What should have been an upbeat conference call reporting good first-quarter earnings for Constellation Energy turned out to be a session dogged by questions from worried industry analysts.
The uncertainty of whether the Public Service Commission will approve Constellation?s subsidiary Baltimore Gas & Electric Co.?s 19 percent rate increase in July or whether the Maryland General Assembly will come back in a special session to force more concessions from the company cast a pall over the Friday morning call.
Constellation?s Chairman and CEO Mayo A. Shattuck III told analysts and shareholders that if the company is forced to give more concessions to get approval for its merger with Florida-based FPL Group, the deal could die.
“We could decide to terminate the merger,” Shattuck said.
While analysts asked a variety of questions about Constellation?s operations, questions kept circling back to the bitter fight between the energy company and state legislators.
“The intensity of the debate was more than anyone could have predicted,” Shattuck said.
Analysts repeatedly asked Shattuck if he expected the legislators to call a special session, after an earlier rate deal died in the state Senate.
Shattuck said he doubted this would happen.
“[If lawmakers go back into session] it puts them out of the business of raising money for reelection,” Shattuck said. “We?ll have to wait and see.”
Shattuck added that once the PSC approved the rate plan, it would take lawmakers several weeks to digest it.
The battle between Constellation and state lawmakers is already having a negative effect on the company credit standing.
Earlier this month, Moody?s Investors Service downgraded the bond rating of Constellation subsidiary Baltimore Gas & Electric Co. from A2 to A3. This affects the interest rates the energy company must pay when it borrows money. In a statement, the New York bond-rating firm said it lowered the rating because it believed BGE would not be able to raise rates over the next several years by enough to cover the increased cost of purchasing power.
If the PSC does approve the new rate deal, BGE ratepayers can still choose to take the original 72 percent rate increase, or opt-in for gradual rate increase.
When pressed by analysts as to when the PSC would make its decision on the rate plan Shattuck replied, “hopefully, we will hear something in the next few days.”
Fast facts
Constellation Energy Group Inc.,
750 E. Pratt St., Baltimore;
constellation.com
» Full Time Employees: 9,850
Source: Yahoo! Finance
