From the email inbox:

Constellation Energy and EDF Group Complete Nuclear Joint Venture

BALTIMORE and PARIS – Nov. 6, 2009 – Constellation Energy (NYSE:CEG) and EDF Development Inc. (a wholly-owned subsidiary of EDF S.A.) today announced that EDF has completed its investment in Constellation Energy Nuclear Group, LLC, which is structured as a new joint venture. With the close of the transaction, the companies look forward to working together to deliver the expected economic, environmental and clean energy benefits created by the joint venture.

Posted by Jay Hancock at 11:57 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

If you haven't switched to an alternative electricity supplier yet, Dominion Retail is offering a good deal to BGE customers. At 10.37 cents per kilowatt-hour for electric supply and cross-country transmission (delivery by BGE is another 2.37 cents), Dominion has the lowest price most BGE customers have seen in a while. The price locks in from now through 2010, and there is no cancellation penalty. A typical house ought to save $10 or more a month.

(Attention: If you switch to Dominion you WON'T lose the $100 BGE credit just obtained by the Public Service Commission as a result of a venture by Constellation Energy, the utility's parent. The credit is applied through your BGE delivery account, which doesn't change no matter who your electricity vendor is. So you can basically double the O'Malley/PSC credit by switching to Dominion.)

UPDATE: Switching to Dominion, WGES or any other competitive supplier does not affect the Peak Rewards you get from BGE cycling off your AC in the summer, either.

In comparing its price to BGE's price, Dominion's marketing department seems a little messed up. They claim 10.37 cents is 12 percent less than BGE's "price to compare" of 11.97 cents. Actually it's 13 percent less. But at this point on the calendar, BGE's price to compare is misleading. That's because 11.97 cents is a blended price to compare for the 12 months starting June 1 -- a period that includes both BGE's high summer rates and lower non-summer rates. But summer is over, so a better point of comparison should be BGE's non-summer price that started Oct. 1 and goes through May 31 -- 11.527 cents.

Got that? No? Don't worry. Dominion's price is still 10 percent less than what BGE's standard price will 

Continue reading "Dominion Retail undercuts BGE's standard price" »

Posted by Jay Hancock at 7:16 AM | Permalink | Comments (23)
Categories: BGE/electricity
        

I get questions about this all the time, so now that EDF Group and Constellation have agreed to complete their deal and rebate $100 to Baltimore Gas & Electric customers, it seems a good time to repeat: EVERY BGE household gets the $100 credit, even if you have switched like me to buying electricity from Washington Gas Energy Services or somebody else. The $100 credit will be applied to the distribution charge on your BGE bill. You always pay BGE a distribution charge; BGE is your electricity delivery company no matter who your supplier is.

Dominion Retail is offering a new deal to BGE customers that is cheaper than BGE's standard charge for households. (I'll have more on this later.) So don't resist switching to Dominion Retail or anybody else because you fear it would jeopardize the $100 credit that the Public Service Commission made Constellation provide as part of the EDF deal. If you're a residential customer and you're in the BGE delivery zone (essentially Baltimore and its suburbs), you get the credit.

UPDATE: Under the PSC requirements BGE has to give the credit by March 30. But it could be earlier.

Posted by Jay Hancock at 9:39 AM | Permalink | Comments (9)
Categories: BGE/electricity
        

I'm reading between the lines here, but it sounds like the Sarkozy government pushed the French EDF Group's deal with Constellation Energy to go through even though incoming EDF boss Henri Proglio has his doubts about it. Without Proglio's wholehearted support, I wonder how well the partnership will work out.

Last week reports surfaced in the French press that Proglio was skeptical of the agreement with Constellation and was looking for a way out. He met in closed session with a parliamentary committee. Some of the legislators leaked his testimony to reporters.

But late last week there was push-back. French government sources were telling reporters that the Sarkozy administration still supported the deal, suggesting that Proglio was told to swallow it. (The French government owns most of EDF's stock.)

Continue reading "How will a reluctant EDF chief affect partnership? " »

Posted by Jay Hancock at 9:17 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

After months of uncertainty and contention over the French EDF Group's plan to invest $4.5 billion in half of Constellation Energy's nuclear power business, the companies announced this morning that they would go through with the deal.

Constellation CEO Mayo Shattuck said last week that they could complete it within a couple weeks. The conditions set by the Maryland Public Service Commission for the transaction include a required credit of about $100 for every residential customer in Baltimore Gas & Electric's service area.

"We have consulted with our Board and received its approval," Constellation said in a prepared statement this morning. "We are now moving to close the transaction as quickly as possible so that we can begin to deliver the many benefits of this investment to all stakeholders across the state."

In its statement, EDF said: "Through its investment in Constellation Energy’s nuclear business, EDF has chosen Maryland to be at the center of its growth efforts in the United States. EDF is eager to be a strong corporate citizen in Maryland, and looks forward to moving its U.S. headquarters to the State."

The decisions come after months of uncertainty and weeks of contentious hearings before the Maryland Public Service Commission, which asserted authority after EDF and Constellation agreed to the deal late last year. Gov. Martin O'Malley had sought several conditions from Constellation before he would agree to countenance the transaction, including protections for Constellation subsidiary BGE, rate rebates for BGE customers and compensation reductions for Shattuck.

In approving the deal with conditions on Friday, the PSC agreed with O'Malley's desired protections for BGE and required a $100-per-household rebate for BGE customers -- about half of what O'Malley had suggested. But it said it has no jurisdiction over Shattuck's pay.

Late last week reports surfaced in the French press suggesting that EDF's incoming CEO, Henri Proglio, was unenthusiastic about the Constellation deal and was looking for a way out. However, Proglio doesn't take over until later this month. EDF's existing boss, Pierre Gadonneix, badly wanted the transaction to close so that the huge French utility could use the United States to demonstrate its nuclear expertise.

In deciding that the transaction can go forward, both companies agreed to the conditions that the PSC imposed.

EDF will own 49 percent of Constellation's nuclear business, and they will operate it together. The PSC decision was the last regulatory hurdle that the partnership needed, U.S. federal authorities having already given it their blessing. The deal's completion and the injection of the French cash strengthens Constellation's financial position after it was badly damaged by the 2008 financial meltdown and came close to seeking bankruptcy protection.

It also sets the stage for the construction of a third nuclear reactor at Calvert Cliffs, which both companies have pledged to pursue. The project would be one of the biggest construction projects ever in Maryland and bring new supplies of electricity to a state that hasn't seen significant generation capacity built in more than a decade. But first the companies need to secure financing for the reactor. And even if construction goes smoothly it would take years to complete.

EDF's and Constellation's statements are below:

Continue reading "After months of doubt, EDF, Constellation OK deal" »

Posted by Jay Hancock at 8:42 AM | Permalink | Comments (22)
Categories: BGE/electricity
        

If Constellation Energy and/or Electricite de France really want to consummate the expansion of their nuclear-energy venture, the Maryland Public Service Commission just made it possible. The PSC would require $110 million in rebates for residential BGE customers as part of the deal. And it wants Constellation to make a $250 million investment into Baltimore Gas & Electric to boost its capital. It also wants to start the process of installing new legal barriers between BGE and Constellation.

But the conditions fall short of what was requested by Gov. Martin O'Malley. He wanted a customer rebate more than twice as big as what the PSC is requiring. And he wanted some kind of restriction or other action on the pay of Constellation CEO Mayo Shattuck. But the PSC took a pass on Shattuck's pay, as it should have. "But even if we might, as individuals, question the wisdom of paying anyone millions of dollars a year given CEG's recent history, it is our role as Commissioners to focus on BGE and its ratepayers," the PSC said in its order.

The conditions don't seem to be deal-killers if Constellation and EDF really want to go through with the transaction. Given recent reports that EDF's new CEO has doubts about the deal, and given that Constellation doesn't need EDF's money as much as it once did, that is very much open to question.

Posted by Jay Hancock at 1:37 PM | Permalink | Comments (5)
Categories: BGE/electricity
        

And we're liveblogging the PSC decision on Constellation and EDF. EDF and Constellation want to have EDF buy half of Constellation's nuclear-energy business for $4.5 billion.

The Public Service Commission approves the deal with "conditions." One of the conditions is "a distribution rate credit to Baltimore Gas & Electric residential ratepayers of $110.5 million." Note -- every BGE residential customer gets a distrubtion credit, whether you have switched electricity suppliers to WGES or anybody else.

"The total $110.5 million rebate will provide a credit of approximately $100 for each BGE residential customer."

UPDATE: The PSC is basically asking EDF and Constellation to divert money they were going to spend on a visitor center at Calvert Cliffs, charitable contributions, a delay in a distribution rate increase etc. and spend it instead on the residential ratepayer credits.

"This condition should not restrict EDF or CEG from building a visitor center or funding CEG's foundation or both," the PSC says.

UPDATE: Another condition of the EDF investment: Constellation has to put $250 million in cash into Baltimore Gas & Electric between now and June 30. Future dividends paid by BGE parent Constellation would also be restricted.

UPDATE: The PSC tells Constellation and EDF they have until Nov. 6 -- next Friday -- to say whether or not they intend to go through with the deal.

And more:

-- Whether or not EDF and Constellation build a third reactor at Calvert Cliffs is up to them, the PSC says. "As we explain, the decision to build Calvert Cliffs 3, and the fate of any impact to our State from that project, lies in the Companies' hands at this point, not ours..." the order says.

-- Ouch! "It is unfortunate, though, if public officials, churches, Chambers of Commerce, business owners, the press and, most of all, the Companies employees' have been (mis)led to believe that our decision approving this Transaction guarantees that Calvert Cliffs 3 will be built."

-- The commission punts on the pay of Constellation CEO Mayo Shattuck, saying it has no jurisdiction. "But even if we might, as individuals, question the wisdom of paying anyone millions of dollars a year given CEG's recent history, it is our role as Commissioners to focus on BGE and its ratepayers."

-- No kidding! "We will not pretend that this rebate, which will amount to approximately $100 per residential customer, will make a significant difference in anyone's bill, although every little bit helps."

Posted by Jay Hancock at 12:22 PM | Permalink | Comments (8)
Categories: BGE/electricity
        

The Public Service Commission's decision on EDF Group's proposal to buy half of Constllation Energy's nuclear-energy business for $4.5 billion is due at noon. Stay tuned.

Also, Hanah Cho reports:

Baltimore's Constellation Energy Group said Friday it remains committed to selling half of its nuclear power business to a French utility after reports surfaced earlier this week that Electricite de France wants to scrap the $4.5 billion deal.

Posted by Jay Hancock at 11:19 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

Be careful using reports in the French press to jump to conclusions that EDF Group will scrap plans to invest $4.5 billion into Constellation Energy's nuclear-power business. It may be true that Henri Proglio, CEO designate of EDF, expressed doubts about the state-owned electricity company's U.S. plans. But I wonder if he understands what dumping the Constellation deal would involve.

Several news organizations say Proglio views EDF's agreement to buy half of Constellation's nuclear-electricity business skeptically. The reports emerged after Proglio met in closed session with a parliamentary committee that oversees the state-owned electricity giant. Politicians gave anonymous quotes to the press afterward.

As noted in a previous post, Les Echos states flatly that Proglio "would like... to exit a proposed joint venture with the American Constellation." Le Monde says, "He would prefer to find an exit." A Reuters piece is more nuanced. (These are my {rough!} translations.)

According to a legislator who did not wish to be named, Henri Proglio expressed doubts about EDF's latest acquisitions. "He said that, for England, the deal had to be

Continue reading "Beware French reports saying EDF/CEG deal dead" »

Posted by Jay Hancock at 6:07 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

EDF Group, parent of Electricite de France and partner of Constellation Energy in an expanded joint venture and proposal to build a third nuclear reactor at Maryland's Calvert Cliffs, has a new boss. Henri Proglio is his name. People have been wondering whether he would take a different approach to EDF's expanded partnership with Constellation, which is under review at the Maryland Public Service Commission.

Now Thibaut Madelin, energy correspondent for Les Echos, is stating as a fact, without offering any evidence, that Proglio wants to dump Constellation.

In a piece about Proglio's appearance before the French economic affairs legislative commitee, Madelin says Proglio "would like... to exit a proposed joint venture with the American Constellation." Lower down in the piece Madelin says this:

Henri Proglio, who would like to make the group's French operations transparent to determine the true cost of nuclear development, seems at any rate ready for strategic change. He wonders about the proposal to buy 50 percent of the nuclear assets of the American Constellation. An exit could be delivered on a plate in coming days with the pending decision of the Maryland public service commission. This would allow the operation under certain conditions. Henri Proglio is free to accept them or not.

Without any on-the-record evidence from Proglio or EDF, I would treat the report cautiously. Still, Les Echos has been ahead of the curve and correct on previous EDF developments.

Posted by Jay Hancock at 11:29 AM | Permalink | Comments (6)
Categories: BGE/electricity
        

Given the Public Service Commission's extensions of looking into EDF Group's attempt to buy half of Constellation Energy Group's nuclear-power business, one wonders how long it will take the PSC to consider Baltimore Gas & Electric's request to install smart meters and get electricity customers to partly pay for them. And how will the PSC rule? Smart meters are essential for energy conservation and will save BGE customers money over the long run.

But that doesn't mean the PSC will say yes. And there are important items for the PSC to examine. At the top of the list is making sure people who are aggressive about cutting energy use and reaping rebates with smart meters aren't gaining at the expense of passive consumers who conduct business as usual and pay the higher peak rates BGE wants to charge. The PSC needs to make sure premiums earned by energy misers come from systemwide savings. BGE says this will be the case, but the PSC needs to make sure.

I queried BGE about this. Mark Case, the utility's senior vice president for strategy and regulation, says BGE had asked the commission to decide by Oct. 1. They couldn't do that, which makes sense given that the EDF stuff is on their plate -- plus everything else they regulate. Even so, the PSC has committed to making a decision by the end of the year, which for the commission is pretty quick. Says Case:

We and Pepco had both asked for a PSC decision by October 1 to give us the greatest chance for DOE funding, knowing how intensely competitive the stimulus grant process would be, and knowing that some state Commissions had already come out in support of Smart Grid and AMI. The PSC put together what they felt was as aggressive a schedule as they could support that would still allow them to do an intensive and comprehensive review.

