Company Gains Investment and Strategic Flexibility
BGE Residential Customers to Receive One-Time Bill Credit
BALTIMORE, March 27 /PRNewswire-FirstCall/ -- Constellation Energy
(NYSE: CEG) today announced it has reached agreement with Maryland
political and regulatory leaders on a comprehensive settlement of prior
legal, regulatory and legislative issues. The company said the settlement
will enhance its strategic flexibility and provide a one-time rate credit
for Baltimore Gas and Electric (BGE) residential electricity customers by
the end of this year.
"This agreement provides far-reaching benefits for our customers, our
shareholders and the State of Maryland," said Mayo A. Shattuck III,
chairman, president and chief executive officer, Constellation Energy. "All
parties gain meaningfully in this carefully crafted settlement, and the
overarching value is a return to regulatory stability and normalcy. This
settlement allows our company and all Maryland stakeholders to move forward
confidently on the many energy-related challenges and opportunities that
lie ahead, including the potential for a new nuclear unit at our Calvert
Cliffs Nuclear Power Plant."
The settlement was negotiated with the Administration of Governor
Martin O'Malley and the Maryland Public Service Commission (PSC). It
incorporates a number of financial and regulatory agreements, as well as
legislative amendments that must be voted on and approved by the Maryland
General Assembly. The parties agreed, pending approval of legislative
amendments and finalization of terms, to dismiss pending state and federal
litigation.
Maryland authorities reaffirmed the validity of agreements signed with
BGE, Constellation Energy's regulated utility subsidiary, and other parties
in 1999 related to Maryland's electricity restructuring law. Therefore, as
part of this 2008 settlement, the PSC will close ongoing proceedings in
cases 9137 and 9099 relating to the 1999 settlement, and the required
legislation will eliminate the PSC's obligation to prepare final reports
specific to BGE, Constellation Energy or their affiliates pertaining to the
1999 settlement. All PSC cases and investigations relating to the terms or
performance of the 1999 settlement by BGE, Constellation Energy or their
affiliates are satisfied and fully released as a result of this 2008
settlement agreement.
Additionally, state law governing investments in companies that own and
operate a regulated gas and electric utility will be amended to eliminate a
restriction on companies acquiring more than 10 percent of the capital
stock of companies such as Constellation Energy or BGE. In addition, an
investor will be permitted to acquire up to 20 percent of the voting
securities of a company such as Constellation Energy without prior PSC
approval. Transactions that directly affect BGE will continue to be subject
to PSC review. Current Maryland laws regarding investment in companies
owning regulated utilities are more restrictive than in many states and
updating these statutes was a key priority for Constellation Energy. These
changes provide the company with greater strategic flexibility when
pursuing investment partners to help finance large-scale, capital-intensive
projects such as new nuclear plants. The settlement is contingent on the
approval of legislation during the current legislative session, scheduled
to run through April 7, 2008.
Constellation Energy will contribute $187 million in the form of a one-
time bill credit for BGE residential electric customers. It is anticipated
that the credit will be applied by the end of 2008 and amount to
approximately $170 per residential customer. For more than 50 percent of
BGE's residential customers, the credit is expected to result in a greater
than 10 percent reduction in electricity bills this year.
An additional benefit for customers relates to costs associated with
nuclear decommissioning activities at Constellation Energy's Calvert
Cliffs' Unit 1 and Unit 2, scheduled to occur no earlier than 2034 and
2036, respectively. BGE customers will be relieved of the potential future
liability for decommissioning both units. As part of the settlement,
Constellation Energy will, through 2016, continue to collect $18.7 million
per year in nuclear decommissioning costs for Calvert Cliffs and rebate
this amount to residential customers, as previously authorized by Senate
Bill 1, which was passed by the Maryland Legislature during a special
session in 2006. Constellation Energy does not anticipate the assumption of
this decommissioning liability from BGE's customers will result in material
incremental costs to the company when it is time to decommission Calvert
Cliffs.
As part of the settlement, BGE will resume collection of the
residential return portion of the Provider of Last Resort (POLR) revenue --
eliminated at the beginning of 2007 under Senate Bill 1 -- from June 1,
2008, through May 31, 2010. Additionally, the utility will implement
revised depreciation accruals.
As part of the agreement, BGE will not file an electric distribution
rate case in 2008. Any rate case filed in 2009 will not be effective prior
to October 2009 and would be capped at 5 percent. This will maintain the
utility's base electric distribution rates -- not including the cost for
the electric commodity -- at 1993 levels through October 2009. The
agreement does not cover natural gas rates, federally approved increases in
transmission charges, electric riders, tax increases or increases
associated with the state's Standard Offer Service power supply auctions.
"We were mindful that any settlement would need to balance the needs of
our residential electric customers and Constellation Energy shareholders,"
said Shattuck. "This package incorporates a direct and significant consumer
benefit, while strengthening the strategic position of Constellation Energy
as a leader in the competitive energy marketplace.
"Furthermore, it removes statutory barriers that could have slowed or
limited the growth of our company. Just as importantly, we've gained a
greater understanding with state leaders that the continued growth and
prosperity of Constellation Energy is beneficial for Maryland," Shattuck
said. "There is a commitment to putting the past behind us and focusing on
the investments needed to create jobs and power Maryland's economic
development."
Constellation Energy, through its UniStar Nuclear Energy partnership
with EDF Group, is well-positioned to play a leading role in America's new
nuclear renaissance. While the company has made no commitment to build, as
part of the settlement agreement it agreed that all things being equal,
Calvert Cliffs would be its number one site priority should it move forward
on plans for a new nuclear plant.
Constellation Energy agreed to elect two independent directors to the
BGE Board of Directors within six months.
Constellation Energy ( http://www.constellation.com ), a FORTUNE 125
company with 2007 revenues of $21 billion, is the nation's largest
competitive supplier of electricity to large commercial and industrial
customers and the nation's largest wholesale power seller. Constellation
Energy also manages fuels and energy services on behalf of energy intensive
industries and utilities. It owns a diversified fleet of 78 generating
units located throughout the United States, totaling approximately 8,700
megawatts of generating capacity. The company delivers electricity and
natural gas through the Baltimore Gas and Electric Company (BGE), its
regulated utility in Central Maryland.
SOURCE Constellation Energy
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Related links:
http://www.constellation.com
http://www.prnewswire.com/comp/084087.html /
CONTACT:
Media, Robert L. Gould, +1-410-470-7433, or
Investors, Kevin Hadlock, +1-410-470-3647, and Janet Mosher,
+1-410-470-1884, all of Constellation Energy
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