Our view: Gov. Martin O’Malley addressed the most important issues posed by the Constellation-Exelon deal by focusing on the long-term impacts to BGE

Gov. Martin O’Malley may not have gotten Exelon to bump up the $100 rate credit it promised to Baltimore Gas and Electric customers as part of its proposed merger with Constellation Energy, but he secured concessions that will be far more valuable to Maryland ratepayers in the long run. The settlement the governor plans to announce Thursday includes a vastly greater commitment to renewable energy and other new power generation than Exelon had ever agreed to before. It contains millions to help improve energy efficiency and assist low-income customers who have trouble paying their bills. And it is likely to produce substantially more short-term and permanent jobs than the energy company’s initial proposal.

That’s all well and good, but the most important concessions the governor secured are subtler. The real risks posed by this merger were that it could lead to long-term increases in electricity rates that would dwarf any one-time rate credit, that it could expose BGE to greater risk, and that it would put ultimate control of BGE in an out-of-state corporation. The settlement the governor reached doesn’t eliminate those concerns, but it reduces them in ways that had not previously seemed possible.

Perhaps the single most important concession Exelon agreed to is a provision that under certain circumstances — such as the bankruptcy of Exelon or a major subsidiary, a credit downgrade or the failure to comply with Maryland Public Service Commission rules and orders — the PSC could initiate hearings to force the company to spin off BGE. That’s an idea the state Office of People’s Counsel had floated, and one that Exelon had seemed unlikely to accept. It provides Maryland with a failsafe option should its greatest fears about the merger come true.

A great risk of the merger was the degree to which it would concentrate market power in the hands of the new energy company. Within the section of the electric grid that services BGE customers, the new corporation would have controlled between a quarter and a third of the supply, giving it excessive power over the prices its own customers would be forced to pay. Exelon had already agreed to sell off three coal-fired plants, but now it is agreeing to conditions on the sale that will prevent them from going to some other major player in the region’s generation market. Exelon also agreed to build substantially more new generation in the immediate Baltimore area than it previously had, which should, in the long run, help lower prices.

Other elements of the governor’s settlement strengthen the financial firewalls between BGE and Exelon (and its risky energy-trading operations) and require that BGE’s board have members who are independent of Exelon and that a majority of the board live or work in the BGE service area. That all reduces the potential for problems posed by BGE becoming part of a much larger corporation, and with having its operations lumped in with Exelon’s two other regulated utilities.

In all, Exelon has agreed to build more than 10 times as much new generation as in its initial offer and to effectively double the amount of solar and onshore wind generation that Maryland has now. That pushes the state much further toward its renewable-energy goals and will help jump-start the green energy industry in the state. That will pay much greater long-term dividends in terms of public health than a one-time rate credit would.

We were strongly critical of the governor two years ago when he objected to a proposal by Electricité de France to buy half of Constellation’s nuclear business. At the time, it appeared that Mr. O’Malley, an old foe of Constellation and its CEO, Mayo A. Shattuck, was simply trying to extort as much as possible from a deal that had little direct impact on BGE and its customers. This time is different, and Mr. O’Malley’s efforts were right on target. This deal posed a substantial and ongoing risk to BGE and its customers, and as such, he was right to put his focus not on how much cash he could squeeze out of the company right now but on long-term issues of governance, market power and Maryland-based energy development. During his time as governor, Mr. O’Malley has secured hundreds of dollars in rate credits for BGE customers, but for most families, that money has come and gone without a second thought. The terms of this deal will benefit ratepayers every single month.

That’s not to say that an Exelon-Constellation merger is a great thing. It still takes a corporate headquarters out of Baltimore, and as EDF officials have pointed out, it greatly diminishes the chances for the construction of a new nuclear reactor at Calvert Cliffs and will almost certainly result in the loss of high-paying jobs here. But the criteria on which the Public Service Commission can judge this deal are narrow: Does it provide benefits for BGE customers, does it produce no harm for them, and is it in the public interest? With the terms Mr. O’Malley secured, the commission should be able to answer all three in the affirmative.

Wins nomination for full, four-year term as mayor

Stephanie Rawlings-Blake glided to victory in the Democratic primary Tuesday, securing the nomination for a full four-year term in the office to which she ascended last year.

In her first campaign for Baltimore’s highest office, Rawlings-Blake turned aside spirited challenges from a state senator, a former city planner and the vice president of the Greater Baltimore Board of Realtors, scoring more endorsements, raising more money and ultimately garnering more votes than the rest of the field combined.

Despite the competition, voter turnout was historically low. In a city where Democrats outnumber Republicans by more than nine to one, the primary win all but assures Rawlings-Blake of victory in the general election.