Continue reading "Will the PSC slow down BGE's smart meters?" »

Posted by Jay Hancock at 11:05 AM | Permalink | Comments (4)
Categories: BGE/electricity
        

Baltimore Gas & Electric was been awarded $200 million in federal stimulus money to install "smart" meters that will let consumers save money by spending less on electricity during times of peak use, Paul West reports in today's paper. No matter what you think of BGE and its parent, Constellation Energy, this is great news. Smart meters will be critical for cutting energy use, reducing carbon emissions, reducing the need to build new generators and making the grid more efficient and reliable. The federal money means the cost to BGE customers to install the meters will be much less. (Over time the meters will save customers more than they cost them.)

Among other things, smart meters will pay BGE customers bonuses for cutting back at times of high use, alert BGE when there are outages, eliminate the need for meter readers and make sure your bill is always up to date. Don't oppose smart meters just because electricity deregulation failed in Maryland for residential customers. Deregulation was a supply-side solution; it was supposed to induce power companies to build new generation plants in Maryland, which would lower prices and solve looming reliability problems. That never happened. Smart-meters are a demand-side solution -- one that's more subject to regulatory control and is better for the planet, in any event.

Here is my July column on BGE's grant application:

The computer in my toaster might be more powerful than the one that guided Apollo 11. But half a century after Robert Noyce launched the cyber age by inventing the silicon-based integrated circuit, computers are curiously scarce in one huge and critical part of daily life.

When power goes out in your neighborhood, Baltimore Gas & Electric has no idea until somebody picks up a phone and tells it. BGE still has to send out meter readers to figure out bills.

Households are clueless about daily electricity price fluctuations. It's like not knowing when strawberries are on sale at Safeway.

What does it cost to run a load of dishes? Bake a turkey? Watch I'm a Celebrity, Get Me Out of Here? Unless you're a power geek, you don't know.

Continue reading "BGE 'smart grid' grant is excellent news" »

Posted by Jay Hancock at 8:46 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

The conditions outlined by Gov. O'Malley for regulators to approve the Constellation Energy Group -- EDF Group deal are similar to conditions he put directly to Constellation earlier this year. He wants 1) A one-time, 10 percent credit to BGE residential customers; 2) A capital infusion from parent Constellation into Baltimore Gas & Electric; 3) A contribution to a fund for lower-income utility users; 4) A moat and walls around BGE to prevent Constellation or any future owner from raiding it for resources.

Added up, all this will easily exceed $600 million at a time when both Constellation and EDF are tight on capital. The 10 percent credit for BGE gas and electric customers would exceed $200 million. Add another $50 to $100 million for the Universal Service Fund for lower-income households. Add at least another $400 million infusion for BGE to get its common-equity ratio up to levels that will make O'Malley and the Public Service Commission happy.

All this money would have to be placed on the counter when the deal closes next year, if not earlier. (However I could see everybody agreeing to have Constellation increase BGE's equity over time instead of all at once.) I wonder how Constellation's bond-rating agencies, which are already putting pressure on the company, would react if the company agrees to these conditions.

Posted by Jay Hancock at 9:58 AM | Permalink | Comments (19)
Categories: BGE/electricity
        

Gov. O'Malley's public admission that settlement talks with Constellation Energy Group have failed leaves him with two choices. Unable to get a scalp from Constellation in the way of rate cuts or a giveback of CEG boss Mayo Shattuck's pay, he can retaliate by having the Public Service Commission reject EDF Group's proposed investment in CEG. (Yes, I know the PSC is supposed to be independent of the governor. Yeah.)

EDF wants to buy half of CEG's nuclear-power business for $4.5 billion. Both companies have said that if the deal goes through they'll build a new nuclear unit at Calvert Cliffs, creating thousands of construction jobs and giving Maryland badly needed new, carbon-free electricity. Both companies have said that without the EDF injection they won't build at Calvert Cliffs. So O'Malley's choice No. 1 jeopardizes the nuclear unit, which he says he wants, and exposes him to voter backlash if the deal fails. (He's running for reelection next year.)

Choice No. 2 is to have the PSC approve the EDF investment without any concessions from Constellation. That's a downer for O'Malley, too. It makes him look weak. His administration has yammered about Constellation and Shattuck's pay all year, and now he backs down. That defeat obscures the substantial

Continue reading "This is the way the EDF deal ends" »

Posted by Jay Hancock at 8:51 AM | Permalink | Comments (19)
Categories: BGE/electricity
        

Mayo A. Shattuck III, CEO of Constellation Energy, turns 55 today, according to Progressive Maryland. I wasn't able to confirm the date -- only that he turns 55 this month. In any event, it's a big time for Mr. Shattuck, and not just because he hits the double-nickel milestone. Shattuck finally becomes eligible for his fabulous, "supplemental" executive pension, worth $33 million at the end of 2008. He has had it in his grasp before, but tomorrow, if the protesters have identified his birthday correctly, he'll nail it. (Progressive Marylnd plans a "party" in front of Constellation headquarters.)

As with regular pensions, CEOs have to rack up seniority before they become eligible for retirement payouts. Unlike regular pensions, supplemental executive plans come in denominations of seven and eight figures. Unlike regular pensions, supplementals are subject to frequent tinkering and upgrades by the board to make already wealthy CEOs even more blessed. In many CEO comp packages supplemental pensions make up huge amounts of the total dough. Until a few years ago companies could hide them behind terrible disclosure rules, but the SEC finally put a stop to that. Now they're spelled out in all their glory, which over time might shame boards into downsizing the packages.

Shattuck signed on to his bonus pension when Constellation hired him as CEO in 2001. He had to put in 10 years of service and be at least 55 years old to qualify for benefits. He almost struck early paydirt in 2006. His attempted sale of Constellation to FPL Group that year would have triggered a golden parachute that included an early, lump-sum payout of the pension. (Nobody actually actually takes monthly payments from these things when they're sitting in a nursing home. As soon as they can they take the lump-sum cash, discounted to present value. The notion that these are "pensions" is a joke.)

But then public hassles over his pay prompted Shattuck to forego the early pension. Then the two companies scrapped their marriage, anyway.

According to the original timetable, Shattuck would still be two years away from completing his 10 years of service and thus not eligible for the boodle until 2011.

Continue reading "Happy Birthday, Mr. Shattuck " »

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (9)
Categories: BGE/electricity
        

On Monday BGE said customers should expect natural gas bills will be 25 percent lower this winter compared with those of last winter. I suspect they're being conservative. Wholesale natural gas prices have crashed.

A year ago gas was selling in the Gulf Coast for 70 cents a therm; now it's 30 cents. That wholesale price isn't the whole equation -- you pay interstate shipping and local distribution charges to get it to your furnace, and those haven't changed much. Still, I bet many households will see gas bills fall by more than 25 percent, especially if this winter isn't unusually cold the way last year's was.

BGE senior VP Mark Case estimates the delivered cost for natural gas will be $1.04 per therm this winter. That suggests he's expecting a "commodity" cost -- delivered gas minus the distribution charge -- of 70 or 75 cents. Lately, BGE's monthly commodity costs have been running in the 50- and 60-cent range. So they would have to rise substantially to achieve "only" the winter-to-winter savings projected by BGE. The October commodity price, just posted, is 59 cents per therm, up from 50 cents in September. BGE has already bought lots of its gas for the winter, anyway.

As usual, Washington Gas Energy Services offers a fixed-price, competing natural-gas product to go up against BGE's floating price. For a year they'll lock you in at a commodity price of 73 cents per therm. For two years they'll lock you in at 85 cents. I'm pretty sure the one-year deal will turn out to be more expensive than BGE's default program. The two-year package I'm not so sure about. If the economy recovers in a healthy way, natural gas prices could easily be north of 85 cents for the winter of 2010-2011.

In any case, I'm sticking with BGE's regular product for now. Last season I spent $950 on BGE natural gas during November through March, or about $1.30 per therm. I could handle a decrease. How about you?

Posted by Jay Hancock at 6:30 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

Electricite de France, the state-owned French power company that has proposed to buy half of Constellation Energy Group's nuclear power business and build a new reactor at Calvert Cliffs, has a new boss. A week ago the government canned Chief Executive Pierre Gadonneix and replaced him with Henri Proglio, an EDF board member who is also the CEO of Veolia, a water and waste-disposal company.

EDF's deal with Constellation is the subject of contentious and seemingly never-ending hearings before the Maryland Public Service Commission, now on their second extension. EDF and Constellation (parent of BGE) had hoped to sew the deal up by now. They've said that building the new Calvert Cliffs unit (and thereby providing Maryland with badly needed, carbon-free electricity) depends on the PSC approving the EDF investment.

The change at the top at EDF has prompted speculation that the new leadership and French government might get impatient with Maryland and pull the plug on the Constellation investment. EDF is heavily indebted and took out something like an adjustable mortgage, which means that its interest payments are about to soar and that it has to sell old operations or cancel new investments to pay down debt. Says this week's Economist magazine :

The firm plans disposals, and could also back away from the deal with Constellation, because the state of Maryland is holding up the process in any case, says Mr. [John] Honore [utilities analyst with Societe Generale]. That would save more than 3.5 billion [pounds sterling].

I have predicted that the EDF/Constellation deal will fail. But I don't think EDF will be the one to walk away.

Continue reading "Will EDF's new boss kill the Constellation deal?" »

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

Why is Gov. Martin O'Malley's Energy Administration trying to suppress testimony requested by his own Public Service Commission on the benefits of letting a French company help build a nuclear plant in Maryland? If you didn't already think politics and not policy were driving the PSC's review of the deal, here is the latest evidence.

The PSC staff hired London Economics International to analyze the agreement by Electricite de France to invest $4.5 billion in Constellation Energy Group's nuclear business. (Constellation owns Baltimore Gas & Electric.) Specifically, LEI's Julia Frayer was asked to determine 1) whether Constellation would be hurt by credit-ratings downgrades if regulators block the deal; 2) whether a new nuclear unit at Calvert Cliffs giving Maryland needed electricity depends on EDF's investment; and 3) whether BGE customers would benefit from lower prices. In response Frayer said things such as:

The likelihood of a ratings downgrade to both CEG [Constellation] and BGE [Baltimore Gas & Electric] is less if the transaction is completed than if it is not.

And:

It appears essentially certain that [Constellation and EDF] will pursue the development of [Calvert Cliffs 3] if the... transaction is approved.

And:

In 2016, demand-weighted annual average energy prices [for Maryland electricity customers after Calvert Cliffs 3 opens] drop by 12% [compared with what they would be without the new Calvert Cliffs unit]... I have estimated the savings over the eight year analysis period to average $141 million per year. This represents an approximately seven percent reduction in wholesale energy costs relative to the cost without CC3.

Great! Say yes and let them start building. More electricity supply equals lower electricity prices. But the Maryland Energy Administration is trying to get Frayer's findings wiped out.

"The State of Maryland and the Maryland Energy Administration hereby move for the exclusion of the testimony of Julia Frayer and Michael M. Schnitzer," says the motion. (Schnitzer is Constellation's expert.) Then it goes on to trash the measurement of benefits in dollar terms as "pseudo-science." And it pretty much tries to discredit the entire report.

What's the point of having a professional PSC staff and experts if you're going to ignore what they say?

Posted by Jay Hancock at 9:44 PM | Permalink | Comments (22)
Categories: BGE/electricity
        

More on Florida Public Service Commission members and their BFFs, the executives at Florida Power & Light whom they're supposed to be regulating. We knew one PSC staffer went to a Kentucky Derby Day party at the home of an FPL exec. We knew that three PSC staffers gave confidential Blackberry messaging codes to an FPL executive, enabling a medium that may have let them communicate without leaving a record. We know that FPL is looking for a huge rate increase, part of which with it would buy an executive jet. Now we have this, from the Miami Herald:

In an emotional appeal, a utility regulator apologized Tuesday for casting a ``cloud'' over the Public Service Commission, but insisted she broke no rules in dining with an executive of Florida Power & Light as it sought a $1.3 billion rate increase.

Commissioner Katrina McMurrian sounded choked up after Commissioner Nathan Skop suggested she had engaged in ``completely unacceptable'' behavior by having a meal with FPL Treasurer Paul I. Cutler in New York before a March 10 utility conference.

FPL Group, FPL's parent, almost merged with BGE parent Constellation Energy three years ago.

Posted by Jay Hancock at 9:59 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

For the second time this week, we have reports of what looks like inappropriately close contact between electric-company interests and the public servants who are supposed to be regulating them. Mike Duvall, an Orange County, Calif., assemblyman and vice chairman of the legislature's utility committee, resigned after a mic recorded his comments on purported dalliances with two women. California media identified one of the women as a lobbyist for an electric company. According to AP:

Several media outlets reported the woman Duvall refers to in his comments works as a lobbyist for Sempra Energy, a San Diego-based energy services company that operates San Diego Gas & Electric Co. and Southern California Gas Co. Sempra issued an e-mail statement saying it was investigating the claims.

"The employee has denied the speculative media reports. Our investigation will be conducted to ensure not only that our policies on employee conduct are strictly adhered to, but also that our employee is treated fairly," the company said.

I would treat the reports identifying Duvall's putative partner with caution. The guy could have just been making stuff up. But if they're true, we have another example of inappropriate socializing between policymakers and energy companies. See this post on the Florida regulator who partied with a utility executive. No reports that I have seen so far on how Duvall voted on matters affecting Sempra.

If you're interested in all the details (me, I'm just worried about the policy implications!), a loyal friend of the blog has found a video link to Duvall's conversation as well as an unedited tape of the comments.

UPDATE: Duvall says he does not admit he had affairs. From the Pasadena paper:

"I want to make it clear that my decision to resign is in no way an admission that I had an affair or affairs," said Duvall, R-Brea, in a statement on his campaign Web site.

"My offense was engaging in inappropriate story-telling and I regret my language and choice of words," he stated. "The resulting media coverage was proving to be an unneeded distraction to my colleagues and I resigned in the hope that my decision would allow them to return to the business of the state."

Posted by Jay Hancock at 11:32 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

Florida Power & Light could well have become an affiliate of Baltimore Gas & Electric. FPL Group, the Florida utility's parent, agreed to merge with BGE parent Constellation Energy Group a few years ago. The companies scrapped the merger after they got resistance from the Maryalnd Public Service Commission.

New details have emerged about how cosy FPL is with the Florida PSC. A state lobbyist who partied with a top FPL exec on Kentucky Derby Day resigned Tuesday, and two other PSC staffers were placed on leave. The Miami Herald reported that an FPL executive had requested and gotten confidential Blackberry messaging codes from one state commissioner and two state staffers. The codes would have reduced chances that the communications would leave a record, the Herald reported.

Meanwhile FPL is asking for a 30 percent rate increase, part of which would be devoted to buying a $31 million executive jet. Beautiful.

