Exelon site

Shown is the site of the old Allied Chemical plant, between Harbor East and Fells Point, which will be the site of the new Exelon headquarters. (Gene Sweeney Jr., Baltimore Sun / February 1, 2012)

By Hanah Cho, The Baltimore Sun Baltimore Sun

4:11 p.m. AKST, February 17, 2012

Because the companies promised millions of dollars to fund energy efficiency and low-income programs, which "can have a more meaningful impact over the long-term," the commission decided not to impose a higher credit or impose a rate freeze.

The commission said in its order that it would have rejected the companies' initial merger proposal, which was filed in May.

But over the course of many months, Exelon and Constellation kept increasing its incentive package to win over critics. The initial $250 million climbed to $515 million before the two companies reached the $1 billion settlement with O'Malley.

The companies also agreed to provide additional measures to protect BGE from the financial troubles of its parent company, including having the utility not pay dividends to the parent company through 2014.

"Certainly throughout this process, we have seen an evolution in commitments that were not present when they filed their application," People's Counsel Paula M. Carmody said. "We do think with our pursuit of additional benefits even after the [governor's] settlement was signed, we were able to secure additional protections and additional benefits for our customers."

Among the conditions imposed by the commission:

•Exelon would develop up to 300 megawatts of new energy generation in Maryland, with more than half coming from renewable resources such as solar and wind.

•Exelon would provide $30 million to create an offshore wind development fund.

•Exelon would maintain $7 million in annual charitable contributions in Maryland for a decade.

Exelon would not lay off BGE workers for at least two years after the merger is completed.

If the deal closes, Constellation and the 195-year-old BGE would become part of Exelon. Executives of the two companies said the merger could create a stronger company able to better weather the increasingly competitive and capital-intensive energy market.

Still, officials have said the merger would lead to the elimination of about 630 positions across both companies, with job reductions felt most in Baltimore. While the combined company would be headquartered in Chicago, it will still have a large presence in Baltimore, where Exelon has committed to building a new skyscraper at Harbor Point.

Constellation's name will remain as the brand for the two company's retail and marketing business, which would be based in Baltimore.

This third merger try could be the charm for Constellation, which had pursued two other large-scale deals under Shattuck, who will become executive chairman of the combined company.

After transforming itself from a small utility to the largest energy marketer in the United States, Constellation reached a low point in late 2008 amid the financial sector meltdown. Facing a credit crisis, Constellation agreed to a shotgun deal to sell itself to Warren Buffett's MidAmerican Energy for $4.7 billion.

But in an about-face, Constellation terminated that agreement to remain an independent company in Baltimore by selling nearly half its nuclear power business to its then-largest shareholder, French utility EDF Group, for nearly the same price as the earlier deal with Buffett.

In 2006, a merger with Florida Power & Light fell through amid political and regulatory pressure and growing rancor over increasing rates.

hanah.cho@baltsun.com

PSC decision

The Public Service Commission put conditions on the deal's approval, which the companies accepted. They include:

•BGE residential rebate of $100 per customer, amounting to $112 million

•Creation of a $113.5 million consumer investment fund that would help Baltimore Gas and Electric customers with weatherization and energy efficiency programs and provide financial aid for low-income ratepayers. The PSC will determine how the fund will be used.

•Development of up to 300 megawatts of new energy generation in the state.

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