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May 23, 2006 (9:50a) - CEG Lawsuit Appeal
Rejected
The Maryland Court of Special Appeals rejected
CEG's appeal to overturn the Baltimore District Court's ruling which prevents
the company from disseminating public information regarding the 72% rate
increase plan.
The decision will effectively allow state politicians and
public groups to pressure the PSC into a re-hearing on the rate increase.
Along these lines, Baltimore City has filed a second motion
formally requesting a PSC re-hearing and attempting to compel the PSC to
include cross examination and expert witness testimony, which was not permitted
at the initial hearing.
May 17, 2006 (11:55a) - CEG Lawsuit Appeal
Filed
CEG has filed an appeal with the Baltimore
District Court to reverse the decision preventing the company from providing
public information related to the rate increase plan. A CEG press release
states the following:
"Yesterday in a filing with the Circuit
Court for Baltimore City, BGE also requested that the case be remanded back to
the PSC for cross examination pertaining to the Rate Stabilization Plan. BGE
contends that the PSC order approving the optional rate stabilization plan is
valid as it stands. However, BGE is seeking to expedite resolution of the rate
stabilization plan so that its customers will have the option to phase-in the
market prices on July 1."
This appeal is expected to be denied as the Court clearly
intends to deal with the lawsuit, in full, on May 30.
May 12, 2006 (8:20a) - Rate Increase Lawsuit
Status
The Baltimore Circuit Court did not rule on the
motion to block the rate increase agreement yesterday as anticipated, but did
rule that BGE (CEG) can not distribute information to customers regarding the
rate plan until the primary lawsuit is decided. An additional hearing has been
scheduled on May 30 for the case.
According to various reports, the ruling has motivated
Assembly members to increase efforts in forcing a special session over the next
two weeks. Thus, even if Mayor O'Malley's motion is denied, lawmakers now have
adequate time to obtain the required petition signatures for a special session.
If this does in fact occur, the special session would most likely be held in
early/mid-June.
May 11, 2006 (10:55a) - Rate Increase Lawsuit /
MD Assembly Status
Baltimore Mayor Martin O'Malley's lawsuit to
block the rate increase agreement between CEG and Governor Ehrlich was heard
yesterday in a Baltimore Circuit Court. A decision is expected as early as
today. The general impression at this point is that Mayor O'Malley's claim will
be denied by the Circuit Court Judge, thereby leaving any further action to the
Maryland State Assembly.
With respect to a possible special session for the State
Assembly, there now appears to be some doubt as to whether there will be enough
support to force the Governor to call the extra session. Senate President
Thomas V. Mike Miller Jr., a democrat, has not given his support to the special
assembly petition at this stage and this may result in a shortage of required
signatures. However, petition leader Curt Anderson claims he has obtained
additional support and expects to have enough signatures before the end of this
week.
It continues to be expected by this publication that
pressure from constituents will ultimately provide enough Assembly support to
call a special session into order.
May 4, 2006 (8:15a) - Maryland Assembly
Status
According to published reports, a petition for a
special General Assembly session will have enough signatures by next week from
lawmakers to force Governor Ehrlich into calling the additional session. The
petition must have the signatures of 25 senators and 71 delegates under
Maryland statute to trigger the special session. As of yesterday, 15 state
senators and 42 delegates had signed the petition.
This publication continues to fully expect a special session
to be called, at which time legislation will be created that will directly
impact the direction of this transaction.
May 2, 2006 (8:40a) - Maryland PSC
Status
CEG has issued the following statement regarding
the Maryland PSC's
rate increase order:
"(T)he company has strong reservations
about aspects of the PSC order, and today filed for a rehearing to preserve its
right to challenge certain commission findings at a future time.
"By deferring customer interest payments related to
rate deferral, the PSC is forcing BGE to borrow far more - perhaps tens of
millions of dollars more. The utility's contributions to the rate stabilization
plan already were generous. BGE recently offered to cover interest expense for
qualified low-income customers. But the order errs by deferring interest
payments for all customers, regardless of their ability to pay. Some customers
do have the means to pay the modest carrying charges and should, rather than
deferring such payments into the future. To force even more debt on BGE's
shoulders will put an additional strain on the utility's finances, potentially
raising costs for all customers."