Posted by Jay Hancock at 10:26 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

We knew that Electricite de France's plan to invest $4.5 billion in Constellation Energy would produce a new unit at the Calvert Cliffs nuclear generation facility, numerous jobs and a key new supply of electricity for the Maryland economy. What I didn't know until recently is that the deal would produce a huge tax windfall for Maryland just when it could use it the most.

Selling half of its interest in the existing Calvert Cliffs units would instantly generate a $130 million income-tax bill for Constellation, the company says. Legislative fiscal pro Warren Deschenaux confirms this -- he says it's about $100 million.

The portion of the plants being sold to EDF is worth about 1.6 billion. Maryland's corporate income-tax rate is 8.25 percent, and it gets slapped right on the EDF proceeds the minute they land in Constellation's possession. It surprised me that income-tax law applies to a capital transaction like this. But when you're a corporation apparently that's the way it works.

For a state that just filled a $700 million budget hole with furloughs, layoffs, huge program cuts and reductions in aid to localities, $130 million could have come in handy and made the cuts less severe. But Gov. O'Malley is having the PSC rake Constellation over the coals in hearings and putting the matter in some doubt. I have gone on the record saying the deal won't get done.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

Liz Kay writes about the continuing plunge in natural gas prices and quotes experts who suggest you should lock in with a long-term natural gas contract instead of using BGE's standard offering, in which the gas price more or less floats with the market from month to month. I'm skeptical; the offerings don't let you lock in for more than two years, and the prices aren't that great. Here is my earlier post on this.

But in any event here are links to the natural gas vendors she mentioned. BGE will continue to deliver the gas through its pipes and charge a delivery fee, no matter who your supplier is. For a lot more on this, scroll down to the "Categories" box on the right and click on "BGE/electricity."

Washington Gas Energy Services
BGE Home (different from plain old BGE.)
Northern Virginia Electric Cooperative

Posted by Jay Hancock at 10:40 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

Natural gas prices hit their lowest levels in seven years on Thursday following a new government report on how much of the stuff is building up in pipes, unburnt. Idle factories and slower-running electricity generators have caused a plunge in demand that would have been unimaginable a year ago, when prices were four times higher. That's bad for gas producers and good for consumers who will use it to heat their homes this winter.

Thanks partly to large new wells tapped in recent years, natural gas prices refuse to rise as the economy starts to recover. This quote from a Bloomberg story tells the tale:

“I’ve tried to guess a bottom on this market a thousand times and it just keeps getting crushed,” said Carl Neill, an energy analyst at Risk Management Inc. in Chicago. “We have a lot in storage. I don’t know what will turn it.”

For BGE customers, natural gas prices more or less float from month to month, and they'll probably bump up a bit from today's level before the cold months. They usually do. But they promise to stay far below levels of a year ago. BGE has already stocked up some gas at prices slightly higher than today's. So far we've avoided a major Gulf Coast hurricane, which was really the only thing that could cause a return to 2008 levels.

The question, as always after prices drop like this, is: Should you lock in a long-term natural gas deal with Washington Gas Energy Services? So far I haven't done so. At 85 cents per therm for a two-year deal, WGES is still way above today's prices. (BGE is charging 56 cents this month.) And it's probably above what prices will be all this winter.

There's a chance BGE's price will be more than 85 cents for the winter of 2010-2011 if the economy recovers in a decent way. But it might not be. And even if it is, I'm betting the money I save this winter by sticking with BGE's lower, floating price will be at least equal to any extra I might have to pay for the second winter. And if natural gas prices continue to fall, the longer-term deals from WGES and other alternative suppliers should improve.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (5)
Categories: BGE/electricity
        

From the Florida papers, stories on the attendance by a top Public Service Commission manager at a Derby Day party thrown by FPL vice president Ed Tancer. FPL Group, the utility's parent, tried to buy BGE owner Constellation Energy a few years ago.

The Public Service Commission delayed the start of hearings on FPL's request for a rate increase for about two hours after Commissioner Nathan Skop raised the issue.

Ryder Rudd, director of the panel's Office of Strategic Analysis and Governmental Affairs, had told at least three of the five commissioners over the weekend that he and his wife had attended a Ketucky Derby party in May at the home of FPL Vice President Ed Tancer in Palm Beach Gardens.

Skop said Rudd should resign.

"Such inexcusable conduct undermines the public trust and confidence in the regulatory process and impugns the integrity of this commission," Skop said. "These are not allegations, but admissions by this employee."

Posted by Jay Hancock at 10:45 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

Connecticut regulators have complained that BGE parent Constellation Energy and another company manipulated the wholesale electricity market in that region and collected more than $50 million in excess revenue as a result. The complaint was filed with the Federal Energy Regulatory Commission in April, but the identities of the companies weren't revealed. Now FERC has agreed to hear the complaint, and it has come out that Constellation and somebody called Brookfield Energy Marketing are the respondents.

The alleged improprieties took place on the New England grid and involved the "capacity" market, in which electricity users pay to reserve future generation time. The capacity market is questionable even when legal, as it pays gajillions of dollars to generators just for existing. Connecticut is alleging something worse.

"Two energy companies that received more than $50 million in ratepayer money to provide power never delivered the electricity," says Gov. M. Jodi Rell's press release.

But in the Reuters story a Constellation spokesman said grid operators reversed previous statements that the juice had not been delivered:

"ISO-New England has retracted initial statements that power bid into the forward capacity markets was not delivered, finding that requests for power were never made," spokesman Lawrence McDonnell said in an emailed statement.

That doesn't address another point made by Connecticut, namely that energy producers gamed the market with a strategy of selling capacity that minimized the likelihood they would ever have to deliver. In any event it's great that the Obama FERC is looking into this. Under Bush, FERC swept multiple allegations of electricity shenanigans under the carpet, including some involving the Mid-Atlantic grid that includes Maryland. FERC has jurisdiction over the interstate wholesale electricity market, which is where all the action and money is. Let's hope this is the beginning of a long process of turning on the lights at the Federal Energy Regulatory Commission.

Posted by Jay Hancock at 7:00 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

From the Staunton News Leader of Virginia, a report that a judge has revoked Dominion Virginia Power's emissions permit for a new coal-powered generation plant. The plant is already under construction. It'll probably end up getting finished, but the ruling demonstrates the challenges to building new generators of any kind, especially coal. It's why conservation has turned into Job No. 1 for the Mid-Atlantic grid.

Posted by Jay Hancock at 10:01 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

Greg Mankiw, former chairman of Bush II's Council of Economic Advisers, repeats his longstanding call for a carbon tax in a piece in Sunday's New York Times. But he faults the legislation moving through Congress because it doesn't charge enough for carbon emissions permits that will be dealt out to industry. This deprives the government of revenue, Mankiw argues, that could be used to finance tax cuts in other areas.

The numbers involved are not trivial. From Congressional Budget Office estimates, one can calculate that if all the allowances were auctioned, the government could raise $989 billion in proceeds over 10 years. But in the bill as written, the auction proceeds are only $276 billion.

The price of carbon allowances will eventually be passed on to consumers in the form of higher prices for carbon-intensive products. But if most of those allowances are handed out rather than auctioned, the government won’t have the resources to cut other taxes and offset that price increase. The result is an increase in the effective tax rates facing most Americans, leading to lower real take-home wages, reduced work incentives and depressed economic activity.

Note that his differences with the Democratic legislation are over whether to offset a carbon tax with other tax cuts -- not over whether anthropogenic climate change is real or whether we need to do something about it.

Posted by Jay Hancock at 8:05 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

In June 2009, Washington-Baltimore area consumers paid more than the U.S. city average for utility (piped) gas (10.9 percent) and electricity (13.6 percent) but less than the national average for gasoline (-4.4 percent) as measured by the Consumer Price Index, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Sheila Watkins, the Bureau’s regional commissioner, noted that the 13.6 percent gap between local and national electricity prices was the largest difference in June in the last 10 years.

Posted by Jay Hancock at 10:30 AM | Permalink | Comments (6)
Categories: BGE/electricity
        

Washington Gas Energy Services is still offering its cheaper alternative to BGE's standard product. Here's a recent interview I did with Jeff Salkin on MPT about it.

Posted by Jay Hancock at 8:36 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

David Sokol, the guy who just pried more than $1 billion out of Constellation Energy Group for a few months' work, just got an added task within Warren Buffett's Berkshire Hathaway and is being tipped as Buffett's possible successor. Says Reuters:

Buffett's naming on Tuesday of David Sokol as chairman and interim chief executive of Berkshire's NetJets Inc unit has renewed speculation that Sokol could be the internal executive in line to replace Buffett in running the Berkshire empire.

Sokol is also chairman of Berkshire's MidAmerican Energy Holdings Co unit. He is 52, several years younger than others whom analysts say could also be heirs apparent, insurance executive Ajit Jain and Geico Corp chief executive Tony Nicely.

Posted by Jay Hancock at 8:30 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

Shortbus begs to differ with BGE parent Constellation Energy's report of "adjusted" earnings of $1.82 per share for the second quarter. This figure is supposed to reflect ongoing profits and doesn't include irregular, extraordinary costs that distort the future picture.

However, as Shortbus points out, irregular and extraordinary are absolutely routine at Constellation Energy Group.

In other words, the non-GAAP [adjusted] earnings omit non-recurring charges in order to provide a picture of "normal" operations. In Constellation's case, the exception is the rule and a quarter without extraordinary charges would be an anomaly. Clearly, these figures are used being used to justify senior management's looting of the treasury and to deceive unwary investors.

[This is Jay. I don't know for a fact that the pay of Mayo Shattuck and other execs is tied to non-GAAP measures. I've asked CEG for comment.]

On the other hand, perhaps I'm being narrow-minded with respect to Constellation's accounting practices. Since I have a current $128 Constellation electric bill in front of me, I can't think of a better opportunity to practice some of Shattuck's "outside the box" methodology. Thus, I see no reason not to submit $4.74, which is a 27 time reduction that represents, in the judgement of Shortbus management, a truer picture of my power consumption.

UPDATE: CEG spokesman Rob Gould refers us to a regulatory document that talks about why the company reports adjusted earnings per share. He doesn't directly address the question of whether management is paid at least partly based on adjusted results, so presumably the answer is yes. The excerpt below implies that they are, saying, "adjusted EPS is an appropriate measure for senior executives..."

In the attached link, go to page 28…..it lays out in the middle of the page………”Adjusted EPS is publicly reported quarterly by CEG. We believe this view of adjusted EPS reflects results that are comparable among periods since it excludes the impact of items such as workforce reduction costs or gains and losses on the sale of assets, which may recur occasionally, but tend to be irregular as to timing. We believe this view of adjusted EPS is consistent with how our investors view our business, and that adjusted EPS is an appropriate measure for senior executives given their company-wide responsibility.”

Posted by Jay Hancock at 10:32 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

Boy is this swirling around the Internets this morning. On Constellation Energy's 2nd-quarter earnings conference call this morning, one analyst referred to "The People's Republic of Maryland." The topic was Constellation's proposed joint venture with Electricite de France, the Maryland's Public Service Commission's review of the deal even though it has no jurisdiction, and yesterday's announcement by the PSC that it won't complete the review in time for CEG's and EDF's deadline.

Posted by Jay Hancock at 10:43 AM | Permalink | Comments (4)
Categories: BGE/electricity
        

The Public Service Commission has extended its review of the proposed joint venture between Constellation Energy Group and Electricite de France. EDF is buying 49 percent of CEG's nuclear-generation business. The companies wanted to close the deal by Sept. 17. Not gonna happen now.

Says the PSC:

In each instance, the State and MEA argued that they have not received full responses to data requests to Constellation Energy Group, Inc. (“CEG”), Baltimore Gas and Electric Company (“BGE”) and Electricité de France International, SA (“EDF”) in a complete and timely fashion, and that they find themselves with insufficient time to prepare their reply testimony, currently due on August 5th.

The Commission is aware and mindful that CEG and EDF want to close the transaction by September 17, 2009, and the Commission has made every effort to complete the public interest review with that deadline in mind. But the Commission cannot and will not compromise the quality of the public interest review of this transaction, and the Commission finds that the public interest in a thorough review outweighs the companies’ understandable desire to close by September 17th.

Posted by Jay Hancock at 5:27 PM | Permalink | Comments (1)
Categories: BGE/electricity
        

Business Week chronicles what happens when you enact universal health insurance but don't put in any cost controls. Not that anybody should have needed a case study. The Democrats' plan is largely modeled on the Massachusetts program, and so far it doesn't have much in the way of cost control, either.

Massachusetts, which instituted universal coverage three years ago, wants to end the practice of reimbursing for every medical procedure and doctor visit. Providers would instead get a yearly fee for each patient, thus eliminating financial incentives to overtreat.

The motivation for this switch is simple desperation—and it should be a warning to Washington. When Massachusetts enacted the most comprehensive insurance-for-all bill in the U.S. in 2006, it did nothing to address rapidly rising costs. Three years later the rate of uninsured residents has dropped from 8% to 2.6%, the lowest of all 50 states. But the cost of covering an additional 428,000 residents is wreaking havoc on the state's finances.

Posted by Jay Hancock at 8:29 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

The Maryland AARP questions BGE's plan to install smart, computerized meters and increase June-September peak-time electricity rates by about a fourth to 16 cents per kilowatt-hour. Sez the AARP:

BGE recommends a pricing structure for all residential customers that would raise rates in the summer by to 16 cents per kWh for usage between 2 and 7pm every summer day. While BGE’s press releases have noted the potential for customers to earn a peak reward credit in the amount of $1.75 per kWh, that option would only exist for the estimated 12 critical peak day events that BGE projects will occur. As a result, residential customers will pay a higher price for essential electricity service for every summer day and only obtain any rewards or benefits if there is a critical peak event called by PJM and only for those few days in which such critical peak events are likely to occur.

BGE has said changing the summertime rates will be "revenue neutral." To me that means revenue neutral NOT COUNTING the $1.75 rebates for lowering your consumption on critical days. Under a real revenue-neutral program, the increase in summertime 2pm - 7pm rates would be 100% offset by a decrease in non-peak rates for everybody. Mrs. Jones in Hampden would see her everyday daytime kw expense go up, but her everyday non-peak kw expense would go down by a like amount -- even if she doesn't change her use pattern.

The rebates for consumption cutters should be financed externally -- through savings gained from not burning expensive peak kilowatts, capacity payments etc. They shouldn't be financed by taking money from Mrs. Jones and others who who don't cut consumption. As BGE's Mark Case explained it when I asked him about this last week, BGE's plan won't penalize Mrs. Jones. Case:

The worst a customer can do is to forfeit the opportunity to save money via the rebates. Our rebate level is not funded through base rates or any customer subsidy – rather it is funded by the PJM capacity and energy revenues which result from the load reductions.

