Some say politics ultimately killed the merger of Constellation Energy and Florida-based FPL Group.
Others say Constellation erred when it linked the unfavorable 72 percent consumer utility rate increase at subsidiary Baltimore Gas and Electric with the planned merger.
The rate increase, which alarmed citizens, became a rallying cry for members of the Maryland General Assembly determined to mitigate its impact. The General Assembly approved a measure that limited the rate increase?s impact and attempted to ditch sitting members of the Maryland Public Service Commission, which has a say in approving the planned merger.
“Politics killed the deal for better or worse,” said Anirban Basu, chief executive officer of the Sage Policy Group, a Baltimore-based policy and economic consulting group.
“It was all about posturing. Everyone knows that the politics have been very divisive and so contentious that the economics of the merger never surfaced,” Basu said.
Constellation and FPL Group announced merger plans in December 2005 and, at the time, expected approval within the year. But as the end of the year neared and it looked like hearings and merger approvals were not on the horizon, Constellation pulled the plug.
“As we considered the situation in Maryland, we determined the risks and uncertainties were too significant to overcome,” said Mayo A. Shattuck III, chief executive officer of Constellation Energy.
Over the past several months, Shattuck and Lew Hay, CEO of FPL Group, had quietly expressed increasing doubts about the planned merger. They canceled talks about merging staff and operations.
Although they won a lawsuit challenging their firings, members of the public service commission weren’t certain they could even legally make a decision on the merger. In its ruling, the Maryland Court of Appeals let stand a provision of the law passed by the General Assembly preventing the sitting commission from approving the merger.
Public interest groups said they were prepared to argue against the merger in debate before the public service commission.
“This is a victory for consumers,” said Johanna Neumann, policy advocate for Maryland Public Interest Group.
“The deal would have created an energy giant that would have been able to dictate rates.”
