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Exelon woos O’Malley; governor backs merger with Constellation

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Maryland Gov. Martin O’Malley claimed victory Thursday in a merger of corporate energy giants, saying that in exchange for his administration’s blessing, he wrested commitments for funding of a new gas power plant, a potential doubling of the state’s output of solar energy and seed money to begin developing offshore wind power.

The power plant would be the largest new source of electricity built in Maryland in a decade, and the money for offshore wind provided O’Malley (D) at least temporary political cover for one of his major policy initiatives, which has sputtered in the General Assembly.

O’Malley said his deal to support the takeover of Maryland’s largest utility would net the state $1 billion in investment and potentially 6,000 saved or created jobs, although critics questioned the math behind those jobs numbers; most appeared to be for temporary construction work.

The governor was first elected in 2006 in part on a promise to reduce consumers’ electricity rates after deregulation of Maryland’s energy market. He has routinely taken a heavy handed approach since then to negotiating with energy companies but has had few successes in recent years.

O’Malley said he is pleased with this deal and is confident that with his approval, Chicago-based Exelon, which runs utility Commonwealth Edison, would receive final approval next month from state regulators for its proposed $7.9 billion takeover of Constellation Energy and subsidiary Baltimore Gas & Electric.

“Though I opposed this merger for many months, I have joined this settlement with Exelon because I believe the company has met the high bar that I demanded,” O’Malley said at a State House news conference, detailing how Exelon had first proposed 25 new megawatts of power generation and ultimately agreed to build in Maryland as much as 300 megawatts.

“In essence, it’s 10 times as much generation being built in Maryland, creating jobs in Maryland,” O’Malley said. “And for those focused on [solar and wind power] . . . this will amount to a doubling of our renewables portfolio in a much shorter time than foreseen.”

Industry analysts said Exelon agreed to greater concessions than expected. Exelon President and Chief Operating Officer Christopher M. Crane said the company recognized that “addressing the reasonable interests of the State of Maryland is an important element of the merger approval process.”

But some critics remain. In a statement, Sen. James C. Rosapepe (D-Prince George’s) Senate Republican leader E.J. Pipkin (R-Queen Anne’s) and called on Maryland’s Public Service Commission to go beyond O’Malley’s deal and require Exelon to spin off BGE to become an independent, Baltimore-based company.

“The PSC can and should require this spin off to protect consumers from excessive electric rates and outrageous power failures,” the senators said.

O’Malley, a lawyer, said that after a week of intense negotiations, he was confident that the deal would prevent Exelon from focusing only on profits and shirking its responsibility to provide quality service to consumers.

Under the deal, Maryland’s PSC will retain authority to spin off BGE, mostly in the event of catastrophes, such as a nuclear accident at Constellation-owned Calvert Cliffs or an Exelon bankruptcy, but also in the event of repeated violations of state orders.

The deal calls for Exelon to build 120 megawatts of natural gas generation and 125 megawatts of renewable energy generation.

If the latter is done with land-based windmills, the state’s on-shore generation of wind power would double. The arrangement also requires 30 megawatts of new solar generation, which would nearly double Maryland’s output.

The solar facility is expected to be built near Baltimore, and the power plant will be required to be built east of Frederick, near the state’ greatest area of energy demand.

Half of the power must be online by the end of 2015, and the other half within 10 years.

Without the deal, Maryland lacked incentives to make significant progress toward its goal of producing 20 percent of its energy from renewable sources within 10 years. But even with the help, the state will require a major infusion of renewable power from offshore wind or some other means to meet that mark.

Exelon also has promised to provide $30 million for an offshore wind development fund, which Malcolm Woolf, O’Malley’s Energy Administration director, said would “leapfrog” Maryland ahead of most other East Coast states in the nascent market. The state can use the money to begin gathering meteorological data at the proposed wind farm site, off the coast of Ocean City, he said.

“We’ve dramatically accelerated our development of offshore wind,” Woolf said. But he acknowledged that the General Assembly, which has been wary of the project’s potential impact on state ratepayers, must create a viable market for the power.

“We still have to have some way to finance it, so the need for legislation is still there.”

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