The PSC needs to make sure this plays out the way he describes it. The full text of AARP's letter to the PSC is below the fold.

Continue reading "AARP questions BGE's 'smart meter' plan " »

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

A reader has a question about this column, which said, "BGE's ambitious 'smart meter' program promises to bring the electrical grid up to the technology standards we expect from bank accounts, cell phones and coffee makers." She asks:

One issue you didn't address in your article the other day is that those so-called "smart meters" won't buy a thing for those of us who took your earlier advice and who are now buying our electricity from another supplier. So, we end up paying BGE for meters we don't want and don't need. We have always been frugal with electricity. That's why we have solar heating and have only turned on the AC about twice in 30-some years. There is a minimum amount of electricity we must use, to run the fans and pumps and whatnot that make this system work. And now, what we do use comes not from them but somebody else. So, we would like to opt out. How much you want to bet that's not an option?

My reply:

You’re right. Opting out will probably not be an option. The only way to make the system work well is to install meters for everybody. But it’s a great investment for society. It’s unclear whether we’ll still be able to buy from WGES in the future. Policymakers are talking about prohibiting all shopping and making everybody buy BGE’s standard product. But in any event 1) The smart meter rebates are supplier neutral. They’ll be passed thru the BGE portion of your bill, which you always pay. You’ll get them no matter who your suppier is. 2) None of this is going to get launched for a year or two. Your WGES contract will probably expire before you get a smart meter.

Posted by Jay Hancock at 10:26 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

As several readers have pointed out, Washington Gas Energy Services is now offering a three-year, price-lock deal on electricity that is lower than BGE's current standard price. The three-year deal is 10.9 cents per kilowatt hour. (Electric supply only. BGE's delivery charge, which is there no matter who your supplier is, is another couple pennies and change. Plus all the nuisance charges.) That's a tenth of a penny more than WGES's two-year package of 10.8 cents. The three-year deal is a no-brainer, and I wish it had been available when I locked in for two years a few months ago.

BGE's standard price this summer is 12.69 cents per kilowatt-hour. That'll dip to 11.53 cents for October through May. It may fall a little more after May, but it probably won't go much below the WGES deal. And in two or three years there's a good chance it will go much higher as the economy heats up and energy prices rise. Energy wonks are uncertain about what will happen in the next year; they're pretty darn sure prices will be up in 2011 and 2012.

Political uncertainties create some haze around the WGES deal and others like it. There is talk in Annapolis of starting to reregulate electricity and banning consumers and commercial users from buying from third parties such as WGES or Commerce Energy. If that happens it's unclear what will happen to long-term contracts. However it turns out, though, the risk that you'll pay more by switching to WGES than you would have by sticking with BGE's standard product over the next three years seems pretty small.

Don't forget Clean Currents, whose "100-percent wind" deal offers a package that supports green energy for 11.7 cents for two years. That's also less than BGE's current standard price.

Posted by Jay Hancock at 8:30 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

Constellation Energy Group, parent of Baltimore Gas & Electric, led by CEO Mayo Shattuck, have made a counteroffer to Gov. O'Malley in the tussle over Electricite de France and what concessions CEG would make for approval of EDF's proposal to invest in CEG's nuclear power business. Basically CEG has decided again to play ball with O'Malley rather than telling him to jump in a lake. Here is what jumps out:

Although the EDF transaction will not have any negative impact on BGE's rates, Constellation nevertheless is willing to discuss commitments regarding BGE's rates.

In particular, CEG would delay asking for an increase in BGE's distribution rates for 10 months, to January 2010 "at the earliest." It would also promise not to seek an increase of more than 2.5 percent, down from 5 percent. They would also talk about delaying requested increases for natural gas.

This is pretty small stuff. The distribution portion of the BGE bill is small, and a 2.5 percent increase in THAT is even smaller. But, again, this signals that CEG and Shattuck are willing to deal.

... our Board of Directors has agreed with our CEO's recommendation to terminate his change in control agreement, and any other rights to severance in a change in control transaction, in order to remove the issue so that it does not continue to serve as a distraction to possible settlement discussions...

Again, more symbolic than substantive. They obviously don't expect a change in control at CEG anytime soon. The biggest bonus for Shattuck in the change in control agreement was accelerated vesting for his pension. The board already made sure he becomes eligible for the pension soon irrespective of any change in control. So it doesn't look like he's giving up much here.

Constellation would be willing to provide BGE access (from one of its existing generation sites) to a potential generation site at no cost to BGE's distribution customers, if following such evaluation BGE pursues the contstruction of a new generation facility.

This is interesting. The state may eventually order BGE to build a new power plant and pass the cost along to BGE ratepayers. If this happens, it sounds like CEG is offering free land for hte plant to be built on, which would save some cost.

Posted by Jay Hancock at 2:56 PM | Permalink | Comments (1)
Categories: BGE/electricity
        

Baltimore Gas and Electric released some details of its ambitious smart-meter program. A few highlights. 1) It's hoping to get up to $200 million in federal stimulus money to help pay for the program. 2) Rather than instituting "real time" pricing, putting all customers at risk of incurring expensive peak charges, the program would pay customers rebates for avoiding peak use. 3) Customer charges to pay for meters would be from $1.24 per month to $1.52.

Without having gone over this in detail, I can say that I suspect it's not a perfect proposal. But the world and Maryland need smart meters to cut energy use, and using stimulus money to help install them is a great idea. Yes, it looks like it'll cost customers $20 a year or so in up front costs. But it''ll save lots of money and carbon over the long term. If everything works as planned, it will be worth it.

The first phase of BGE's Smart Grid proposal would be the installation of 2 million advanced, or "smart," electric and gas meters, operating through a robust utility-to-customer, two-way communications network, which forms the foundation for an automated, digital intelligent grid. The utility is also planning to roll out a new Smart Energy Pricing (SEP) program as its standard rate schedule, which would pay customers rebates for reducing power consumption during peak periods. In the pilot of advanced metering technology and Smart Energy Pricing, participating residential customers reduced their consumption during peak periods by 26 percent to 37 percent, saved more than $100 on average and gave the program a 93 percent satisfaction rating.

BGE's ability to rapidly and most cost-effectively carry out the Smart Grid initiative depends upon PSC approval and cost recovery in a timeframe that would allow the utility to qualify for a competitive Department of Energy (DOE) grant of up to $200 million to partially fund the initiative. BGE anticipates filing its DOE grant application in early August 2009, and it is anticipated that DOE would begin announcing grant awards in October 2009. The utility estimates initial deployment and operating costs of nearly $500 million over five years, and expects that over the project's lifecycle customer savings will exceed costs by a ratio of more than 3 to 1.

Under the cost recovery mechanism proposed by BGE, the monthly customer surcharge would be 38 cents per month for electric-only customers and 44 cents per month for gas-only customers in the first year of implementation, and the customer cost would increase slightly over time as benefits also ramp up. Over the life of the program, the monthly surcharge would average approximately $1.24 and $1.52, respectively, for residential electric and gas customers, and would be reduced based on the award of a DOE grant. Customer savings from reduced energy and operating costs will be several times greater than the amount of the surcharge.

Posted by Jay Hancock at 11:08 AM | Permalink | Comments (14)
Categories: BGE/electricity
        

This just in from Baltimore Gas and Electric:

BALTIMORE (July 10, 2009) - Baltimore Gas and Electric Company (BGE) today announced that it will hold a press conference to unveil plans for one of the most advanced Smart Grid initiatives in the nation, highlighted by the planned installation of 2 million residential smart meters throughout the BGE service territory and anticipated cost savings for BGE gas and electric customers in excess of $2.6 billion over the life of the project.

The presser is Monday. If these really are smart meters, they'll offer the option of "real time" pricing for residential users, letting them refuse the most expensive kilowatts during the day and passing along most of the huge savings available for offpeak, nighttime use. BGE's "time of use" plan, as presently designed, doesn't pass along enough of the offpeak savings.

The $2.6 billion in projected savings, which would be achieved by using less electricity as well as through prices lower than they otherwise would have been, may be optimistic. Does it include the cost of the meters, which will be considerable? We'll find out Monday.

Posted by Jay Hancock at 2:54 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Jeffries & Co. published a report today saying that a rejection by the Public Service Commission of Electricite de France's proposal to buy half of Constellation Energy Group's nuclear energy business would prevent CEG from building new generators. CEG owns Baltimore Gas and Electric. Some highlights:

If the JV [joint venture] were not approved, the balance sheet of Constellation and BG&E will not support new investment. Instead, the companies will need to use surplus cash to pay down debt.

• BG&E would be unable to build or contract for new generation
because of balance sheet constraints. Although the electric utility
re-regulation proposal would require BG&E to build new power
plants, the utility would need to dedicate its surplus cash generation
to debt pay-down in order to preserve its credit rating.

• Among the projects which BG&E would likely have to abandon
would be the proposed new nuclear power plant at the Calvert
Cliffs site.

I don't know why they're confusing BGE and CEG. The proposed Calvert Cliffs nuclear unit would be built by Constellation, not BGE. But the overall analysis stands. Constellation, after its near-death experience last year, needs outside capital to build plants. Or an order from the PSC that would build capital costs into BGE's rates for residences and businesses.

Posted by Jay Hancock at 12:37 PM | Permalink | Comments (2)
Categories: BGE/electricity
        

The Federal Energy Regulatory Commission has done a state-by-state analysis of the potential for "demand response" mechanisms to cut peak electricity use. Demand response involves incentives and other measures to get people to use less juice. Part comes from agreements like BGE's Peak Rewards plan, which pays households that allow BGE to cycle off their air conditioning at critical times. Demand response will also eventually come from response to price signals. Peak-use electricity is very expensive; on really hot days the price for electrons can jump 20- or 50-fold for a few minutes. Yet the customer has no sensitivity to these spikes because the meters aren't sophisticated enough. The AC stays turned on no matter how expensive the electricity gets.

Eventually "smart" meters will put households at risk for incurring high charges for peak-demand electrons. Adjusting and cutting down shouldn't change you lifestyle much. You should be able to program your meter/thermostat to shut down the AC when megawatt hours reach a certain outrageous price -- say, $100 per megawatt hour. In theory that would leave your unit off for only a few minutes and not enough that you would notice much. And if everybody does it it makes a huge difference for pressure on the grid.

The FERC study finds that Maryland has enormous potential to cut peak demand by virtue of the fact that it already has some peak demand programs in place and the fact that it has a high concentration of central AC among households.

Says FERC:

Ranked by demand response potential as a fraction of peak demand, Connecticut, Maryland and Maine are highest; each has substantial amounts of existing demand response, Maine has an above-average share of peak demand in the Large commercial and industrial customer class, and Maryland has a relatively large amount of residential central air conditioning.

Maryland, the agency says, could cut peak demand by 28 percent by 2014 and an amazing 32 percent by 2019. Not only will that reduce pollution. It will ease upward pressure on electricity prices and reduce the need to build generators.

Posted by Jay Hancock at 8:13 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

I have received a fair amount of email about last week's column that said:

You don't need to be a lawyer to understand how Gov. Martin O'Malley's Public Service Commission is flouting the law. Rarely is the difference so bright between what is permitted and what is perpetrated.

The law, signed by O'Malley in April 2008, lets the commission review deals by electric utility owners only if a transaction would give somebody at least a fifth of the shares or a fifth of the board seats at the owner corporation. The red, octagonal "STOP" sign at the end of my street is a similar example of clear legal language.

But the commission claims the power to reject Electricite de France's plan to invest in BGE parent Constellation Energy even though the French company would get only one out of more than 10 board seats and owns fewer than 10 percent of the shares. The decision demonstrates stunning bad faith by Maryland as well as O'Malley's increasing desperation to be seen as keeping campaign promises to lower electric prices.

Readers want more legal background. Here is the full language of the law passed last year by the General Assembly. Here are the relevant paragraphs:

(2) FOR THE PURPOSES OF THIS SUBSECTION, A PERSON MAY NOT BE CONSIDERED TO HAVE ACQUIRED, DIRECTLY OR INDIRECTLY, THE POWER TO EXERCISE ANY SUBSTANTIAL INFLUENCE OVER THE POLICIES AND ACTIONS OF A GAS AND ELECTRIC COMPANY IF THE PERSON: (I) AFTER ANY ACQUISITION OF VOTING INTERESTS OF A COMPANY THAT OWNS OR CONTROLS A GAS AND ELECTRIC COMPANY, DIRECTLY OR INDIRECTLY, OWNS, CONTROLS, OR HAS THE RIGHT TO VOTE, OR DIRECT THE VOTING OF, NOT MORE THAN 20% OF THE OUTSTANDING VOTING INTERESTS OF A COMPANY THAT OWNS OR CONTROLS A GAS AND ELECTRIC COMPANY; AND (II) DOES NOT HAVE THE RIGHT TO DESIGNATE MORE THAN 20% OF THE BOARD OF DIRECTORS OR OTHER GOVERNING BODY OF A COMPANY THAT OWNS OR CONTROLS A GAS AND ELECTRIC COMPANY.

Here is the full text of the commission's order that begins:

In this Order, the Public Service Commission finds that Electricité de France International, SA (“EDF”)1 would, upon completing a proposed transaction with Constellation Energy Group, Inc. (“CEG”), “acquire, directly or indirectly, the power to exercise … substantial influence over the policies and actions”2 of CEG’s wholly-owned subsidiary, Baltimore Gas and Electric Company (“BGE”).

Here is how the commission lamely explains its decision to take jurisdiction even though the law says it lacks it:

CEG argues that the “safe harbor” ends our review of this transaction because EDF is acquiring neither voting interests that would take its holdings above 20% nor the right to designate more than 20% of the CEG Board of Directors. We find that the plain language of (e)(2) compels exactly the opposite conclusion: because EDF will, in the proposed transaction, acquire rights and assets other than voting interests in CEG, the “safe harbor” does not and cannot apply. Once a proposed transaction includes elements other than acquisition of stock and board designation rights, it no longer is eligible for the (e)(2) exception.

Stock ownership and board votes are the alpha and omega of substantial control. All corporate law is predicated on the notion that the people who own companies and the boards that supervise them are the controlling entities. This PSC sentence -- "Once a proposed transaction includes elements other than acquisition of stock and board designation rights, it no longer is eligible for the (e)(2) exception." -- is Orwellian in its casual assertion of omnipotence. By such logic, if Constellation wanted to give an ice cream party for EDF or another business partner, the PSC could block the deal.

