Maryland Gov. Martin O’Malley is declaring victory for dropping his initial opposition to the proposed $7.9 billion merger of Chicago-based Exelon with Constellation Energy Group, the parent company of Baltimore Gas & Electric Co. (the last Fortune 500 company remaining in the city he once ran as mayor) and squeezing $1 billion worth of concessions in return for his support. The 11th-hour settlement requires the new company to give each residential customer a $100 rebate within three months of the merger, which is likely to be approved by federal regulators next year.
After being socked with a 72 percent rate increase the same year O’Malley ran for governor promising to roll back electricity rates, Marylanders will welcome the extra hundred bucks. But the rebate is also designed to divert the public’s attention from the real reason for O’Malley’s sudden change of heart: a $1 billion payoff that basically funds O’Malley’s stalled renewable energy agenda in return for his support.
Exelon promised to sell three coal-powered plants and build a new 120-megawatt plant powered by natural gas. Given the recent discovery of the vast Marcellus Shale natural gas deposit, it would likely have done so anyway without any gubernatorial arm-twisting. However, the settlement also doubles the state’s energy output from inefficient solar panels and land-based windmills, and provides seed money to jump-start development of a wind farm off the coast of Ocean City – which has failed to attract investors.
Thus, the deal gives O’Malley political cover for the lack of progress on one of his major policy initiatives, which requires Maryland to generate 20 percent of its energy from renewable resources by 2020. But even with Exelon’s promise to produce 125 megawatts of energy from renewable sources – more than it will generate from the new natural gas facility – Maryland will still fall short of O’Malley’s unrealistic goal.
The reality is that it presently costs more to generate electricity from alternative sources, so the giant new energy company will pass these increased costs to consumers. Maryland ratepayers will ultimately pay millions of dollars more for their electricity than they would have otherwise just so O’Malley can keep his political promises. Meanwhile, other states will be enjoying the benefits of a wholesale drop in electricity prices because of huge natural gas discoveries in Pennsylvania, Texas and elsewhere. The governor is hoping that the 100-buck rebate he bargained for will make them forget.