Executives from Constellation Energy Group and BGE told two General Assembly committees Tuesday that the 60-pagebill under consideration was bad for the companies, and “terrible for the customers of BGE.”
“We?re deeply concerned that it will cause a financial crisis for BGE,” said K.W. DeFontes Jr., president of BGE. “We are in an extremely high-risk position.”
The legislature?s bill creates “increased risk of doing business in Maryland” and will likely lead to further credit downgrades from Wall Street, forcing the company to pay higher interest rates to borrow money, such as the $1.1 billion in new debt it floated recently, DeFontes said.
The bill would fire the current Public Service Commission and establish a new commission, giving it new mandates to look at rates, the value of BGE assets, how electricity is acquired through auction, and the Constellation-FPL merger.
It is the uncertainty of the new regulatory setup that is most troubling, executives said. This will likely force the company to buy electricity at higher rates as out-of-state suppliers “incorporate greater risk premiums in our bids,” DeFontes said.
If passed, the bill could cost jobs and corporate charitable contributions in Maryland.
William Massey, a Washington lawyer who served 10 years on the Federal Energy Regulatory Commission, said the situation in Maryland had some similarities to the scenario in California that forced the bankruptcy of the nation?s second-largest utility.
After the state imposed rate caps, “what caused the problem is that the utility couldn?t recover their costs” for acquiring the power, Massey said. “I think Wall Street will be concerned,” Massey added.