Judge Berger's dismissal last week of Constellation's challenge to the PSC's authority does nothing to change this argument. He didn't rule on the merits of the case.

Posted by Jay Hancock at 10:44 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

BGE has posted its monthly update for natural gas prices. The price edged up from 57.05 cents per therm in June to 61.71 cents for July. At 62 cents it's only 40 percent of its price from last July, which was $1.58.

Last month I published a column saying that energy prices might be heading up and that you might want to sign up for WGES's fixed-price natural gas deals, even though they're substantially pricier than what BGE has been charging month to month. But the column was wishy washy.

"Based on what we're seeing so far, we would expect this winter's gas to probably be a little lower than last winter, but it's going to be higher than what we see right now," said Ronald T. Jennings, BGE's director of gas supply.

Is that reason enough to lock up your own supply, separate from what BGE will offer? (BGE is always your electric and gas delivery company, but suppliers can vary.) The best natural gas deal out there is from WGES (see phone number above), letting you buy for a year at 73 cents and two years at 84 cents.

While substantially higher than today's price, those deals - especially the two-year package - will look good if the economy recovers in a robust way. If prices of $1.20 or $1.50 per therm would make a distressing dent in your budget, the two-year WGES deal is the way to go.

I haven't locked in with WGES or anyone else for natural gas. I'm betting the economy will continue to be weaker than many expect. And I'm betting against another Hurricane Katrina, which disrupted gas production and shipment and caused prices to spike for the winter of 2005/2006. But energy prices seem to be sensitive to even subtle signs of economic growth, and it's not a clear call.

Posted by Jay Hancock at 9:19 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

Today's column begins:

You don't need to be a lawyer to understand how Gov. Martin O'Malley's Public Service Commission is flouting the law. Rarely is the difference so bright between what is permitted and what is perpetrated.

The law, signed by O'Malley in April 2008, lets the commission review deals by electric utility owners only if a transaction would give somebody at least a fifth of the shares or a fifth of the board seats at the owner corporation. The red, octagonal "STOP" sign at the end of my street is a similar example of clear legal language.

But the commission claims the power to reject Electricite de France's plan to invest in BGE parent Constellation Energy even though the French company would get only one out of more than 10 board seats and owns fewer than 10 percent of the shares. The decision demonstrates stunning bad faith by Maryland as well as O'Malley's increasing desperation to be seen as keeping campaign promises to lower electric prices.

Here is the relevant language from the law. Like I said, clear as day:

FOR THE PURPOSES OF THIS SUBSECTION, A PERSON MAY NOT BE CONSIDERED TO HAVE ACQUIRED, DIRECTLY OR INDIRECTLY, THE POWER TO EXERCISE ANY SUBSTANTIAL INFLUENCE OVER THE POLICIES AND ACTIONS OF A GAS AND ELECTRIC COMPANY IF THE PERSON:

(I) AFTER ANY ACQUISITION OF VOTING INTERESTS OF A
COMPANY THAT OWNS OR CONTROLS A GAS AND ELECTRIC COMPANY, DIRECTLY
OR INDIRECTLY, OWNS, CONTROLS, OR HAS THE RIGHT TO VOTE, OR DIRECT
THE VOTING OF, NOT MORE THAN 20% OF THE OUTSTANDING VOTING
INTERESTS OF A COMPANY THAT OWNS OR CONTROLS A GAS AND ELECTRIC
COMPANY; AND

(II) DOES NOT HAVE THE RIGHT TO DESIGNATE MORE THAN
20% OF THE BOARD OF DIRECTORS OR OTHER GOVERNING BODY OF A COMPANY
THAT OWNS OR CONTROLS A GAS AND ELECTRIC COMPANY.

Posted by Jay Hancock at 10:26 AM | Permalink | Comments (10)
Categories: BGE/electricity
        

A couple links for energy prices. BGE's summer prices, which took effect June 1 unless you switched to an alternate supplier, can be seen by clicking here. BGE's default price for residences through September will be 12.669 cents per kilowatt-hour, the highest it has ever been. (Add 2 cents and change for BGE's delivery on top of that, plus all the nuisance charges.) Non-summer prices starting in October are also there.

And BGE just posted its latest monthly price change for natural gas. The June price (again, excluding delivery) is 57.05 cents per therm, a slight increase from May but less than half the price from a year ago. To see the chart of monthly gas prices back to 2002 click here.

Posted by Jay Hancock at 5:46 PM | Permalink | Comments (8)
Categories: BGE/electricity
        

UPDATE: Diane also has this to say. Will nudge the company.

I still see that WGES' FAQ page on residential electricity shows the $75 or $7.00 month cancellation fee, though. They really should update that ASAP to reflect the increase as detailed in the terms and conditions of the current offers. As an alert consumer, I have an issue with a company publishing conflicting information. I'd imagine it could create problems for them as well? http://www.wges.com/page/faq.php?c_type=ELE

I've been recommending the electricity package being offered by Washington Gas Energy Services as an alternative to the standard BGE product. You can sign up for up to three years for 10.8 cents per kilowatt hour with WGES. This summer's standard BGE price will be over 12 cents. (This is transmission and generation only. BGE, which stays as your delivery service no matter whom you buy juice from, adds on a delivery charge.)

Alert reader Diane D. notes that WGES has changed the termination fee if for some reason you want to get out of the contract early. Formerly it was $75 or $7 per month remaining in the term, whichever was greater. Now it's $150 or $20 a month. I asked WGES boss Harry Warren about the reasons for the change. His response, via email:

"WGES increased its residential electricity supply termination fees in May 2009. This change is in response to the price volatility energy markets have recently experienced, moving as much as 20% in less than 6 months.

"When a customer signs an electricity supply contract with WGES for a guaranteed price and a 1, 2 or 3 year term, WGES purchases wholesale supply at that time at prevailing prices to fulfill its obligation to the customer. This puts us in a different position from other companies that charge termination fees such as cell phone or cable operators. We need to cover potential losses on reselling the electricity if a customer breaks their contract. Note that our contract terms still waive this fee if the customer moves."

I still think the three-year deal for 10.8 cents is a good bet. And note that if you change residences, they don't charge you the termination fee.

Posted by Jay Hancock at 10:53 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

Call me stupid, but it's difficult to see how Electricité de France's minority stake in a subsidiary of the holding company that owns Baltimore Gas and Electric -- and one seat on the holding company's board -- gives it "substantial influence" over BGE. Whether or not EDF would obtain substantial influence is the test of whether its deal to invest billions in Constellation Energy's nuclear operation is subject to approval by the Public Service Commission.

Constellation is BGE's holding-company owner. It would have a good case if it told the PSC, the governor and the legislature to jump in the Inner Harbor. But once again Constellation is negotiating with policymakers rather than litigating, as Laura Smitherman and Hanah Cho report in today's Baltimore Sun. The governor wants price reductions for BGE customers, investment in clean energy, protection of BGE against financial raids by outsiders and "absolute transparency" on compensation to Constellation boss Mayo Shattuck. Whatever "absolute transparency" means.

I'm not saying Constellation's executive pay policies and the experience of BGE and its customers in the wake of deregulation aren't a problem. Maryland policymakers have tried to hold previous Constellation deals hostage to try to get concessions for BGE customers. This time the legal ground looks more slippery. It doesn't seem to matter to Constellation. The hostage could probably walk out the door and hail a cab. But instead he's negotiating the ransom.

Posted by Jay Hancock at 9:50 AM | Permalink | Comments (5)
Categories: BGE/electricity
        

I was an early enrollee in BGE's Peak Rewards program, where they install a digital thermostat and get the ability to briefly shut off your air conditioner on the hottest summer days. I haven't noticed any difference in summer cooling. You get up to $200 in BGE credits for letting them do this. Now BGE says it has signed up 75,000 households, which will substantially reduce demand and the need for new, polluting power plants.

BALTIMORE, MD – Baltimore Gas and Electric Company (BGE), a subsidiary of Constellation Energy (NYSE: CEG), today announced it has enrolled more than 75,000 residential customers in PeakRewardsSM, a BGE Smart Energy Savers Program SM and one of the largest electricity demand response programs in the country. When it reaches its enrollment goal, PeakRewardsSM is expected to reduce enough demand for electricity during peak usage times to power 170,000 homes, the equivalent of the generation capacity of a small-to-medium-size power plant.

Posted by Jay Hancock at 10:37 AM | Permalink | Comments (10)
Categories: BGE/electricity
        

Andrew Mickey of Seeking Alpha says:

Throughout the first eight weeks of this (stock and energy) rally, natural gas prices seemed to fall week after week. Inventory continued to set new highs practically each week. Every round of price declines brought a further decline in natural gas rigs in operation. Last week another 17 rigs were taken off line, according to Baker Hughes (NYSE:BHI).

That all changed last week and natural gas prices started to rebound. In all, natural gas prices rebounded sharply from a bit under $3.25 per Mcf to $4.52 as I write. That’s a 40% move in a little over a week.

So now the big question on investors’ minds is, “Was that the bottom?”

If natural gas prices are permanently headed up (I'm skeptical), the Public Service Commission's inquiry into how BGE and other utilities will protect consumers against increases is relevant. But if gas prices have taken off, the PSC proceeding is also too late. BGE's standard monthly gas price for residential users has plunged from $1.05 per therm in December to 53 cents in May. .

Posted by Jay Hancock at 10:21 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

KMT sez:

So we made the switch to WGES for natural gas and electricity. Now what - do you know if we have to cancel anything with BGE? I certainly don't want to pay double! Thanks.

The answer is no. WGES or any other supplier will let BGE know that you switched, and you don't need to call BGE. No risk of paying double. I just switched to WGES. First I got a letter from WGES confirming the change. Then I got a letter from BGE acknowledging the swtich.

Posted by Jay Hancock at 11:41 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

The blog recommends dumping BGE's standard electricity product, which will hit 12.7 cents per kilowatt hour this summer, not counting delivery charges, for Washington Gas Energy Services' deal at 10.8 cents. Readers want to know: If I switch to WGES or another alternative supplier, will BGE kick me out of the Peak Rewards program, where I get savings for having a cutoff switch on my air conditioner?

The answer is no. If you're in Peak Rewards, it doesn't matter who your supplier is. Even if you switch to WGES or Commerce Energy or somebody else, Baltimore Gas and Electric will still be your electricity utility, delivering the juice. Peak Rewards is a BGE program.

Posted by Jay Hancock at 1:20 PM | Permalink | Comments (2)
Categories: BGE/electricity
        

Readers want to know: Now that regulators say BGE’s standard household electricity price will be lower for the 2009/2010 winter than it was for the 2008/2009 winter, does it still make sense to switch to a competing offer from Washington Gas Energy Services?

Yes. Last winter’s default BGE price (about 12 cents per kilowatt hour, not counting delivery) was the highest ever for that season, so being slightly lower for next winter is no big deal. WGES (888-884-9437cq) will sell you juice for up to three years at 10.8 cents, so it’s still the superior offer at least for the next 12 months.

Baltimore Gas and Electric bought its last allotment of electricity for October through May a few days ago. So far neither BGE nor the Public Service Commission will say exactly what the price will be for that period. But they do say the average residential price for the whole 12 months – including summertime rates – will be slightly higher than in the previous 12 months.

That’s really all you need to know. Prices for this summer will be 12.7 cents; paying WGES 10.8 cents instead will save more than $30 a month for a typical house for June through September. The WGES savings starting in October will be less, but they still should be decent.

Posted by Jay Hancock at 11:16 AM | Permalink | Comments (7)
Categories: BGE/electricity
        

When workers at Electricite de France, the big French power company, want to protest management actions they sometimes sabotage their own company and cause blackouts for thousands of their own customers. BGE owner Constellation Energy has agreed to expand its partnership with EDF in nuclear-powered electricity. BGE employees don't seem to be quite as radical. From The Times:

It was the second time in a week that blackouts had hit the Paris region as striking gas and electricity workers adopted radical tactics to support their call for a 10 per cent pay rise and an end to outsourcing of jobs.

They are denounced as industrial saboteurs by the Government and face disciplinary action and prosecution, but say they are determined to press ahead with what they portray as a struggle against free-market forces.

The movement got off to a slow start. “We’ve been on strike for three weeks but at first no one paid any attention at all,” he said. “It was only when some of the guys started cutting the electricity and gas that things got moving.”

The militants armed with a map showing the substations and keys to the locks can shut down power to thousands of homes in a few minutes.

Last Thursday 66,500 EdF customers lost their electricity supply, some for several hours. In Douai, northern France, two patients in intensive care had to be moved when a hospital lost power for 40 minutes.

Earlier this week the activists sought to win public support by switching 350,000 customers from peak to off-peak tariffs — a 50 per cent saving. They also restored power to hundreds of households that were cut off by EdF because they had failed to pay their bills.

Posted by Jay Hancock at 8:00 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

I keep mentioning "100 percent" wind energy available in Maryland for the lowest cost ever. I chose to go with cheaper, conventional electricity offered by Washington Gas Energy Services, pledging to put the savings into weatherization and cutting energy use of all kinds.

Commenter Andrew says: "Sorry, but if you care about other people in the world, the wind power would have been better."

In the San Jose Mercury News, UC Santa Cruz professor Daniel Press argues that wind-power certificates of the type that back green-electricity contracts in Maryland are being peddled by "green-energy scammers."

Are wind-energy contracts a scam? Or will they save the world?

Neither, actually. I would describe the deals being offered by Clean Currents and other purveyors of wind energy in Maryland as environmentally friendly and supportive of alternative energy -- just not necessarily in Maryland. 100-percent Wind energy deals in Maryland come with two parts: 1) traditional energy off the grid, generated by the usual suspects, coal and nuclear fission; and 2) Renewable energy certificates, sold by wind-power companies, pledging that somewhere wind energy was used to generate kilowatts equal to the amount your home consumed.

There's no reason why you can't buy RECs directly from various purveyors instead of bundled with your residential electricity bill. (It looks like they cost about 2 cents/kwh these days.) However purchased, RECs direct additional resources to wind-power farms and, at the margin, provide incentives to build new wind-generation capacity. And the planet doesn't care where carbon emissions are produced. If wind farms in Texas or Western Maryland mean the system has to build fewer coal plants, that's a good thing. So is cutting energy use from any source.