It is somewhat surprising that CEG would take this position
given that the PSC has essentially given in to the company's and ignored
immense public concerns for the rate increase plan in any form. By requesting
another hearing, CEG (and FPL) are exposing themselves to intensified
opposition and criticism on several fronts and creating greater risk for the
the transaction in general.
It seems highly unlikely that the PSC will amend its
decision and re-instate customer interest payments. This action would infuriate
the public and state representatives alike, all but ensuring legal actions from
both.
A response from the PSC is expected shortly and will be
posted immediately as it is made publicly available.
May 1, 2006 (9:45a) - Maryland PSC
Status
As expected, the
Maryland PSC
approved the rate increase implementation plan in a 4-1 vote, despite major
public protests during the hearing process. The four votes in favor of the plan
are Governor Ehrlich appointees, with the lone dissenter a non-appointed
Democrat.
It is abundantly clear that State Assembly members allowed
the Governor/Company agreement and PSC process to play out in order to add
momentum to what is now a probable special session to be called within the next
few weeks. The situation in Maryland has reached the point where
representatives will have no choice but to demand a special session to address
the various rate increase and merger issues, and will almost certainly undo the
apparent progress made over the last two weeks. There is simply to high a level
of public opposition, within an election cycle, for the legislators to ignore
at this point.
It is therefore anticipated that the companies will soon be
forced to deal with major concessions, and very likely a new PSC, if and when a
special Assembly session is convened. Perhaps by the end of this month, FPL
will need to re-assess its desire to complete the transaction under what are
likely to be very strict conditions set by the Assembly.
April 27, 2006 (9:40a) - Maryland PSC
Status
The
Maryland PSC will
hold a hearing today to consider the rate increase agreement reached between
CEG and Maryland Governor Ehrlich. As the current Commissioners are Ehrlich
appointees, the agreement is fully expected to obtain PSC consent shortly after
the conclusion of the hearing.
April 25, 2006 (9:00a) - Maryland Status
The
Maryland PSC has
cancelled the public hearings in this case, which were scheduled to begin
yesterday (4/24). The cancellation is due primarily from labor and consumer
group requests that Governor Ehrlich's rate increase agreement with the
companies be reviewed before more forward with the PSC process. No new date for
the public hearings has been established as of this entry.
Additionally, reports indicate that State Assembly members
are now moving towards calling a special session in order to address the rate
increase agreement and other issues involving the merger. Not surprisingly, the
calls for a special session are begin driven by public concerns which have
(again, not surprisingly) escalated in the last few days.
It is extremely unlikely that public concern/opposition will
abate any time soon, and this will surely result in Assembly members reacting
quickly in getting the merger/rate increase issues back into the spotlight via
a special session. It is anticipated that this will occur within the next two
to three weeks, at which time the companies will again be facing the prospects
of state government oversight of the deal, as well as a potential rejection of
the rate increase agreement.
April 21, 2006 (9:15a) - Maryland Rate Increase
Agreement Reached
CEG yesterday reached an agreement with Maryland
Governor Ehrlich to reduce and defer the 72% rate increase that has become a
major issue in this transaction. A CEG press release states the
following:
"The plan filed with the PSC today is not
contingent upon Constellation Energy’s proposed merger with FPL Group,
Inc. But the merger could still greatly benefit BGE customers. In the final
days of the 2006 Maryland General Assembly session, Constellation Energy
reached an agreement with the Governor and legislative leaders that would have
provided $600 million in benefits to BGE customers, spread over 10 years. A
bill including that proposal died on the Senate floor in the final moments of
the session, but Constellation Energy is standing by this offer and will
contribute $600 million over 10 years to help lower rates for all residential
customers, including those who opt-in to the rate stabilization plan, subject
to the close of its merger with FPL Group."
This is obviously a very positive development for the
transaction, but by no means does it assure that other major obstacles will be
removed as a result. The PSC member situation remains a critical aspect for the
deal, and there still has been no indication that state politicians intend to
abandon the effort to replace the current Commissioners. As this continues to
be a major political issue, it is more likely that the Assembly will keep it in
the spotlight over the coming months and continue to challenge the PSC and the
Governor by making the deal as difficult to complete as possible.
