Maryland legislators and Constellation Energy may have reached an accord on Baltimore Gas & Electric Co.?s rate increase but the deal hasn?t calmed a still nervous Wall Street.
Fitch Ratings, a Wall Street investment ratings firm, said the deal hasn?t changed Fitch?s outlook for BGE and parent Constellation, which is less than optimistic.
“While the legislation eliminates some of the uncertainty regarding future rate increases. Fitch?s concerns with the legislation include the dismissal and replacement of all current Public Service Commission members, the large deferred energy balance created by BGE, and the long-term rate reductions or tariff offsets mandated for the utility,” said Ari Kagan, an analyst with Fitch.
Kagan echoed concerns mentioned by business leaders and others.
“The legislation?s firing of the PSC raises concerns about the composition and independence of a new Commission and ongoing political constraints upon timely recovery of future utility cost increases,” Kagan said.
The Maryland Chamber of Commerce said in a release that the legislation “damages Maryland?s business and regulatory environment.”
The chamber dislikes “arbitrarily repealing a $6 million income tax credit from BGE in the middle of a tax year.”
Also unclear is a planned merger of Constellation with FPL Group, a Florida-based energy company.
The plan approved by the Maryland General Assembly calls for a 15 percent initial rate increase for 11 months beginning July 1 with a move to market rates by Jan. 1, 2008.
Next year, BGE can begin charging customers a monthly fee to recover the costs of deferring the increase.
Fitch considers BGE?s outlook as “negative” and Constellation Energy as “evolving.”
The ratings “remain unchanged” Kagan said.
“Fitch expects to resolve the Negative Outlook Rating for BGE and Evolving Outlook for [Constellation Energy] once there is greater clarity on several issues,” Kagansaid.
Those issues include: ” The PSC?s composition and willingness and ability to allow BGE timely cost recovery, the completion or termination of the FPL merger, and the ultimate impact on [Constellation Energy?s] and BGE?s long-term financial profiles.”