Press, however, says:

Wind farms in California and Texas sell electricity on the wholesale market, with a significant boost from federal production tax credits for renewable energy. But prices for renewable-energy certificates, as negotiated by brokers and power producers, are very low — 10 percent of the difference between the cost of producing nonrenewable and renewable energy, and far too little to actually spur production.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (8)
Categories: BGE/electricity
        

Gov. O'Malley's proposal to "re-regulate" electricity, which would have required new electric generation plants in Maryland to be owned by BGE and other utilities, failed in the House. That seems to be the sensible decision. The only reason to rush into re-regulation would have been a maxed-out grid and the need for new, regulated generation pronto. The recession and accompanying decline in the use of energy has pushed back the day when we need to start building. Now policymakers can seek reform on the federal level, monitor the economy, energy prices and grid capacity and figure out what to do at some leisure.

Electricity companies lobbied like heck to keep this bill from being passed. It'll be back next year, but there is one thing the industry could do to stop it in its tracks: build a dang generation plant. Maryland has seen no significant new generation since the 1990s. Deregulation was supposed to bring new, privately sponsored plants, along with the competition and lower prices they imply. It never did. This is industry's last chance to get a non-regulated, moderately sized natural-gas generator in Maryland and deliver on the promise of dereg. If it doesn't, next year the Assembly or the Public Service Commission really will order BGE to build a regulated one instead.

Posted by Jay Hancock at 5:00 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

After waffling between “100-percent wind” electricity and a cheaper deal for dirty kilowatts from Washington Gas Energy Services, the Hancock household signed up for the WGES package – 10.8 cents per kilowatt hour for three years.

In doing so we’ll save about $30 a month this summer, compared with the standard Baltimore Gas & Electric summertime price (12.7 cents) (clicking on this BGE rate sheet will show a generation price of 12.242 cents; add another .4 cent and change in transmission cost for a price to compare of 12.7) and lesser amounts in ensuing months. We’ll be protected if wholesale electricity prices spike back up before 2012.

In rejecting the wind deal, we took the advice of environmental groups saying your first move to go green should be reducing energy use, not burning energy as usual and switching sources. We’ll take the savings from the WGES deal – and then some – and invest in insulation and other upgrades to cut consumption, getting big tax credits in the bargain.

Wind-energy deals support the generation of wind kilowatts somewhere, but not necessarily in Maryland. And they don’t necessarily cause overall carbon emissions to go down, says the Environmental Defense Fund. The only way to do that is to cut consumption or buy offsets, which effectively pay somebody else for cutting his/her emissions.

Posted by Jay Hancock at 5:00 AM | Permalink | Comments (7)
Categories: BGE/electricity
        

Yesterday, in a column on tax incentives and other help to reduce energy use and make your house weathertight, I noted that the Department of Housing and Community Development is handling weatherization grants for low-income households. They've gotten swamped with calls are are referring people to county- and city-level agencies, which take applications and determine eligibility. Here are the local contacts. Don't call DHCD; call your local county or city, as listed below.

MARYLAND LOCAL WEATHERIZATION PROGRAM AGENCIES

Ms. Susan Malone
Allegany County Human Resources Development Commission, Inc
19 Frederick Street
Cumberland, Maryland 21502
301-777-5970 ext 135
smalone@allconet.org
Serves: Allegany County

Ms. Cherlyn Mitchell
Department of Housing and
Community Development
City of Baltimore
2700 N. Charles Street
Baltimore, Maryland 21218
410 396-3584
cherlyn.mitchell@baltimorecity.gov
Serves: City of Baltimore

Mr. Tony Coffield
Community Assistance Network, Inc
7701 Dunmanway
Baltimore, Maryland 21222
410 285-4674
acoffield@canconnects.org
Serves: Baltimore County

Continue reading "Whom to call for low-income weatherization " »

Posted by Jay Hancock at 3:39 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Wednesday's column was on all the people who want to subsidize green energy choices, from the state of Maryland to the IRS to Baltimore Gas & Electric. The piece generated numerous reader questions.

Q. Are you sure I can swtich my electricity purchases to Clean Currents or Washington Gas Energy Services and stay in BGE's PeakRewards club, which gives discounts for putting a cutoff switch on my air conditioner unit? BGE's customer service reps said if I join Clean Currents I can't be in PeakRewards.
A. The customer service reps are misinformed, if in fact that's what they said. The whole point of PeakRewards is to cut electricity demand for all users, no matter whom they buy juice from.

Q. It's a 30 percent tax credit for qualified spending on weatherization, appliances etc. Does that include the labor to install the insulation, furnace or whatever it is?
A. The legislation doesn't say. In the past the IRS has said: materials only; you can't get credited for the cost of labor on these kinds of things. Perhaps they'll issue a clarification.

Q. I installed insulation and new windows in 2008. Can I take the stimulus tax credit?
A. No. The stimulus package didn't pass until February. The stuff has to be put in this year or next year.

Q. It's a $1,500 tax credit for buying qualified appliances or weatherization. Can I take a $1,500 credit once in 2009 and again in 2010 for a different project?
A. No. It's a one-time deal.

Q. How do I know if my insulation/fridge/siding/door/etc. qualifies for the tax credit?
A. Ask the contractor of the manufacturer. Manufacturers are supposed to certify that their products are eligible.

Q. Your column used the examples of spending $1,000 on insulation and taking a $300 credit. Do I have to spend at least $1,000?
A. No. It's 30 percent of any qualified expense, up until you use up the $1,500 credit (which would represent total qualified weatherization and appliance purchases of $5,000).

Posted by Jay Hancock at 8:00 AM | Permalink | Comments (6)
Categories: BGE/electricity
        

In electricity/heating posts, dedicated guerrilla markets keep trying to promote the (name deleted) infrared space heater with links, fake praise etc. in the comments. But the Jay Hancock blog counterinsurgency battalion sleeps not.

Posted by Jay Hancock at 3:30 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Here is the start of today's column. I'll have more on the blog later on details I didn't have room for in the column, and answers to reader questions.

Two-thirds of Americans think the environment is getting worse, but most haven't made major changes to help the air, soil and water, according to recent Gallup polls.

If you're one of the procrastinators, your number of excuses just got smaller. Thanks to the recently passed federal stimulus bill, Maryland energy grants and a maturation of the alternative energy industry, the incentives to go green in big ways and small are higher than they've ever been.

Wind-generated electricity is the cheapest in history. Government and utilities will pay for huge portions of insulation upgrades, efficient appliances and solar installations. And anybody can shave $100 off his or her electric bill this summer by letting Baltimore Gas & Electric briefly shut off their air conditioning on the hottest days.

Posted by Jay Hancock at 10:12 AM | Permalink | Comments (4)
Categories: BGE/electricity
        

Two weeks ago I wrote:

But prices might go lower. For now in the Hancock household, we're sticking with BGE's standard commodity price [for natural gas], which has fallen to 84.6 cents for March from $1.05 in December. Based on what the futures market is saying, I'll be shocked if BGE's April price isn't in the 70s and if we don't hit the 60s at some point.

Wrong again! BGE just posted its commodity gas price for April -- 57.92 cents per therm -- a huge drop from December and down 63 percent from last summer's high of $1.5763. Energy prices have popped up again in recent weeks, so it may not be quite that low next month. But certainly there is no reason to take the fixed-price offer from BGE Home (a separate company owned by BGE parent Constellation energy) of 99 cents.

And unless you expect a Gulf Coast hurricane or a stunning economic revival, the WGES fixed-price offer of 72 cents per therm doesn't seem too competitive, either. It makes sense to stay with BGE's standard gas price, which floats from month to month. Wait until October, when it's very possible the fixed-price offers from alternative vendors could be much better. (The gas commodity price is what you pay for the evaporated hydrocarbons piped into your house. You pay extra for delivery etc.)

Posted by Jay Hancock at 10:20 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

From the Guardian. Electricite de France, Constellation Energy's nuclear partner, is accused of hacking into Greenpeace's computers in France.

A senior executive of the French state energy giant EDF, which now owns the main UK nuclear power operator British Energy, has been charged on suspicion of spying on the environmental group Greenpeace.

The case has sparked outrage among anti-nuclear campaigners in France whose secret services were behind the bombing of the Greenpeace flagship Rainbow Warrior 24 years ago.

An EDF security executive, who previously worked as a police commander, is being investigated for conspiring to hack into Greenpeace France's computer system. Judges are investigating whether state-owned EDF, the world's biggest nuclear-reactor operator, hired a private detective agency run by a former member of the French secret services to illegally spy on environmentalists and infiltrate their ranks.

Posted by Jay Hancock at 2:31 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Out of town and no blogging for a few days. Meanwhile, people ask:

Q. If I switch away from BGE's standard electricity product, will I be kicked out of BGE's Peak Rewards club, which gives rebates for briefly cycling off my AC on hot summer days?
A. No. Peak Rewards is a BGE program. BGE is always your electric utility and your electric distributor. Switching to WGES or Clean Currents for juice won't affect Peak Rewards.

Q. Will BGE charge me a fee to switch to a different supplier?
A. No.

Q. Do I need to notify BGE if I switch to Clean Currents or WGES?
A. No. WGES or Clean Currents does that for you.

Q. I have time-of-use metering, in which I pay more for electricity used at peak times than for electricity used at offpeak times. Can I switch suppliers?
A. No. If you want time of use metering -- and the offpeak discounts look pretty lousy this summer -- you can't switch to WGES or anybody else. Eventually, as the grid gets smarter, this should change.

Posted by Jay Hancock at 8:47 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

From today's column on natural gas shopping:

But natural gas prices have fallen, too, and the 1 million Maryland households that heat and cook with gas are also getting a break.

No matter what happens, families using natural gas will probably save hundreds of dollars next winter compared with this year's bills.

BGE Home and Washington Gas Energy Services, the two main alternatives to Baltimore Gas & Electric Co.'s standard gas product, are offering their best fixed-price gas deals in a while. (BGE Home is owned by BGE parent Constellation Energy, but it's a different company from BGE.)

WGES's gas-shopping Web site is here.

BGE Home's site is here.

Historical, month-by-month prices for BGE's standard natural gas service are here.

Posted by Jay Hancock at 8:26 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

Readers have asked: 1)Where can you go online to find out what BGE's prices will be after May 31? 2) Where can you go online to compare different electric offers?

1) BGE's prices for June through September are here. The summer generation rate is 12.242. Add .4 cents and change for transmission and you get close to 12.7 cents for the "price to compare" for summer. (Note -- this is different from the ANNUAL price to compare on your BGE bill, which smooths out seasonal differences.)

2) The best list of independent electricity vendors is put together by the Office of People's Counsel and can be found here.
Note that OPC's price to compare includes the ~.4 cent transmission charge. Its listed BGE price to compare is too low and probably based on dated data -- 11.82 cents. That's substantially less than the 12.7 cents that BGE's price will hit this summer.

Here is OPC's site for natural-gas shopping.

BGE's list of residential suppliers is here. But it doesn't include prices; you have to link or call to the vendors to get prices. And some of the Web-quoted prices look very old and high. BGE's site also doesn't include third parties reselling suppliers' products.

.

Posted by Jay Hancock at 1:13 PM | Permalink | Comments (6)
Categories: BGE/electricity
        

From Saturday's column:

Shopping for household energy has revived in Maryland, thanks to a drop in wholesale prices, frustration about BGE's winter heating bills and worries about even higher electricity prices to come.

Residential users who dump BGE's or Pepco's standard electricity package could save $20 a month this summer by buying energy instead from merchants such as Washington Gas Energy Services or a program being rolled out by several chambers of commerce. Natural gas prices have plunged, too. (I'll write more about them in Wednesday's paper.)

The electricity savings aren't huge, but there's no reason not to take them. Until policymakers fix flawed wholesale markets and increase Central Maryland's kilowatt supply, it's at least temporary self-help. There has also never been a better time to buy nonpolluting, wind-generated electricity, which has become cheaper than BGE's standard price for the first time.

BGE's standard price will be 12.7 cents/kilowatt-hour this summer. (Generation & cross-country transmission. Local distribution is extra.)

WGES is offering 10.8 cents for one to three years.

Dominion Retail is offering 10.75 cents to the end of this year.

Clean Currents is offering 100 percent clean wind energy for 11.5 cents for 1 year and 11.8 cents for two years.

Posted by Jay Hancock at 8:25 AM | Permalink | Comments (5)
Categories: BGE/electricity
        

This just in. The $32 million bonus pool that Constellation Energy executives extracted from Electricite de France last year will not be spent on executive pay, says CEG. (CEG called them retention incentives.)

UPDATE: The Sun's breaking story on the Constellation bonuses is here.

Constellation Energy (NYSE:CEG) today announced that it will not pay to any Constellation employee any payments it receives from EDF Development, Inc. (EDF) that were originally earmarked for potential payments to its employees under Constellation Energy's long-term incentive plans.

In December 2008, both Constellation Energy and EDF were concerned that the potential instability of the workforce could lead to retention issues among key managers in the company, particularly those highly skilled in the areas of safety and reliability. In response to these concerns, and in light of the fact the company had no existing retention program in place, a decision was made to use an existing long-term incentive plan as a potential retention vehicle. None of the senior officers of Constellation Energy, including the chief executive officer and members of the management committee, were guaranteed payments under the plan.

"In December 2008, Constellation Energy had an urgent need to stabilize the leadership of the company given the tumultuous state of the global markets and Constellation Energy's financial condition at the time," said Mayo A. Shattuck III, chairman, president and chief executive officer of Constellation Energy. "EDF demonstrated a full commitment to the company by agreeing to pay the compensation on two specific long-term plans, which in the aggregate amounted to less than 1 percent of the total annual employee compensation costs of the company.

"Since that time, there has been a tremendous amount of concern over employee compensation throughout the country, and this program has been misconstrued by some as a potential cost to our BGE customers, who we recognize are struggling with high energy bills. The funds for this program were coming entirely from EDF and would not have impacted BGE rates. Nonetheless, we have determined that this issue has become a significant distraction to the important long-term benefits for Maryland that our strategic partnership with EDF represents. Also, since December, the fundamental outlook for Constellation Energy has improved. As a consequence, we have decided to remove this compensation issue from the critically important review of our transaction with EDF."

Posted by Jay Hancock at 4:29 PM | Permalink | Comments (1)
Categories: BGE/electricity
        

The Public Service Commission just made a big bet on natural gas, overruling consumer advocates and its own staff, by ordering utilities to buy much of next winter’s gas at today’s cost rather than waiting for prices to possibly fall even further.