April 13, 2006 (8:35a) - Maryland Status
As of this entry, Maryland Governor Ehrlich has
not called a special session of the State Assembly in order to resolve the
issues surrounding this transaction. Apparently, the Governor now believes he
will be able to arbitrate the situation single-handedly, describing himself as
"the only game in town." It also seems apparent the the Assembly
members are currently content to allow the process to remain on hold until
further notice from the Governor.
It therefore remains very difficult to predict the outcome
of this mess, given the highly politicized and uncertain direction of the key
issues. There continues to be no indication that Assembly members will back
down from the initiative to replace the current Maryland PSC leaders, and a
formal appeal can be expected to be filed very shortly in this matter.
Obviously, there remains enough volatility in this situation to suggest that a
negative outcome in the deal is very possible, if not probable.
April 11, 2006 (8:20a) - Maryland Status
The companies and Maryland lawmakers failed to
reach a rate-increase agreement before the State Assembly session ended
yesterday. The sticking point is the PSC members issue, which Governor Ehrlich
refuses to concede in an effort to maintain his authority. It appears that the
Assembly is determined to replace the PSC Commissioners regardless of the
Governor's efforts and this will very likely create significant delays, if not
complete failure, for the merger transaction.
The Governor is expected to call a special session of the
Assembly at some point today, which would begin next week.
April 10, 2006 (9:15a) - Maryland Status
(Addendum)
According to published reports, the companies
and Maryland State Assembly representatives are currently less than $225m apart
in negotiations for resolving the CEG rate increase issue. It is also being
reported that the Assembly will hold a special session is an agreement is not
reached before the end of session today.
Additionally, a Maryland judge blocked the attempted
replacement of Maryland PSC commissioners, which can be considered a temporary
victory for the companies. However, the state has indicated it will appeal the
decision shortly.
For the moment, there appears to be some hope for a positive
outcome for this deal where the Maryland legislature is concerned. Further
development are expected to be announced during the day and will be posted
immediately as they become available.
April 10, 2006 (8:50a) - Maryland Status
On Friday (3/7), Maryland Governor Ehrlich
vetoed all three bills relating to this transaction, deeming them
"unnecessary." The General Assembly remains expected to override the
vetoes during today's session.
April 7, 2006 (8:05a) - CEG Employee
Communication Details
Late yesterday, CEG disclosed
this inter-office
e-mail to employees, which contains the following passages:
"We believe some in the Legislature have
underestimated the value of our proposals, while others fail to appreciate the
reality of today’s energy markets. The irrefutable fact is that the rate
increase is due to globally rising commodity fuel prices that are well beyond
the control of BGE or Constellation or the state of Maryland. We have fully
explained that if rates were adjusted to today’s prices, they would still
only be 66 percent higher than 1993 rates, while other commodities like gas,
heating oil and coal have all risen more than 100 percent. We explained that
BGE has not profited from the cost of the electric commodity. And, we explained
the discriminatory aspects of capping BGE customer rates while allowing other
Maryland utilities to charge rates 40 percent to 50 percent higher than ours at
a time when BGE is transitioning to market rates. I am comfortable that
lawmakers have the facts, and now they must find the resolve to deal with them
fairly and judiciously.
"In addition to the rate issue, the Legislature has
passed a number of bills that would unfairly—and, we believe,
illegally—attempt to extract hundreds of millions of dollars from
Constellation Energy and BGE, and require legislative approval of the merger.
These proposals would put unreasonable strains on our balance sheet and
threaten the merger, but there is an even more important issue at stake. We
can’t allow the future of our company to be overly influenced by an
election-year political debate. We have an obligation to protect our employees,
our shareholders and our future—and we will."
Obviously, the companies intend to remain defiant in the
face of overwhelming and increasing opposition among Maryland citizens (i.e.
voters) and politicians. It is somewhat surprising that the companies would
continue to maintain this posture leading up to the close of the State
Assembly's session end on April 10, knowing full well these issues will
continue to gain momentum leading into the next session.
