit Urges Utility To Continue User Credits

Constellation Is Seeking Court Approval to Stop

Maryland filed suit yesterday against Constellation Energy to force the region's largest power company to continue to give electricity customers credits on their bills that will amount to almost $400 million over 10 years.

The suit was filed by the office of Attorney General Douglas F. Gansler (D) in Baltimore Circuit Court against the Baltimore-based energy giant and two subsidiaries. It responds to Constellation's announcement in January that it planned to seek a federal court ruling allowing it to stop making the payments. The credits on electricity bills to 1.1 million customers of Baltimore Gas and Electric Co., a subsidiary of Constellation, began last year and come to $2.83 a month.

"In this time of economic uncertainty for so many of our families, it is unfortunate that Constellation would seek to further boost its profits on the backs of the working people of our state," Gov. Martin O'Malley (D) said in a statement.

The state's action marks another step in its battle with the power company over the 1999 law that opened Maryland's electricity markets to competition.

Deregulation, also adopted by the District and Virginia, did not bring competition to residential customers and lower their bills as lawmakers predicted.

Starting in 2006, BGE customers in the Washington suburbs and Baltimore were hit with a 72 percent rate increase. The General Assembly convened in special session that year to address the soaring rates, and the credits, $386 million over a decade, were a concession extracted from Constellation.

The company, with annual revenues of $21.2 billion, was pursuing plans at the time to merge with a Florida company, and the credits were offered in return for state approval. But the merger eventually was called off, and Constellation officials said they will file suit in federal court Monday to cancel the obligation.

Company officials have said the legislature's decision in 2006 amounted to an unconstitutional taking of property and violated the 1999 deregulation deal, which was signed by lawmakers, state regulators, Constellation and advocates for electricity customers.

"We have very divergent views of the 1999 settlement, which we have always maintained was just and fair and beneficial for BGE customers," Constellation spokesman Robert L. Gould said yesterday in a statement. "Many of these issues have been reviewed, and our position upheld."

Company officials have said the effort to stop the credits is an outgrowth of what they say is the state Public Service Commission's creation of a hostile climate. The panel of utility regulators has been battling Constellation since O'Malley took office last year over some terms of the 1999 deregulation deal, saying the agreement was unfair to electricity customers.

The commission issued a report to lawmakers last month, saying Maryland's move to deregulation saddled electricity customers with nearly $1 billion in undisclosed costs for the eventual decommissioning of the Calvert Cliffs nuclear plant and for outstanding mortgages on power plants the company incurred when it took the plants over from BGE.

Constellation officials have accused regulators of politicizing concerns about the switch to competition and jeopardizing the company's plans to build a third Calvert Cliffs reactor.

The attorney general's lawsuit argues that the legislature, like the PSC, has a legal right to amend utility rates and is not bound by the 1999 deregulation deal. The suit also says that requiring the company to give the credits does not harm Constellation shareholders because the company is so profitable.

Constellation announced its intention to file suit "even as Constellation announced 'outstanding' growth in revenues and earnings during calendar year 2007," the state lawsuit filed yesterday says.

The suit calls the 72 percent rate increase for BGE customers "one of the largest electric rate increases by a major utility in modern American history."