Senators Pipkin and Rosapepe propose re-regulation plan to cut electricity prices. MTEF helps design the plan.

Proposal Regarding Constellation/EDF Deal

Press Release

June 2, 2009
For Immediate Release
Contact: Senator EJ Pipkin 410 924 2787 (c)
Senator Jim Rosapepe 202 271 5545 (c)

Pipkin, Rosapepe Back 10% Savings in Reregulation of BGE Rates; Urge PSC to Make it Condition for Approval of Constellation/EDF Deal

Today Senators E.J. Pipkin (R, Upper Shore) and Jim Rosapepe (D, PG and Anne Arundel), wrote a letter to Public Service Commisssion (PSC) Chairman Doug Nazarian, urging the PSC to promply adopt the re-regulation proposal developed by Jeff Hooke, Chairman of the Maryland Tax Education Foundation (MTEF). The plan would reduce consumer BGE rates by at least 10% and increase Constellation's stock price by $4 to 8 per share, according to Hooke's analysis.

The reregulation proposal is consistent with Governor O'Malley's priorities as detailed in his Chief of Staff's May 21 letter to Constellation Energy.

Attached is Hooke's analysis and recommendations.

The text of the Senators' letter follows:

June 2, 2009
Douglas R.M. Nazarian
Chairman
Public Service Commission
Office Of The Commissioners
William Donald Schaefer Tower
6 St. Paul St., 16th Floor
Baltimore, MD 21202

Dear Mr. Chairman:

We write to share our thoughts on how the PSC can quickly bring the CEG/EDF case to a conclusion for the benefit of BG&E ratepayers, as well as the two firms and their shareholders. Attached is a re-regulation proposal developed by Jeff Hooke, Chairman of the Maryland Tax Education Foundation (MTEF), and a respected investment banker with extensive experience in the utility industry. His proposal is consistent with Governor O'Malley's priorities as detailed in his Chief of Staff's May 21 letter to CEG. We endorse the MTEF proposal and urge the PSC to adopt it promptly.

The proposal’s key points are the following:

-- Conditional approval of the CEG/EDF transaction, based on the two firms’ agreement to sign long-term contracts at PSC regulated rates with BG&E's SOS plan for residential and small commercial customers. The ten Maryland power plants should provide enough electricity to fulfill SOS needs.

-- Renegotiation of the CEG/EDF transaction price to reflect the impact of re-regulation on the projected earnings of the CENG joint venture.

-- Reduction of the $1.1 billion termination fee CEG paid to Mid-American and the promise by CEG to use its best efforts to obtain such reduction. Not only does the fee have a potentially harmful effect on BG&E ratepayers, but legal research undertaken by an experienced counsel retained by MTEF suggests that the fee may be excessive ( and therefore illegal) under Maryland corporate law. A copy of that research was provided to the PSC earlier.

MTEF’s analysis estimates that (i) the long term supply contracts based on regulated rates; and (ii) a termination fee reduction, would:

-- Reduce rates for SOS customers by a minimum of 10%
-- Stabilize SOS rates going forward
-- Have a positive impact on Constellation Energy by removing uncertainty

We urge you to move promptly to adopt this proposal. This would end uncertainty in the energy and financial markets, set up a model for the entire State, and place Maryland's energy policy back on the side of the ratepayers.

Sincerely,

EJ Pipkin
Senator

Jim Rosapepe
Senator