Natural gas prices have plunged along with all energy costs. PSC staff, the Office of People’s Counsel and Maryland utilities all wanted to buy gas as usual, filling pipes month by month between now and October and paying the spot price each time. Locking in now, they argued, would prevent utilities "from buying at even lower prices in the months to come," according to a PSC order filed Tuesday.

But the commissioners, having witnessed last summer’s natural-gas spike, ordered Baltimore Gas and Electric and other utilities to lock in prices for 40 percent of next winter’s needs at today’s price. Consumers will still save a ton compared with this winter’s cost, they said, and they’ll be partly protected if another hurricane disrupts supplies this summer and fall.

It may backfire on consumers. Wholesale gas prices have already plunged 60 percent from last summer and are 15 percent under their average for the last five years. But if the recession deepens they’ll have even further to fall.

UPDATE: Energy consultant Robert McCullough, on the PSC's decision to seize on today's prices, via email:

"I think they got it right. Natural gas tends to follow oil which as, very strangely, started to increase in price after an announcement from OPEC last weekend that they are maintaining output against a market with falling demand."

Posted by Jay Hancock at 8:41 AM | Permalink | Comments (10)
Categories: BGE/electricity
        

Today's column is on proposed Maryland electricity re-regulation.

Maryland is doing it again: rushing into politically fashionable energy legislation that could end up generating a nasty shock.

Policymakers are talking about canceling kilowatt shopping even for commercial and industrial customers. They're setting up everybody to pay for expensive, new generation plants.

What, exactly, is the hurry, except to appear to be doing "something" about high electricity prices?

One reason I'm uncomfortable with trashing the potential ability of consumers to choose their electricity vendor is that it could harm some of the most promising initiatives to conserve energy. We are wasting energy now not only because our homes are underinsulated but also because our electric meters are too dumb to know not to buy the most expensive kilowatts. Smart meters, effective time-of-day pricing (nighttime juice should cost much less for households than it does now) and other measures could dramatically cut down on kilowatt use, pollution and the need for new generation.

Conserving the most electricity with smart meters needs each user, including most/many households, to make their own decisions about usage and to see the savings in their bills that result from those decisions. If BGE buys kilowatts in bulk and charges everybody the same price, this won't happen. Yes, there are complications. Numerous households won't want to deal with programming thermostats and picking vendors. You need to worry about low-income buyers. But if we're serious about conserving, smart meters and smart grids are something to think about.

Blogger Lynn Kiesling gives a taste of what might happen:

Say, for example, you are on the train to work, and you get a SMS notification that due to unexpected weather, there will be a higher-than-normal electricity price in the 9:00-10:00 hour. You may have already programmed your devices to respond to price signals, but what if the price is high enough that you want to change your settings? You can log in to your HAN from your mobile device, or from your computer at work, and change the device settings in the home through the web portal.

There is much more on her blog, Knowledge Problem.

Posted by Jay Hancock at 11:44 AM | Permalink | Comments (4)
Categories: BGE/electricity
        

The default BGE natural gas price has dropped again, falling to 84.6 cents per therm for the month of March. That's the lowest since it was 87 cents in late 2006 84.12 cents in October 2007. Note I said the default BGE price -- the one that everybody pays unless they sign a fixed-price contract with BGE Home, Washington Gas Energy Services or others. Those folks are paying much more and ought to consider dumping those deals -- even if it involves paying a termination fee -- and going back to the standard, floating, monthly BGE rate.

Last fall BGE Home signed thousands of households up for a fixed-price, year-long deal of $1.599 per therm -- nearly twice what BGE's floating price is now. Some of the sticker shock over this year's BGE bills is surely from folks who locked into these terrible fixed-price deals. I keep hearing from readers who don't understand that their fixed-price contract is with BGE Home, not BGE, and that they have an option to go with the regular, floating rate. The recession is causing energy prices to plunge. Natural gas futures for next winter are below 70 cents per therm. Unless somebody can lock you up at THAT price for a year or two, I see little reason to not to go with BGE's floating rate.

Posted by Jay Hancock at 8:27 AM | Permalink | Comments (7)
Categories: BGE/electricity
        

It has been clear for several years that Maryland would need to build new, regulated power plants at some point if private investors didn't do it first. Gov. O'Malley's proposed legislation merely formalizes the option. More significant is what he did not embrace: Seizing the former BGE and Pepco generation plants through eminent domain, compensating their present owners (Constellation Energy and Mirant) and billing electric customers for the cost.

That would have driven bills even higher than they are now, put customers on the hook for expensive environmental upgrades, killed Constellation's plan to add a third nuclear unit at Calvert Cliffs and forced customers to pay for dismantling the first two units when they get decommissioned in a couple decades. Seizing valuable assets owned by large corporate citizens would also have sent a troubling signal about Maryland's respect for property rights.

Terrible as it was, electricity deregulation was a deal made by the state, codified in law and confimed under the settlement O'Malley made with Constellation. If you sell your car for a lousy price in the real world, you can't just call the repo man when you change your mind.

O'Malley's plan is re-regulation in the sense that it might bring back one or two regulated generation plants to Maryland. It would not re-regulate existing plants. And there is still a chance for private projects other than the Calvert Cliffs project. Nothing in his plan would preclude that.

Posted by Jay Hancock at 10:04 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

I have never seen this before. Whatever you do, don't link to this site!!! You would think that BGE/Constellation's lawyers have better things to do.

If you are interested in linking to our Web site, you must first notify us by sending notice to our Webmaster per the contact information below. You must include your name, organization name, contact information (including phone number and e-mail address), URL of your site, and a list of any URLs from which you want to link to our Web site.

1. You must link to the home page only. Links to other pages on our Web site are prohibited.

2. Links must only be text-based using the words "Constellation Energy" and "www.constellationenergy.com", or "Baltimore Gas and Electric Company" and "www.bge.com". You may not use these words, or any of our logos or other marks as a link or in any other way. By linking, you acknowledge and agree that all rights to these words and marks, including but not limited to all content appearing on our Web site and the design of our Web site, belong solely to us.

3. Framing is not permitted under any circumstances. You may not create frames around our Web site or use any other technique that alters in any way the visual presentation or appearance of our Web site.

Posted by Jay Hancock at 10:17 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

One followup point on Saturday's column on Constellation boss Mayo Shattuck.

How hard is it to be fired from the top reaches of corporate America? Consider the strange case of Mayo A. Shattuck III, chairman and chief executive of Baltimore-based Constellation Energy.

Commodity bets with borrowed money and market turmoil nearly pushed Constellation into bankruptcy in September.

The company's stock has fallen 75 percent since the beginning of 2008. Constellation shares have delivered about the same return as a broad basket of U.S. electricity and utility stocks since Shattuck took over in late 2001.

Constellation said this week that it was cutting its dividend by half, reducing income for thousands of Marylanders who bought the stock back when it was a reliable, boring utility called Baltimore Gas & Electric. The company lost $1.4 billion last quarter. It's laying off 800 people.

But not the guy at the helm when the sloop hit the reef.

The column goes on to quote Freeman Hrabowski, president of the University of Maryland Baltimore County, praising Shattuck. I did not know, and should have mentioned, that Shattuck is chairman of UMBC's Board of Visitors and has given UMBC money.

Posted by Jay Hancock at 11:02 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

A commenter wondered whether grid frequency anomalies -- running higher than 60 hertz -- could have made BGE meters run faster and BGE bills go higher than they should have:

What if the power generating stations were erroneously making electricity at 65, 70, or 75 Hertz? Just as the frequency of the alternating current will affect the speed of a motor, it will affect the speed of electric meters.

Whereupon reader Bryan put the question to Mike Holt's electrical training forum, which elicited the following replies from the community, which is skeptical:

The US electrical grid is so interconnected that is is all but impossible for the grid frequency to fluctuate by more than tenths of a frequency. If you ever saw 70Hz, the reading would immediately be followed by 0Hz as the grid shuts down causing a multi-state power outage.

And:

NERC Regulates the grid to 60Hz +/- 5%, so the highest you could see is 63Hz. But local regulations are more restrictive and the most you typically see is 60.1 Hz for sustained periods. Over/Under frequesncy relays would prevent any large distortion as Jim said.

And:

Just think of all the electric clocks that would run fast! Most devices that use large amounts of electricity for heating or lighting are rather frequency insensitive.

Posted by Jay Hancock at 11:08 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

Pulled from comments. Interesting thought. Googling suggests that grid frequency fluctuation is a problem in developing countries but not here. It looks like cycles are pretty tightly regulated in the U.S. and in the PJM mid-Atlantic grid

I have notified the Maryland Public Service Commission of my following theory:

"My electric bill for last month was abnormally high - it has never been higher!
Something happened and I suspect it might be technical in nature. As an engineer with a degree in electronics and electrical technology, I suspect that perhaps the electrical characteristics of the alternating current supplied our homes was abnormal, causing meters to spin faster than normal.

The frequency of alternating current should be 60 cycles per second, or 60 Hertz. What if the power generating stations were erroneously making electricity at 65, 70, or 75 Hertz? Just as the frequency of the alternating current will affect the speed of a motor, it will affect the speed of electric meters. There should be records of the alternating current frequency from the monitoring equipment at the power plants made available to the PSC for review."

Posted by Jay Hancock at 8:00 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

My new BGE bill: $414.06 Yee haw! A new record, I think, although it may have been over $400 before. The next bill should be better for me and everybody if February ends up being warmer than January, which is likely. A decline in natural gas prices to below 90 cents per therm starting this month should also help gas customers.

Posted by Jay Hancock at 8:00 AM | Permalink | Comments (4)
Categories: BGE/electricity
        

BGE has posted the February "commodity" price for natural gas: 89.71 cents per therm. That's the cheapest for the default BGE product since October 2007. The plunge in market energy costs is starting to show up in BGE's retail prices. Ninety cents per therm is 14 percent lower than BGE's December price and 43 percent lower than the high of $1.58 reached in July. (This is your raw fuel price. Delivery charges are added.)

But the only BGE customers who will benefit from this plunge are those who didn't sign up for a fixed price deal with a third-party supplier such as BGE Home (different but related to BGE), Washington Gas Energy Services, etc. For many customers, BGE Home is still charging last summer's prices.

For anybody stuck with these fixed-price deals (typically you have to lock in for a year), it still might make sense to cancel and go back to BGE's default price -- even if there is an early-termination fee. It's a recession. Don't pay more for energy than you have to. BGE's standard natural-gas price should move even lower in coming months. But you need to switch as soon as you can because it takes a while for the paperwork to happen, and most of your savings will be reaped in colder-weather months.

BGE's electricity price should also eventually move lower, but not as much. And it will take longer. See Saturday's column for more details.

Posted by Jay Hancock at 6:30 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

Good advice on cutting BGE bills from commenter Charlie, who chimes in on an extended thread on BGE costs here. In terms of per-cubic-foot heating power I assume space heaters are much more expensive than central heat. But they've also gotten more efficient. And if you're only using them to heat selected spaces, they could lower your overall bill.

The people who spend $20,000 on energy related expenditures hopefully plan to live in their home a long time. That's a long payback period. Of course the house is more comfortable and it might help the resale, but you won't get it all back. My suggestion for folks who live in an old drafty house and have done all the obvious inexpensive 'energy tips' is to make serious use of space heating. Keep the house quite cold and just heat the room you're in. There are all kinds of space heaters, pick the one that works for you.

Posted by Jay Hancock at 9:53 AM | Permalink | Comments (5)
Categories: BGE/electricity
        

Some good responses to Saturday's column on big BGE bills, the gist of which is:

Metro Baltimore is freezing, worried about the recession and wondering why BGE bills are higher than ever even as the cost of gasoline, electricity and other energy has plunged.

Blame a cold winter and BGE's purchase of electricity last year when energy prices were hitting record heights. The popped energy bubble should eventually mean moderately lower BGE bills.

In my email inbox this morning is a mix of reactions, from the superfrugal who keep the thermostat at 61 and don't understand why everybody else doesn't, too, to those who DO keep the thermostat down but still struggle paying bills, to the couple with $1,200 monthly BGE bills.

Jay, our last bill was $528 and I’m expecting the next one to be over $600. To say that we are about broke is an understatement. And it’s the utility bills that are sending us over the edge. Our thermostat is never over 66, usually at 62, I’ve never been so cold in my home in my life. We’ve taken measures to cut costs, but to no avail. Our home is old (1925), central gas heat on first floor and electric baseboard on second floor – whole house is about 1800 sq. ft. Our highest bill here before deregulation was $165. Outraged doesn’t begin to describe it. And I will tell you that I talk about this issue all the time to people I meet, work with and to all the activists groups I work in – everyone is outraged and no one has forgotten.

AND:

Jay: $300 and they're complaining!?! We live in a 3,500 sq ft spec house, built in '86, we bought it in '91; replaced the the heat pumps 3.5 yrs ago w/ Carriers super duper new improved ya-dee-ya-da system and our last 2 bills have been $1,150.00 and $1,275.00 respectively! No kids, just the wife & I; 67 degrees upstairs, 68 downstairs; we're not chronic launderers unlike some friends who seem to go nuts if they don't hear the whir of the Maytags ... we do a load a week, and about 1.5 loads per week w/ the dishwasher. The AC/Htg folks blame it on the "heatpacks" coming on at a certain temperature ... w/ a straight face!

AND:

Mr. Hancock....I have been reading your column for some time and was particularly taken with the Saturday, January 31 edition. We live in a 2-BR rancher in Catonsville and have watched our BGE bills soar - some explanations are acceptable, some are not: Over the past 18 months we have initiated measures to help control our usage. Our total cash outlay is $20,030 to add replacement windows; hot water heater; insulaltion upper and lower levels; replaced standard light bulbs with fluorescent; storm doors front and rear; 2 ceiling fans in BR's - PLUS we enrolled in the 3-tier BGE hourly rate program; unplugged all equipment not in use; launder and use dishwasher only on off-peak hours and lowered the thermostat 2 degrees day and evening. And we only heat the upper level which contains 1180 square feet. All of this is documented and this month's BGE bill was for $492.50.

Repeated calls to BGE have been received courteously but with no substantive response as to how our increased billings can be exlained. Do you see any way that the million+ customers of BGE can look forward to relief anytime in the near future?

AND:

I never cease to be amused at the people who are complaining about high heating bills. Imagine lowering the thermostat from 70! These people are their own worst critics unintentionally. For years we operated our house at 65 daytime, 60 at night. Since my wife is now 75 and recovering from open-heart surgery we run the house at 67! I wonder how many electric users

Continue reading "You think YOUR BGE bill is huge..." »

Posted by Jay Hancock at 10:18 AM | Permalink | Comments (38)
Categories: BGE/electricity
        

The “commodity” gas price for Baltimore Gas & Electric’s 600,000 household natural gas customers popped up a bit for December, rising from 96 cents per therm last month to $1.05 per therm. The federal Energy Information Administration blames unseasonably cold weather in much of the country for increased demand and higher prices.