Presumably, the companies will quietly reverse their
position during the Assembly break and attempt to salvage the deal via serious
negotiations on the volatile rate increase issue. Until this process moves
forward constructively and in good faith, there seems to be little chance the
deal will be successfully completed at this time.
April 5, 2006 (9:05a) - CEG Response to
Legislative Actions
CEG, via Baltimore Gas & Electric officials,
has publicly voiced its displeasure with the Maryland State Assembly's
involvement in the merger and rate increase situations. According to reports,
CEG states the following:
"They understate the value of our proposal
and overstate the value of their leverage. The legislature needs to be more
realistic."
Unfortunately, this type of backlash from the companies will
only increase the political resolve to intervene in the deal and it is somewhat
surprising that this type of combative tactic is being used. The companies are
now, without any doubt, in a position that requires complete cooperation with
the Maryland legislature. Defiance at this early stage serves absolutely no
purpose and will be perceived by the public as additional reason to oppose the
merger and rate increase.
Oddly, it is almost beginning to appear that the companies
are taking the steps to sabotage the deal at this point.
April 4, 2006 (8:20a) - Status Report
The Florida PSC has decided to intervene in the
FERC review, although the PSC does not have any formal jurisdiction over the
merger. The PSC involvement appears to be essentially information gathering at
this point and very likely will little or no impact on the actual FERC review.
In Maryland, the state assembly has voted to replace the
current state PSC Board and will in turn choose four of the five next Board
members, allowing the Governor to select the fifth member. Naturally, this
development will have a major impact on the merger review, as the
assembly-selected members are fully expected to favor severe concessions from
the companies.
There have been several reports from Maryland publications
that Governor Ehrlich is considering vetoing the recent merger oversight
measures, but this would be political posturing only, as the assembly currently
has plenty of support to override any gubernatorial veto.
March 31, 2006 (8:35a) - Maryland Status
Yesterday's Maryland State Senate vote was
39-7 for the bill to give veto power to the legislature and to appoint
special counsel to independently review the merger outside the PSC review. The
support for the measure is significant two reasons: 1) a veto by Governor
Ehrlich would be easily overturned with the current vote count, and 2) the vote
sends a very clear message that the companies efforts to this point fall well
short of the assurances necessary for the deal to move forward.
Regardless of the companies' claims yesterday that ongoing
discussions have been "'productive," the situation in Maryland
continues to become more ominous each day. If the companies intend to proceed
in the same manner (essentially defiant) as they have to this point, there is
very little chance the transaction will be successfully completed. In other
words, FPL needs to re-evaluate it approach and allow major concessions from
CEG in order to turn this situation around.
At this stage, FPL seems unwilling to do this.
March 30, 2006 (9:05a) - Maryland Status
The situation in Maryland appears to becoming
more difficult for the companies despite it efforts to ease rate increase
concerns. Yesterday, the state Senate voted to block the merger if the
companies fail to $528 million directly to residential customers as a direct
form of rate relief. On Senator was quoted with the following after the
vote:
"This is saying we've got a hammer, and
we're going to bring it down on your head."
In addition to this measure, the state Assembly has rejected
the companies' "aggressive plan" announced on March 28, sending a
very clear message that major concessions will be required in order to even
begin swaying opposition to the merger.
Negotiations are expected to resume today, but it is not
anticipated that any type of breakthrough will occur at this time.
March 28, 2006 (4:20p) - Rate Increase Plan
Announced
The companies have announced an "aggressive
plan" designed to reduce the immediate impact of BGE's large rate
increases, which have become the center of controversy among Maryland consumers
and politicians. A joint company press release states the following:
"As part of our proposal, we have taken the
unusual and creative step of offering substantial economic incentives directly
linked to the closing of our proposed merger with FPL Group to reduce the
residential rate increase to a more affordable amount for our residential
customers. We're drawing upon all resources company-wide to support a
far-reaching plan that is in line with electric rate increases seen in Maryland
during the past two years, insulates customers from the full impact of
skyrocketing fuel prices, and allows for a manageable phase-in to market
pricing."
The key word above is definitely 'creative.' This is a
highly calculated and significant move by the companies and, on the surface,
should be received relatively positively by a significant amount of state
politicians. However, this action is also a very transparent attempt to force
the merger issue in response to rapidly growing -- and potentially
deal-threatening -- opposition.
