Exelon exec makes case for merger with Constellation

Calvin ButlerExelon’s corporate leaders are willing to work with Governor Martin O’Malley and Maryland officials to “tweak” its plans for renewable energy in Maryland and to discuss that issue and others the state has raised in challenging the proposed merger with Constellation Energy Group, a senior Exelon executive told GBC members on October 26.

“Despite all the ins and outs, we continue to have very good and open conversations with the governor’s office, with the City of Baltimore, and with state officials across the state,” Calvin Butler, Exelon’s senior vice president for corporate affairs, said during a GBC event to update members on the proposed merger.

On October 31, the Maryland Public Service Commission (PSC) will begin a month-long series of evidentiary hearings on the merger followed by three sessions to hear comments from the public about the merger.

Butler outlined Exelon’s commitment to $250 million in direct investment within Maryland as a result of the merger. Investments would include:

  • construction of a new 250,000 to 325,000 square-foot building in Baltimore to house Exelon’s consolidated wholesale and retail business;
  • giving a $100 rate credit to all BGE customers;
  • spending $50 million to develop 25 megawatts of new renewable energy in Maryland;
  • Giving $15 million to the PSC to be used for the benefit of BGE customers and $4 million to the state to support its EmPower Maryland initiative.

Exelon has also pledged to maintain $10 million per year in charitable giving for at least 10 years.

He noted that the growth divisions of Exelon will be located in Baltimore. “The future growth of this company is in the energy trading business and the selling of energy, and that’s what’s going to be headquartered here in the city of Baltimore,” he said.

Reservations expressed by state officials have ranged from operational and logistical issues that Exelon can directly answer to “philosophical differences on whether they believe in competitive markets or not,” Butler said.

He also estimated that between 600 and 700 construction jobs will be created to build the new division headquarters building.

In response to concerns raised by the state in submissions to the PSC, Exelon put additional safeguards for BGE in their proposal, recognizing the importance to the state of keeping BGE independent and addressed concerns that the merged company’s size would give it the ability to manipulate the price of power on the market, said Butler.

“One thing that Exelon and Constellation believe in that you need to know is that we believe in clean energy and competitive markets,” he said.

Exelon, however, cannot accommodate proposals that it commit to building 400 megawatts of renewable energy – as opposed the 25 megawatts that Exelon is pledging – because it would create an estimated $1 billion capital expense burden to be borne by shareholders and customers.

“The price of building 400 megawatts is significant and would really take away any of the financial advantages to the deal,” said Butler. “We always look at what we are going to do, to build or to own, to ensure that it will not unnecessarily raise rates on customers, because someone pays for everything that we do. Many people forget that.”

Would Exelon consider building more than 25 megawatts of new generation of renewable energy if reasonably cost-effective opportunities arose? “That’s a possibility,” said Butler. “We’re not opposed to talking” about possibilities.

Butler asked for merger advocates to communicate their support by writing to the Public Service Commission or attending one of the public hearings on November 29 in Bel Air, December 1 in Baltimore, and December 5 in Annapolis.

“Our biggest ally is getting the message out,” said Butler, and to “reduce the noise factor” surrounding the proposed merger.

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