“Thank you for your confidence and your vote to have me continue as your mayor during these times. It is a humbling experience,” Rawlings-Blake, 41, told supporters at a post-election celebration Tuesday night. “I will work every day to make your lives better, to make our city better and to earn your confidence.”

She wished her opponents well.

“This campaign was good for our city,” she told the crowd at Soundstage Baltimore, a downtown nightclub.” It was a good race about issues and that people deserve the best from their government.”

Gov. Martin O’Malley, a staunch ally, proclaimed Rawlings-Blake’s win “a tremendous victory for Baltimore.” Rep. Elijah E. Cummings spoke of his pride in Rawlings-Blake, who he said was “like a daughter.”

In the Republican primary, Alfred V. Griffin held a 22-vote lead over Vicki Ann Harding with 288 of 290 precincts having reported.

Rawlings-Blake was elevated to mayor in February 2010 after Sheila Dixon resigned in a plea deal to settle corruption charges. The fact that she wasn’t elected to the office inspired an unusually high number of serious challengers.

But Democrats said her calm demeanor in the face of crises — the pair of blizzards that greeted her arrival in office, followed by two years of budget shortfalls and, most recently, a hurricane and an earthquake — inspired their confidence.

“I want to give her a full term,” Angela Lyles, 46, said after voting in East Baltimore. “She needs to get a fair chance.”

Democratic voters also backed City Council President Bernard C. “Jack” Young, who was appointed by his colleagues after Rawlings-Blake became mayor. Young trounced a field that included Thomas Kiefaber, the former owner of theSenator Theater.

State Sen. Catherine Pugh, former city planning director Otis Rolley, former Greater Baltimore Board of Realtors vice president Joseph T. “Jody” Landers and Clerk of Court Frank M. Conaway Sr. sought to turn the mayoral primary into a referendum on Rawlings-Blake’s leadership.

The challengers tried to paint her as the latest representative of an establishment that had been unable to make the city safe, maintain the public schools or grow the economy. They said she was too tightly allied with the wealthy developers who backed her campaign, and lacked the political independence to reverse decades of decline.

But the field split the anti-incumbent vote, bolstering Rawlings-Blake.

“It sort of chops up the vote into little slivers of the pie,” said Lenneal Henderson, senior fellow in the William Donald Schaefer School of Public Affairs at the University of Baltimore.

Pugh, who came in second to Rawlings-Blake, struck a defiant tone before a crowd of about 200 supporters.

“We believe leadership needs to listen,” Pugh said. “We can do better, and the reality is we have to do better.”

Pugh told reporters her campaign “didn’t have enough time” to get out its message.

“We entered the race knowing we were climbing uphill,” she said.

Pugh, who began her political career representing West Baltimore on the council, positioned herself as a candidate who possessed a vision for the city that she said Rawlings-Blake lacked.

Mike Perkins, 61, who voted West Baltimore’s Hazelwood Elementary Middle School, said Pugh was the best alternative to Rawlings-Blake.

“We need some changes,” he said. “Stephanie Blake is a rubber stamp.”

Pugh retains her seat in the state Senate. She is due to head back to Annapolis next month for a special session on congressional redistricting.

Rolley, 37, finished third. During the campaign, he kept up a steady drumbeat of criticism of Rawlings-Blake, and rolled out position papers detailing wide-ranging reforms for city government.

He told supporters that he was disappointed with low turnout. He called the end of his campaign the “beginning of a campaign to take our city back.”

Dan Lozier, a 29-year-old software engineer in Canton, said he liked the plans Rolley presented on his website.

“He really detailed what he wanted to do,” Lozier said. He said Rolley’s website compared favorably to the mayor’s campaign material, which he found to be “about as generic as it gets.”

Landers made the city’s property tax rate a central issue in the campaign.

The Baltimore headquarters of Constellation Energy Group, which agreed to sell itself to Chicago-based Exelon Corp., will see the “most impactful” job cuts related to the $7.9 billion deal, according to a top Exelon executive.

In a meeting with Exelon executives on Aug. 10, Exelon president and chief operating officer Christopher Crane said an undetermined number of cuts will affect legal, information technology, financial and other corporate positions, according to documents filed Tuesday with the Securities and Exchange Commission.

Corporate-related layoffs were expected because of consolidation and job redundancies under the deal, but Constellation and Exelon have said Baltimore is expected to have net positive jobs. That’s because Exelon will relocate some of its businesses — and its employees — to Baltimore.

“What we will look at is how do we get to our right numbers with everybody with a smile on their face,” said Crane in a transcript of the meeting. “It most likely won’t be possible in Baltimore and we’ve been very open with the folks there, but we also have people that are willing to move to Chicago, some folks in Chicago that raised their hand and said look, I’ll take a package and, so, we have to manage that properly ’cause you can’t do mass packages. But I think there’s a way we can do it where it’s less impactful.”