It is unclear at this point if the rate plan will appease
enough of the state Assembly and, perhaps more importantly, the constituents,
to shift the current overall opinion of the deal towards support. Maryland
Governor Ehrlich will clearly support the rate plan and oppose legislative
actions for oversight of the deal, which will obviously be a net positive.
Unfortunately, the political climate and sentiment regarding the energy
industry is decidedly unfavorable for the companies at this stage and it is
entirely possible that this 'strong-arm' tactic will backfire. This is much
more likely to occur in Maryland, as has been discussed previously.
March 27, 2006 (7:40a) - Maryland Status
Not surprisingly, the Maryland House Economic
Matters Committee panel voted to recommend a bill giving the state General
Assembly full veto power over this transaction. The bill will now be forwarded
to the General Assembly for debate. The date of this event has not yet been
established.
It remains fully expected that this bill will be signed into
law, creating a significant obstacle for the companies in the coming months.
March 24, 2006 (10:35a) - Maryland
Status
Despite CEG's rate increase deferment efforts,
Maryland lawmakers have decided to proceed with a bill that would give the
State Assembly consent authority over this transaction. The bill also includes
provisions giving the State Attorney General statutory involvement in the
merger review on behalf of consumers.
The current expectation is that the bill will be presented
to the State House of Delegates at some point next week for debate.
Given the mounting opposition to the deal and concern over
energy rates, this will be a highly publicized bill in the coming days and it
is currently assumed that Maryland lawmakers will ultimately vote the bill into
law. It is unclear what, if any, measures the companies can take to stall or
prevent this action, but it is generally assumed that this process it outside
the companies' control at this point.
March 22, 2006 (8:50a) - Maryland Status
CEG has taken the first step in attempting to
appease Maryland lawmakers in offering to defer announced rate increases
(+/-72%) on a staggered basis through 2014. At this point, the offer is in its
most preliminary phases, and has received only a lukewarm response from state
politicians. Several members of the state assembly continue to insist that the
merger be blocked until the rate increases are permanently reduced, so the
company's current efforts must be viewed as an initial step in reaching some
sort of compromise with the strong political opposition. This process is
expected to continue well into the summer of this year.
In other developments in Maryland, the state Capitol's
newspaper (The Capital) recently published
this editorial calling for the merger to be stopped, citing
CEG executive compensation, in light of the rate increases, as the primary
reason. The editorial reaches the following conclusion:
"Constellation is seeking to take windfall
benefits for its executives - while sticking the taxpayers with the bill by
forcing high rates that will make it a more attractive merger partner for FPL.
This deal should be stopped."
It seems rather apparent that current climate in Maryland is
decidedly anti-CEG and very much anti-Merger. This is not terribly surprising
given the magnitude of the deal -- CGE's Baltimore Gas & Electric is a
state icon and the first public utility in the U.S. -- and the negative overall
sentiment surrounding energy costs. It would be an understatement to say the
companies have their work cut out for them in turning public/political
opposition around in favor of the transaction. This process promises to be
extremely long and arduous, and without offering major concessions and
promoting the deal in the most favorable light, the transaction will remain
tenuous at best.
March 13, 2006 (10:05a) - Maryland PSC Status
(Addendum)
It will be added that CEG has publicly claimed
that the Maryland
PSC has no jurisdiction to block this transaction and that it believes the
PSC should concluded its review by June of this year.
This claim has been met with fierce criticism from Maryland
politicians and will very clearly not serve the best interests of the companies
where this merger is concerned.
While the PSC may indeed not have the authority to actually
block the merger, it certainly has the ability to impose debilitating
conditions as well as stall the review process as it determines necessary.
Additionally, it is now becoming very clear that the PSC, if not the Maryland
legislature will soon have the power to block the transaction.
