Exelon wanted to offer to build more renewable energy, lower credit to residential customers as part of its US$7.9B bid for Constellation Energy, company's president, COO Christopher Crane says
November 2, 2011
– Exelon wanted to offer to build more renewable energy as part of its $7.9 billion bid for Constellation, the company's president testified Tuesday as top executives for both appeared for a second day before Maryland regulators.
The deal includes a $100 credit for each residential customer of Constellation's regulated utility, Baltimore Gas and Electric, as well as a promise to build 25 megawatts of renewable energy in the state.
Exelon President and Chief Operating Officer Christopher Crane said he originally wanted to include more renewable energy and a lower credit in the deal. However, Crane said Constellation CEO Mayo Shattuck told him he believed the Maryland Public Service Commission viewed rate credits as more of a benefit to the consumer.
When asked if the company considered building more renewable energy and not lowering the credit, the Exelon CEO said the company was willing to negotiate. However, Crane said he felt an estimate by the companies, valuing the 25-megawatt project between $45 million and $55 million, was an adequate commitment.
"We're willing to negotiate and move things back and forth, but we think the total value of the package meets the test," Crane said.
Shattuck said he " felt more strongly about the credits," adding the Constellation board debated the overall commitment throughout the negotiation process and by the end the commitment went up for the residential credits, renewable energy and a new downtown headquarters for BGE.
"We felt it was very important to work on that issue," Shattuck said, adding it took the Constellation board up to the last minute to approve the package.
The two companies have also promised not to cut BGE's workforce for two years.
Shattuck and Crane took the stand together before the PSC for a second straight day and were questioned for most of the day by an attorney for French energy firm Electricite de France.
EdF is a large Constellation shareholder and nuclear energy partner that is opposing the deal because of the impact the company believes it will have on Constellation's nuclear unit. Gov. Martin O'Malley's administration has also asked regulators to reject the deal unless changes are made, saying it poses risks for BGE customers.
The two were also questioned by an attorney for the new owners of the Bethlehem Steel power plant, who asked about the lack of credits for commercial customers of BGE, and attorneys for the city of Baltimore and the Sierra Club and other environmental groups.
The hearing continued late into Tuesday with questioning by an attorney from the Office of the People's Counsel, which represents consumers before the commission. Attorney Bill Fields questioned Crane on how much local control BGE would have after the merger.
Crane said the utility would be run locally as are Exelon's other two utilities, but if safety or performance suffers, Exelon will step in.
The Exelon executive was asked if BGE would be held to a 10 percent return on equity target as other Exelon utilities have been held to in the past, and whether BGE would ask for rates to meet that target.
"It will be a balance" between what regulators will approve, customer care, performance of the unit and other factors, Crane said, adding that the BGE board would ultimately decide. Fields then asked if the BGE board would be elected by Exelon officials, and Crane said it would be.
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