April 7, 2011

The Washington Post By Aaron C. Davis

Maryland lawmakers will not pass the centerpiece of Gov. Martin O’Malley’s environmental agenda, a plan to build one of the nation’s first offshore wind farms in the Atlantic Ocean, before they adjourn Monday, according to multiple sources close to the negotiations.

Sources in both chambers of the state’s General Assembly say lawmakers are expected to agree to further study the estimated $1.5 billion project in coming months and reconsider the legislation either this fall when they reconvene in a special session for redistricting, or in their 2012 session in January.

O’Malley lobbied lawmakers heavily in recent weeks to pass the measure. It is backed by a coalition of environmentalists as well as unions who believe construction of the massive turbines would bring 2,000 jobs or more to the state, as well as make Maryland a leader in green energy.

But the plan ran into significant opposition from both Republicans and Democrats in the legislature, who said they had too many unanswered questions about the potential costs on the state’s electric ratepayers.

Under a complicated set of steps laid out in the bill, the state would require Maryland utilities to sign 25-year agreements to buy offshore wind power at a price far above the current market rate. The subsidy would go to developers of the offshore wind farm who say they could not secure financing for the project otherwise. The cost would be spread among all residential and commercial customers through a monthly fee on electric bills.

For most residential customers the cost was estimated between $1.44 to $3.61 a month, for large companies and municipalities the surcharge could add up to 2 percent of their bills, or tens of thousands of dollars monthly.

Proponents attempted to counter concerns over the costs, arguing that with similar investments underway in Massachussets, Rhode Island and New Jersey, competition will increase and make the price of wind power competitive with that from fossil fuels. Maryland would also benefit, they said, by locking in a share of its energy prices with wind power for decades.

The House Economic Matters Committee is scheduled to vote on the bill this afternoon. Several lawmakers have prepared amendments to attempt to pass the bill to the House floor, but sources said that was unlikely.

March 23, 2011

The Baltimore Sun by Julie Bykowicz

With lawmakers on the fence about one of his signature legislative issues this year, Gov. Martin O’Malley today made the case that investing in offshore wind would help create jobs in the short term and stabilize energy rates over the long run.

The Democratic governor urged the General Assembly to pass his offshore wind plan because “if we don’t make the right choices,” he said, fossil fuels will continue to rise, global warming will continue and other states will jump ahead in the country’s relatively new push to harness wind for electricity.

O’Malley spoke at Annapolis’ City Dock, surrounded by environmental activists and building trades workers who stand to benefit from new jobs if the state adopts a plan to build and install steel wind turbines more than 10 miles off the coast of Ocean City.

But lawmakers have been reluctant about the plan and its associated costs, which would be passed along to utility customers across the state. Sen. Thomas “Mac” Middleton, chairman of the Senate committee considering the proposal, recently suggested it may need a study before lawmakers embrace it.

To allay fears about rate increases, O’Malley today suggested an amendment limiting the added cost to a maximum of $2 per month in the first year. Sen. Paul Pinsky, who has pushed for wind energy the past two years, said he’s not sure if the one-year cap would be enough to move the bill forward.

Less than three weeks remain in the 2011 legislative session.

Baltimore Business Journal – by Daniel J. Sernovitz , Staff

Anne Arundel County granted the Cordish Cos. approval Thursday to start work on its planned $500 million Maryland Live! casino near Arundel Mills mall.

Anne Arundel County Executive John R. Leopold said the county’s planning and zoning department approved site plans submitted by Cordish subsidiary PPE Casino Resorts Maryland LLC on Tuesday. That approval clears the way for the company to seek additional permits for grading and building construction, putting Maryland Live! on track for an initial opening in late 2011 and for final completion a year later.

“I’m pleased that we’re now moving forward,” Leopold said in an interview. “We hope that the construction jobs will become a reality before the end of 2011.”

The approvals follow a Nov. 2 voter referendum that gave Cordish the zoning it needs to move ahead with the development.

Leopold said the construction work is expected to create more than 1,500 jobs once started, but he deferred to officials from the Cordish Cos. for specifics on job openings and when the work will start. Cordish officials could not be immediately reached for comment. Information about jobs and contractor opportunities can be found at Maryland Live!’s website, www.ppecasinoresortsmd.com.

Cordish is still working with county officials on several related parts of the project, including traffic upgrades that will minimize the impact of the gaming venue on the roads leading to and around the mall complex.

As proposed, Cordish plans to break the project down into two phases. The first, a combined parking garage and casino with about 2,000 machines, is slated to open about a year from now. A larger facility with 4,750 machines and entertainment options including a restaurant concept by celebrity chef Bobby Flay, would follow in the fourth quarter of 2012.

Baltimore Business Journal – by Gary Haber Staff