But BGE’s price is still far below its level of a few months ago and below offers from independent suppliers. BGE Home, a lesser-regulated company owned by BGE parent Constellation Energy, has been trying to sell households on a fixed price gas contract of $1.599 for the winter.

The commodity cost is based on the wholesale market and doesn’t include delivery and other stuff. The wholesale price for natural gas has plunged by half since the summer. That’s not as much as the decline in oil and gasoline, but it’s still a huge break for consumers.

It may not feel like one, however, because households weren’t using much gas during the warm months. BGE’s default price is still higher than the 96 cents from December 2007. That’s partly because BGE bought some of its gas a few months ago, when prices were high.

If the economy continues to struggle, as it probably will, natural gas prices could fall even more. That could be offset, however, by an especially cold winter.

Posted by Jay Hancock at 9:34 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

BGE has set the November commodity gas price: 96.34 cents per therm. This is slightly lower than the $1.599 that BGE Home, the less-regulated company owned by BGE parent Constellaton Energy, is charging people who lock in for the whole winter.

At my house we use about 100 therms per month in the winter. That's a difference of $64 a month between the BGE Home product and the standard, floating BGE price. Even if you're locked into the BGE Home deal, it's worth paying the $50 cancellation fee to get back to BGE's standard price.

Posted by Jay Hancock at 11:30 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

This just in from Constellation Energy. The company was supposed to close on a $2 billion line of credit today that would have shored up its liquidity and increased its options. But RBS Securities and UBS Loan Finance will front only up to $1.25 billion now, and the deal might not close until Nov. 26.

Constellation is trying to make up the difference elsewhere -- including maybe with more cash from Warren Buffett's MidAmerican Energy Holdings, the company that has agreed to buy Constellation for the fire sale price of $4.7 billion. Buffett rescued Constellation in mid-September by injecting $1 billion, but he insisted on being able to buy the whole company as part of the agreement.

The Constellation/MidAmerican buyout must be approved by shareholders and the Public Service Commission. Last week I wrote about the chances that shareholders could reject the deal and Constellation could slip out of Buffett's grasp. It was always a long shot, but this lowers the chances even more.

From Constellation's press release:

Constellation Energy announced that the closing of the previously announced credit facility has been extended to no later than Nov. 26 and currently expects to receive total commitments from the banks of approximately $1.0 billion to $1.25 billion. The company also announced that it is exploring other alternatives with MidAmerican Energy Holdings Company and other parties to provide additional liquidity of up to $750 million.

"Despite the very challenging credit environment, we are making significant progress toward meeting our liquidity needs. We believe the combination of the $1.0 billion investment by MidAmerican, the expected size of the credit facility, and the progress toward and expected impact of achieving our strategic initiatives provides sufficient liquidity to manage our business and successfully close the merger," said [Constellation CEO Mayo] Shattuck.

Posted by Jay Hancock at 7:29 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Electricite de France, the state owned French electricity company, has decided not to make another offer for Baltimore's Constellation Energy Group. After an on-and-off interest in the owner of Baltimore Gas and Electric, EDF said today that "the current conditions are not conducive to presenting a new offer."

EDF had talked to Constellation several weeks ago as the American company's credit-rating came under pressure, but Constellation signed a deal to be bought by Warren Buffett's MidAmerican Energy Holdings for $26.50 a share. EDF has said its offer was $35 a share. Constellation is down $2.50 to $23 today. EDF's statement:

Given the current state of financial markets and in particular the difficult credit market for corporates, and after discussions with several potential American partners, EDF has determined that current conditions are not conducive to presenting a new offer for Constellation Energy Group. EDF confirms its objective of developing at least 4 EPRs in the United States in partnership with one or several American players and continues to review closely all possible options.

Posted by Jay Hancock at 2:18 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

EDF is sending signals it will take its time in deciding whether to make a counteroffer for Baltimore's Constellation Energy Group. Yesterday Les Echos was saying it wouldn't be surprising to see the the board of Electricite de France meet this weekend. Now the EDF flack is noting that the Buffett deal will take months to complete, implying that EDF is in no hurry. Or maybe they're just trying to sandbag Buffett, which is unlikely to work.

From an Agence France Press story in Les Echos this morning:

EDF has not had the time to make a counteroffer for Constellation Energy

Warren Buffett moved more quickly than the French group, which is a shareholder in the troubled American electricity company. The American billionaire reached a definitive agreement to buy Constellation for only $4.7 billion.

EDF, which did not launch a timely counteroffer, said Saturday that it "took note of the agreement" between Constellation Energy Group and the company owned by billionaire Warren Buffett, MidAmerican Energy, and continues to evaluate various options for continuing its nuclear development in the United States. "EDF takes note of the agreement reached between its partner Constellation Energy and MidAmerican, the implementation of which will take several months," said a spokeswoman for the French electricity group. "In this framework, EDF continues to evaluate its options with the objective of continuing its nuclear development in the United States," she added.

Posted by Jay Hancock at 9:00 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

You leave the Web for 12 hours and look what happens. Who would have thought the financial world’s next holy guacamole moment would happen in Baltimore? Obviously a potential ratings downgrade has triggered a Constellation Energy liquidity crisis -- or vice versa. Translation: Rating agencies, shareholders and lenders fear it may run short on cash to carry out day-to-day operations. But we have no idea what’s causing it yet.

What’s clear is that Constellation’s reliance on borrowed money is putting it in dire straits. Much like many Wall Street firms that have run into problems, Constellation uses short-term loans to play the markets – in its case, mainly commodities such as wholesale electricity and natural gas. A huge portion of its profits – we don’t know exactly how huge – has depended on this play. Two things could have gone wrong: 1) A critical trading blowup or 2) A perception by shareholders, lenders and rating agencies that the cheap, easy money Constellation needs to play the market won’t be there in the future.

What’s a trading blowup? When you make a bad bet, lenders demand more collateral. When you make a really bad bet, you run out of collateral to post, which causes lenders to pull the plug, which threatens the whole enterprise.

We don’t know that this is what’s going on. But it’s one explanation given the plunge in

Continue reading "What could have gone wrong at Constellation?" »

Posted by Jay Hancock at 1:38 PM | Permalink | Comments (19)
Categories: BGE/electricity
        

The plunging price of natural gas is good news for home heating bills this winter, but I don’t see anybody offering deals to lock in a price that reflects the decline. Your best bet is probably to float with BGE’s standard monthly rate instead of locking in a price with a competitive supplier.

Baltimore Gas and Electric passes along a “commodity” gas price that varies with the wholesale market. It also charges a distribution fee.

After popping to $1.58 per therm in July, BGE’s September commodity price is back down to $1.02. (This is the default price everybody pays unless they choose to switch to a competitive supplier.) And unless Hurricane Ike messes with Gulf Coast petro-production the way Hurricane Katrina did, prices should fall further as it gets colder.

At least, that’s what Wall Street says. Last week, in the forward market, natural gas for January delivery was selling for about 85 cents per therm. Gas has followed the price of oil downward after both peaked this summer.

But a one-year deal from Washington Gas Energy Services had a commodity price of $1.32 per therm for BGE customers. (You still pay the distribution fee to BGE.) Even if you’re afraid prices will pop up to $1.58 again or higher, that’s a heck of a premium to pay for the insurance.

Despite the decline, the price of gas still hasn’t fallen to where it was when last winter began.
BGE’s commodity price was between 90 cents and a dollar until April, when it started spiking. People who locked in at $1 per therm – last fall’s fixed price from the independents – missed some savings over the winter but were spared the summer highs.

Posted by Jay Hancock at 10:01 AM | Permalink | Comments (4)
Categories: BGE/electricity
        

Today's column is on the proposed liquefied natural gas terminal at Sparrows Point.

Maryland undoubtedly needs more and cheaper energy, but we're not going to do just anything to get it. We won't strip state forests for fireplace fodder. We won't reverse pollution controls on cars and power plants.

And we shouldn't let ships carrying liquefied natural gas sail into the mouth of the Patapsco River.

Importing small but potentially catastrophic industrial risks into highly populated areas may have been OK for the 20th-century economy. It doesn't work now.

A reader asks:

Ref your article today on the NIMBY LNG terminal proposal. Hard to understand why you didn't mention the existing LNG terminal in Maryland further south on the Chesapeake Bay at Cove Point. They are nearing completion of a new tank and a new pipeline.

http://www.dom.com/about/gas-transmission/covepoint/index.jsp

The tanks are just a couple of thousand feet from homes. See aerial map view on Google
Maps:http://maps.google.com/maps?hl=en&ie=UTF8&ll=38.386948,-76.410041&spn=0.024724,0.055618&t=h&z=15

I didn't mention Cove Point because I ran out of space. Yes, there is an LNG terminal there. Yes, it is expanding and yes, there are nearby homes. The Google Maps link makes this very clear. But the area is still much less heavily populated than Sparrows and vicinity. And the Cove Point terminal has been there since 1972. So I assume many of these homes were built and bought in the knowledge that the LNG plant and the risks were there. That's different from bringing a terminal into an already-populated areas.

Posted by Jay Hancock at 10:03 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

Ed Crooke, director and former vice chairman of Constellation Energy and Baltimore Gas & Electric, died of cancer on Sunday. Crooke was part of BGE's old, pre-deregulation guard, headed by Chris Poindexter, which gave way to new leadership following the 2001 terrorist attacks. Constellation had planned to split BGE off as a separate company, and Crooke was going to be its boss. But in the energy market turmoil and general economic chaos that followed 9/11, Constellation's board wisely decided it needed the stable cash flow from the BGE ratepayers to anchor the whole enterprise.

Poindexter gave up the CEO slot to Mayo Shattuck, who until then had been an outside director. Poindexter held the chairmanship for a time. Crooke retired as vice chairman of Constellation/BGE in December 2001, but he stayed on as a member of the board of directors.

Read BGE's statement on Crooke here. Read Fred Rasmussen's obituary here.

Posted by Jay Hancock at 10:39 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

Constellation stock is falling again this morning, brushing $60, its lowest level since late 2006. The mojo Constellation got from the BGE rate caps coming off is behind it now. The rate caps disappeared in mid 2006, which reaped huge windfalls for BGE parent Constellation. Why? During deregulation the company took over BGE's former power plants, most of which are driven by coal and nuclear energy. With the deregulated price of electricity being largely set by natural-gas generators, and with natural gas soaring in price, BGE could book huge margin spreads between its cheap fuel costs and the soaring wholesale market price.

That's still largely going on, although the price of coal has zoomed this year, cutting into the cushion. But Wall Street is focusing on other things, such as the profits Constellation makes from playing the energy markets for its own account. Today's column:

A few sentences on page 46 of a financial disclosure that did not change reported profits, sales or net worth caused Constellation Energy Group's prospects to go into brownout this week.

Its shares dropped 16 percent Tuesday. Analysts rushed to downgrade the stock, although one contrarian changed his recommendation from "underperform" to "hold" because the shares had fallen so far.

Standard & Poor's downgraded Constellation bonds to two steps above "junk" status.

A little jumpy, aren't we?

Not at all.

The punishment of Constellation is an encouraging sign that Wall Street is again skeptical of companies that depend on opaque accounting and complex financial bets for much of their profit. A little such skepticism for folks betting on subprime mortgages could have saved a lot of heartache.

Read the whole thing here.

Posted by Jay Hancock at 10:15 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

The Reuters story on Constellation Energy's stock plunge is better. But it doesn't make sense that increased collateral for a multi-step bond downgrade that hasn't happened yet would bang the stock that bad. Is the energy bubble collapsing faster than anybody expected?

NEW YORK (Reuters) - Shares in Constellation Energy Group (CEG.N: Quote, Profile, Research) tumbled nearly 18 percent on Tuesday to their lowest level in almost two years after the power producer said a credit rating downgrade could force it to post billions of dollars in extra collateral.

Constellation said in a quarterly report with the U.S. Securities and Exchange Commission late on Monday that it had underestimated its collateral liabilities by $1.6 billion in the event its debt rating was cut three notches.

High volatility in fuel and electricity prices have increased the risk of a downgrade, and the company could be forced to post $3.37 billion in collateral to cover those contracts if its debt is downgraded three levels.

One analyst said that disclosure coupled with ongoing concerns about the transparency around the company's cash flows were worrying investors.

Posted by Jay Hancock at 4:33 PM | Permalink | Comments (1)
Categories: BGE/electricity
        

West Virginia has approved the "Trail" transmission line that will help relieve megawatt congestion in central Maryland, prevent blackouts and potentially alleviate high electricitiy prices. The project still needs lots of other approvals.

From the Charleston Gazette:

The state Public Service Commission late Friday approved Allegheny Energy's plans to build a huge electric transmission line that will stretch across much of Northern West Virginia.

Just hours before a midnight deadline, commissioners issued a "certificate of public convenience and necessity" for the Trans-Allegheny Interstate Line, being promoted by Allegheny as TrAIL. The 500-kilovolt transmission line will run from southwestern Pennsylvania across West Virginia and into Northern Virginia.

From Marylanders for Reliable Power:

Calling it "a significant step in the right direction," Marylanders for Reliable Power spokesman H. Russell Frisby praised the decision of the West Virginia Public Service Commission, rendered August 1, 2008, to permit construction of TrAIL, the Trans-Allegheny Interstate Line through 114 miles of West Virginia...

According to Frisby, "The construction of this line is a starting point for easing the region's badly congested power grid. The expansion of transmission capacity will allow economic devleopment and help to enture reliable electricity to one of the nation's fastest growing areas. However, it is only a start, and, unfortunately, it will not solve Maryland's critical electricity shortage."

From West Virginia Public Broadcasting:

Landowners along the proposed route fought the new transmission line, but earlier this year, officials with Allegheny Energy made two concessions that paved the way for PSC approval – they changed the route to more closely follow existing powerlines, and they agreed on a package of rate reductions negotiated in part by Governor Joe Manchin. The agreement also included a promise to move a transmissions operations center and dozens of jobs to West Virginia.

The fight isn’t over yet, though. Regulators in Virginia and Pennsylvania still have to approve the line, and the West Virginia chapter of the Sierra Club is planning to challenge the PSC decision in state Supreme Court.

Posted by Jay Hancock at 4:41 PM | Permalink | Comments (2)
Categories: BGE/electricity