December 11, 2023
Annapolis, US 40 F

Letter: Thoughts On The Constellation-Exelon Merger


The proposed merger of the year by the executive staff of Constellation Energy and Exelon Energy is a dangerous and unreasonably expensive charge to all rate payers of Baltimore Gas and Electric. If the Maryland Public Service Commission fails again, as they did in 2008 to protect the best interests of the ratepayers of BGE by forbidding this merger (as Senators Pipkin and Rosepepe pointed out in their letter to the PSC that the PSC is legally required to protect ratepayers best interests) they should all lose their appointments, for the reasons below.

First a little history, sometimes known as spinach time. In the 1990s, the fad of energy deregulation swept the country and along with many other states Maryland swallowed the bait hook, line, and sinker. The initial result of energy deregulation created the most massive white collar crime wave in history with the rise of ENRON which proceeded about 10 years ago to defraud the electricity ratepayers of California. That criminal enterprize could not have happened in a traditional energy regulated environment, but just as prohibition brought us a crime wave by the mob, energy deregulation produced a similar crime wave, this time in the white collar financial industry of energy trading.

In the middle of the last decade, Mayo Shattuck, CEO of Constellation Energy decided to make it an energy trading giant, only to lose so much money in the trading game that Constellation’s stock price went from $100/share to $20/share in short order. Constellation was within hours of bankruptcy when Berkshire Hathaway’s Mid American Energy offered to buy Constellation Energy for $26.50/ share and a signed agreement was announced in a SEC EDGAR filing on 9/23/2008 which also included a billion dollar loan to Constellation Energy. Mr. Shattuck knew he was going to lose his job (now being compensated in total benefits at the rate of $15 million/yr in a recent EDGAR filing) so he looked for a savior. Alas, he found one in the form of Electricity De France (EDF) and sold 49.9% of Constellation’s nuclear capacity consisting of five nuclear reactors to EDF for a reported $4 billion. Regretfully, the Maryland PSC allowed this action, clearly violating their legally required responsibility to protect the ratepayers’ best interests, and Mayo Shattuck then paid off Mid American Energy with approximately a half billion dollars in penalty for defaulting on the merger agreement. Meanwhile the price of electricity DOUBLED in Maryland. Mid American Energy, a regulated utility, charges 8.35 cents/KWH to it’s 2.4 million customers, and has not raised its rates since 1999. BGE charges 14 cents/KWH and Exelon charges 17 cents/KWH, fully 100% more than Mid American Energy’s customers. Mid American Energy has managed to invest $5.4 billion in the creation of 2,909 megawatts of wind power over this time.

This most recent merger of the year with Exelon is expected to produce a $36 million windfall to the Constellation Energy executive ranks with Mayo Shattuck pocketing $13.4 million personally, and the rest distributed from the wallets of BGE ratepayers into the pockets of the executives. This is exactly what the Occupy Wall Street Protests are all about. There is no conceivable economic reason for this unconscionable and unreasonable transaction. It is also dangerous because it has the potential for the merger of Exelon a $29 billion market capitalization company with the world’s largest antique nuclear power plant fleet, all more than 30 years old, and Constellation Energy, an $8 Billion market capitalization company. It will create the most “too big to fail” organization in the electric power industry that would cause a major disaster should an economic catastrophe strike the merged companies with a market capitalization of $37+billion. Should a bankruptcy occur, the ratepayers of such an organization would get killed with pass through charges.

Martin O’Malley has made a major blunder by flip-flopping on the merger from opposition to support, and has risked his political career on the same cross of electricity that crucified Gray Davis‘ political career in California with the ENRON debacle.

The Maryland PSC should deny this merger immediately if not sooner.

Charles L. Rogers, MD, Edgewater


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