The Federal Energy Regulatory Commission has approved the merger of Baltimore Gas & Electric Co. and Potomac Electric Power Co.
The $2.9 billion merger will create one of the largest utilities in the country. FERC said the merger is consistent with the public interest and meets the requirements of its policy regarding competition, rates, and regulation (OGJ, Jan. 6, 1997, p. 26).
FERC said the merged company, to be called Constellation Energy, will not adversely affect competition in long- or short-term wholesale capacity markets.
Chairman Elizabeth Moler said, "The commission has aggressively pursued a more competitive electric industry. In evaluating proposed mergers, we need to ensure that they will not be anticompetitive. At the same time, it is equally important that we not impose a crushing regulatory burden on mergers that do not have a negative impact on wholesale competition.
"Under our policy statement, we have said that we will evaluate the effect of a merger on the wholesale market, and will leave the evaluation of a merger on retail markets up to the states, unless they ask us to get involved because they lack adequate authority under state law.
"In this case, as our order notes, we see cause for concern at the retail level. The record indicates that Constellation would control 100% of the market for firm energy and between 80-88% of the market for non-firm energy if retail access became available in the applicants' service territories."
Moler said the Maryland and District of Columbia public service commissions are considering those issues, and FERC will rely on them to develop any necessary mitigation.
Other FERC rulings
In other actions, FERC approved settlements for three major interstate pipelines and their customers.
FERC said approval of the settlements involving Tennessee Gas Pipe- line Co., El Paso Natural Gas Co., and Columbia Gas Transmission Corp. represent the commission's continuing reliance on market participants, rather than formal litigation, to resolve issues arising from the more competitive natural gas market.
Tennessee was the largest gas pipeline without a settlement of its take-or-pay contracts. The deal caps total gas supply realignment costs at $1.185 billion. Tennessee will absorb $180 million of the costs, 23.3% of the remaining costs up to $1.185 billion, and 100% of the costs exceeding that amount.
The El Paso settlement resolves the issue of unsubscribed capacity on the company's pipeline system. The deal creates a risk-sharing mechanism under which El Paso will assume 65% of the risk of unsubscribed capacity costs, and firm customers will assume the rest.
The Columbia settlement sets the company's rates through Apr. 1, 2002, which coincides with the termination of most of the company's current transportation and storage contracts.
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