March 13, 2006 (8:35a) - Maryland PSC
Status
The
Maryland PSC has
adopted the following procedural schedule in its review of this
transaction:
| April 25, 2006 |
Hearing on Direct Testimony |
| April 26, 2006 |
Hearing on Direct Testimony (if necessary) |
| May 26, 2006 |
Filing of Reply Testimony |
| June 23, 2006 |
Filing of Rebuttal Testimony |
| July 10 & 12, 2006 |
Public Hearings |
| August 7-9, 2006 |
Hearing on Reply and Rebuttal Testimony |
| August 10 & 14, 2006 |
Public Hearings |
| August 30, 2006 |
Initial Brief Due |
| September 13, 2006 |
Reply Brief Due |
| September 20, 2006 |
Oral Argument (if necessary) |
Not that the procedural schedule does not include a
projected decision date. This is not surprising given the magnitude of this
transaction and the PSC's tendency to re-schedule decision hearings multiple
times before formally acting in most cases. It should also be noted that this
procedural schedule is subject to revisions as the review process moves
forward.
The PSC review for this deal will very obviously not be an
easy process for the companies and could very easily extend well into the
fourth quarter of this year, if not the first quarter of next year.
Additionally, if the Maryland State Legislature succeeds in passing into law
provisions providing for oversight of this merger, the possibility of the deal
falling through will be greatly increased.
The companies will very likely be required to agree to major
concessions in order to obtain clearance in Maryland, the nature of which will
become more clear over the coming months. The Maryland PSC and/or political
involvement continue to be considered significant issues for this deal and
could eventually develop into a deal-threatening situation this fall.
March 2, 2006 (8:35a) - FERC Status
The FERC has posted
this reply letter to Senator Bill Nelson, who has directly
expressed concerns regarding this merger to the regulatr. The FERC letter
states the following:
"(B)efore making a final decision on the
proposed Constellation/FPL merger, the Commission will evaluate the complete
record and carefully consider the positions of the parties and any potential
negative effects on consumers."
March 1, 2006 (11:15a) - FERC Status
The companies yesterday filed an "Errata
and Supplemental Information" document with the FERC. The filing is
available by following
this link. The errata issues are characterized as
insignificant to the market study. The supplemental information includes a
request that certain information be deemed confidential as the FERC review
proceeds.
February 28, 2006 (8:40a) - Maryland
Status
According to published reports, Maryland state
senators (led by Leo E. Green) are now considering legislation that would give
the General Assembly review and approval/rejection authority of this
transaction. At this time, there has been no formal bill drafted regarding this
proposal.
Additionally, the
Maryland PSC will
hold preliminary hearing on the merger today, the details of which are not
currently available. It is presumed that the hearing will focus mainly on
procedure and will establish the basis for a formal procedural schedule going
forward. Any developments from this hearing will be posted when available..
February 24, 2006 (11:05a) - Additional
Opposition Details
According to published reports, more opposition
has developed to this transaction -- only now it involves Florida consumers as
well as those in Maryland. Florida members of
ACORN have
reportedly intervened with the
Maryland PSC,
joining an growing number of political and public opponents.
Furthermore, it is now known that at least 35 Maryland state
senators are involved in a resolution requesting the MD Attorney General's
involvement in the deal review.
While opposition and/or intervention is certainly a normal
part of utility review processes, the amount and momentum of the concern in
this case is very unusual. Once again, it is now believed that the Maryland PSC
review presents a much more difficult, and time consuming, process than the
companies originally anticipated. Completion of the merger during the third
quarter of this year seems highly unlikely given the developments to date. A
fourth quarter close may also be in doubt unless the companies are able to
quickly deal with the mounting opposition.
February 22, 2006 (10:20a) - Maryland
Legislative Status
Maryland Delegate Galen Clagett yesterday
introduced a bill in the state legislature that proposes forcing any public
service company (utilities) to become officially incorporated in the the state
before being allowed to provide its services. Mr. Clagett also introduced a
second bill which, if passed, would allow the
Maryland PSC
"access to accounting books and records of public service companies"
-- in this case opening FPL's records to the regulator for full disclosure.
There has very clearly been momentum building within the
state legislature over the past several days regarding non-Maryland and
non-U.S. entities from operating businesses that directly affect Maryland
residents. The highly publicized seaport transaction which would affect the
Port of Baltimore has served to politicize these issues, including this merger
transaction. In other words, there is now a fairly good chance that legislation
will be passed in the near future that will impact the review process of this
deal.
