BALTIMORE, March 27 /PRNewswire-FirstCall/ -- Constellation Energy today announced it has reached agreement with Maryland political and regulatory leaders on a comprehensive settlement of prior legal, regulatory and legislative issues. The company said the settlement will enhance its strategic flexibility and provide a one-time rate credit for Baltimore Gas and Electric (BGE) residential electricity customers by the end of this year.
"This agreement provides far-reaching benefits for our customers, our shareholders and the State of Maryland," said Mayo A. Shattuck III, chairman, president and chief executive officer, Constellation Energy. "All parties gain meaningfully in this carefully crafted settlement, and the overarching value is a return to regulatory stability and normalcy. This settlement allows our company and all Maryland stakeholders to move forward confidently on the many energy-related challenges and opportunities that lie ahead, including the potential for a new nuclear unit at our Calvert Cliffs Nuclear Power Plant."
The settlement was negotiated with the Administration of Governor Martin O'Malley and the Maryland Public Service Commission (PSC). It incorporates a number of financial and regulatory agreements, as well as legislative amendments that must be voted on and approved by the Maryland General Assembly. The parties agreed, pending approval of legislative amendments and finalization of terms, to dismiss pending state and federal litigation.
Maryland authorities reaffirmed the validity of agreements signed with BGE, Constellation Energy's regulated utility subsidiary, and other parties in 1999 related to Maryland's electricity restructuring law. Therefore, as part of this 2008 settlement, the PSC will close ongoing proceedings in cases 9137 and 9099 relating to the 1999 settlement, and the required legislation will eliminate the PSC's obligation to prepare final reports specific to BGE, Constellation Energy or their affiliates pertaining to the 1999 settlement. All PSC cases and investigations relating to the terms or performance of the 1999 settlement by BGE, Constellation Energy or their affiliates are satisfied and fully released as a result of this 2008 settlement agreement.
Additionally, state law governing investments in companies that own and operate a regulated gas and electric utility will be amended to eliminate a restriction on companies acquiring more than 10 percent of the capital stock of companies such as Constellation Energy or BGE. In addition, an investor will be permitted to acquire up to 20 percent of the voting securities of a company such as Constellation Energy without prior PSC approval. Transactions that directly affect BGE will continue to be subject to PSC review. Current Maryland laws regarding investment in companies owning regulated utilities are more restrictive than in many states and updating these statutes was a key priority for Constellation Energy. These changes provide the company with greater strategic flexibility when pursuing investment partners to help finance large-scale, capital-intensive projects such as new nuclear plants. The settlement is contingent on the approval of legislation during the current legislative session, scheduled to run through April 7, 2008.
Constellation Energy will contribute $187 million in the form of a one- time bill credit for BGE residential electric customers. It is anticipated that the credit will be applied by the end of 2008 and amount to approximately $170 per residential customer. For more than 50 percent of BGE's residential customers, the credit is expected to result in a greater than 10 percent reduction in electricity bills this year.
An additional benefit for customers relates to costs associated with nuclear decommissioning activities at Constellation Energy's Calvert Cliffs' Unit 1 and Unit 2, scheduled to occur no earlier than 2034 and 2036, respectively. BGE customers will be relieved of the potential future liability for decommissioning both units. As part of the settlement, Constellation Energy will, through 2016, continue to collect $18.7 million per year in nuclear decommissioning costs for Calvert Cliffs and rebate this amount to residential customers, as previously authorized by Senate Bill 1, which was passed by the Maryland Legislature during a special session in 2006. Constellation Energy does not anticipate the assumption of this decommissioning liability from BGE's customers will result in material incremental costs to the company when it is time to decommission Calvert Cliffs.
As part of the settlement, BGE will resume collection of the residential return portion of the Provider of Last Resort (POLR) revenue -- eliminated at the beginning of 2007 under Senate Bill 1 -- from June 1, 2008, through May 31, 2010. Additionally, the utility will implement revised depreciation accruals.
As part of the agreement, BGE will not file an electric distribution rate case in 2008. Any rate case filed in 2009 will not be effective prior to October 2009 and would be capped at 5 percent. This will maintain the utility's base electric distribution rates -- not including the cost for the electric commodity -- at 1993 levels through October 2009. The agreement does not cover natural gas rates, federally approved increases in transmission charges, electric riders, tax increases or increases associated with the state's Standard Offer Service power supply auctions.
"We were mindful that any settlement would need to balance the needs of our residential electric customers and Constellation Energy shareholders," said Shattuck. "This package incorporates a direct and significant consumer benefit, while strengthening the strategic position of Constellation Energy as a leader in the competitive energy marketplace.
"Furthermore, it removes statutory barriers that could have slowed or limited the growth of our company. Just as importantly, we've gained a greater understanding with state leaders that the continued growth and prosperity of Constellation Energy is beneficial for Maryland," Shattuck said. "There is a commitment to putting the past behind us and focusing on the investments needed to create jobs and power Maryland's economic development."
Constellation Energy, through its UniStar Nuclear Energy partnership with EDF Group, is well-positioned to play a leading role in America's new nuclear renaissance. While the company has made no commitment to build, as part of the settlement agreement it agreed that all things being equal, Calvert Cliffs would be its number one site priority should it move forward on plans for a new nuclear plant.
Constellation Energy agreed to elect two independent directors to the BGE Board of Directors within six months.
Constellation Energy ( http://www.constellation.com/ ), a FORTUNE 125 company with 2007 revenues of $21 billion, is the nation's largest competitive supplier of electricity to large commercial and industrial customers and the nation's largest wholesale power seller. Constellation Energy also manages fuels and energy services on behalf of energy intensive industries and utilities. It owns a diversified fleet of 78 generating units located throughout the United States, totaling approximately 8,700 megawatts of generating capacity. The company delivers electricity and natural gas through the Baltimore Gas and Electric Company (BGE), its regulated utility in Central Maryland.