It should be noted that Maryland is a very progressive state
and the PSC has tended to reflect this over the last several years. If given
the opportunity, via statute, to press FPL for unusual measure in its review,
it certainly will do so -- especially if the political/public concerns
persist.
Therefore, at this time it will be acknowledged that the MD
PSC review represents a potentially major obstacle for the deal. It will
very likely become an issue the companies will be forced to address with more
vigor than originally anticipated and could possibly result in a
reconsideration of the transaction from FPL's perspective.
Naturally, this process will be followed closely over the
coming months.
February 21, 2006 (10:00a) - CEG Lobbying
Reported
The
Washington Post is
reporting that CEG is actively lobbying to prevent the Maryland State
legislature from intervening in the regulatory review processes -- primarily
the Maryland PSC review.
The fact that the companies deem it necessary to take such
measures serves as a warning sign, albeit a minor one at this early stage of
the transaction. It is not uncommon for companies in major utility mergers to
launch lobbying efforts, but rarely does the lobbying become this visible so
early into the regulatory processes.
At issue, according to the post, is Maryland representative
concerns that state citizens will ultimately end up paying for FPL's power line
repairs, which are necessary as a result of hurricane-inflicted damages. It is
expected that MD representative will pass a resolution assigning independent
counsel to oversee the regulatory process and to ensure that the power line
issues are resolved.
At this time it is still far to early to determine if the
political concern in Maryland will have a significant affect on the timing, or
completion, of the transaction. However, it must be acknowledged at as an
important factor going forward.
It remains anticipated that the companies will appease any
regulatory/consumer/political concerns in response to the current
actions.
February 17, 2006 (10:20a) - FERC Status
The Maryland Office of the People's Counsel has
filed a motion to intervene in the FERC review of this transaction. The motion
is available by following
this link.
February 15, 2006 (8:30a) - FERC Review
Details
The FERC application was filed on February 9,
2006. The docket number for this case is EC06-77-000. The docket sheet
may be accessed by following this
FERC link.
The FERC review for this case is expected to result in
approval in roughly the standard 120 days, or before the end of June
2006. Opposition has already been filed with the FERC by consumer groups
(see previous two updates), but this is not expected to have a significant
impact on the review or final decision.
February 13, 2006 (9:35a) - Opposition
Details
Various consumer groups in both Maryland and
Florida have reported filed official protests to this merger with the FERC and
Maryland PSC. Those
involved to this point include Public Citizen,
Progressive Maryland, and Maryland State Delegate Curtis
Anderson -- all of whom appear more concerned with the deal benefits to CEG
officers, rather than the actual impact of the merger on customers.
This type of opposition in the early phases of a major
utility merger are essentially standard, and simply serve to lay the framework
for small concessions at the state review level. The companies surely expected
some mild opposition and presumably are prepared, even at this point, to
appease consumer/political concerns as needed.
The opposition raise to this point is definitely not
considered a major concern of the deal at this time.
February 7, 2006 (9:15a) - Maryland PSC
Status
The
Maryland PSC has
assigned case number 9054 to its review of this transaction. The case
file is currently available at this
PSC website. The official application filing date was January
30, 2006.
As discussed on January 23, the
Maryland PSC will most likely be the lead regulator in this case and its
reviews of major utility mergers tend to be fairly lengthy -- occasionally
lasting 10 or 11 months. The current projection for this particular review is
about 8-9 months, or roughly August/September 2006.
Of note in the Maryland process is some
initial concern expressed by state politicians focusing on
CEG's policies regarding the state's poor. It is fully expected that the
companies will adequately address these concerns during the review process and
that these issues will not significantly affect the timing to PSC
approval.
December 23, 2005 (12:45p) - Initial
Analysis
This appears to be a relatively straightforward
combination with respect to recent utilities transactions. As with apparently
all utility mergers under the new SEC guidelines, PUHCA approval will not be
required, thereby eliminating potentially additional delays to the regulatory
process. Without PUHCA, the state regulators will very likely determine timing
to completion. CEG's operational map is provided below:
The fact that CEG provides electricity to retail and
commercial customers only, should allow for relatively smooth state reviews, as
the chances of vigorous public opposition are obviously much smaller. Even if
some opposition develops among retail/commercial interests, state PUC's are not
likely to offer as much sympathy as they would if residential consumers were
involved. In other words, state approvals should be obtained without much
difficulty for this transaction.
The Maryland PSC will probably be the lead state regulatory in the
deal. Below is a chart showing the PSC's most recent major utility
reviews:
The MD PSC reviews are fully accessible and therefor easy to
follow from start to finish. The habit of the PSC is to add cases to meeting
agendas fairly early, but then repeatedly delay actually hearing the case for
several months, depending on caseload and/or progress in the specific
transaction review. Although the chart above clearly shows that PSC reviews
often last more than 10 months, it seems unlikely that this deal will require
that much time in order to reach a final decision. Assuming the initial
application is filed in a January/February 2006 time frame, MD PSC approval can
be expected in roughly August 2006.
Details of other required state approvals will be obtained
and posted shortly.
At this early stage, the transaction is projected to close
at some point in September 2006.
December 21, 2005 (11:35a)- Timelines - Recent
Utility Transactions
| Transaction |
Length
(Days) |
$ |
HSR |
SEC |
SEC
(PUHCA) |
FERC |
Misc |
| NUI Corp (NUI) - AGL Resources
(ATG) |
139 |
691m |
30 |
28 |
94 |
n/a |
NJ
103
VA
81
MD
69
|
| Amer Water Works (AWK) - RWE AG
(DAX: RWE) |
481 |
4.6b |
30 |
27 |
n/a |
n/a |
States (12)
See File
|
| Seabrook Consortium - FPL
Group, Inc. (FPL) |
201 |
837m |
> 30 |
n/a |
n/a |
n/a |
NRC
165
IRS
150
States
NJ, DC, MD, DE, VA, PA
(See File)
|
| Lattice Group PLC - National
Grid Group PLC (NGG) |
183 |
21.7b |
n/a |
n/a |
131 |
n/a |
|
| Conectiv (CIV) - Potomac Electric
Power (POM) |
536 |
2.2b |
30 |
34 |
370 |
136 |
States
NJ, DC, MD, DE, VA, PA
(See File)
FCC
155
|
| PowerGen PLC (PWG) - E.ON AG
(EON) |
449 |
7.4b |
30 |
n/a |
282 |
122 |
Exon-Florio
34
EU / OFGEM
39
|
| RGS Energy Group (RGS) - Energy
East (EAS) |
484 |
1.4b |
30 |
40 |
374 |
133 |
|
| NRG Energy (NRG) - Xcel Energy
(XEL) |
80 |
|
|
24 |
77 |
|
|
| Orion Power (ORN) - Reliant
Resources (RRI) |
146 |
2.9b |
62
(Re-filed) |
31 |
|
115 |
NY PSC
56
|
| Niagara Mohawk (NMK) - National
Grid (NGG) |
514 |
3b |
>30 |
|
344 |
122 |
NY PSC
316
VT PSC
41
Exon-Florio
30
UK OFT
30
Virginia
131
Kentucky
33
|
| Aquila, Inc. (ILA) - UtiliCorp
United Inc. (UCU)$ |
62 |
|
n/a |
|
n/a |
36
(shares only) |
SEC
24
|
| GPU, Inc. (GPU) - FirstEnergy
Corp. (FE) |
455 |
11.9b |
30 |
|
373 |
126 |
NJ
NY
PA
NRC
160+/-
FCC
90+/-
|
| IPALCO Enterprises (IPL) - AES
(AES) |
254 |
2.15b |
10 |
|
148 |
115 |
IN
|
| Columbia Energy (CG) - NiSource
(NI) |
248 |
8.5b |
30 |
|
200 |
106 |
PA
VA
KY
ME
|
| Unicom Corp (UCM) - PECO Energy Co
(PE) |
394 |
31.8b |
|
|
217 |
153 |
NRC
295
|
| New Century Energies (NCE) -
Northern States (NSP) |
513 |
4.8b |
30 |
|
198 |
140 |
TX
NM
WY
CO
ND
MN
AZ
KS
|
|
