Legal battle between Constellation, state could jeopardize reactor

Sides square off over $386 million from deregulation

The Baltimore-based energy giant’s filing followed the state’s move on Friday to file a pre-emptive lawsuit in Baltimore City Circuit Court against Constellation and subsidiaries Baltimore Gas & Electric Co. and Calvert Cliffs to uphold the law that requires reimbursements to ratepayers over 10 years.

The legal dispute has lawmakers worried about the fate of the third reactor, which is projected to generate millions of dollars of revenue for the state and county.

‘‘The best hope for reducing greenhouse gas emissions, given that we have tremendous generation needs, is, in my opinion, nuclear,” said House Minority Leader Anthony J. O’Donnell (R-Dist. 29C) of Lusby. ‘‘This administration seems intent not only on imposing onerous restrictions on generation development, but also on precluding the nuclear option in Maryland. That’s bad for the economy and bad for the environment.”

Constellation’s lawsuit alleges that the General Assembly violated the deregulation agreement in its bid to mitigate rate increases for more than 1 million BGE customers. Deregulation aimed to reduce energy bills, boost production and increase competition, but soaring utility costs led to price inflation when rate caps expired.

‘‘The sanctity of an agreement is a basic tenet of business and cannot be selectively and unilaterally changed many years later, particularly after the other party has fully performed its obligations under the agreement,” Mayo A. Shattuck III, Constellation’s chief executive officer, said in a statement.

‘‘This means a contract is a contract, and the state must abide by the rule of law,” Shattuck said.

The state asked the court to affirm its actions as legal and necessary to relieve the cost burden on ratepayers, who were saddled with 72 percent increases in their energy bills.

‘‘Despite receiving healthy and growing profits over the last several years, Constellation wants to boost its bottom line at the expense of hard working Marylanders,” Attorney General Douglas F. Gansler (D) said in a statement.

‘‘The $386 million rightfully belongs to Maryland ratepayers, and we will do everything in our power to make sure that this cost is not passed on to consumers,” Gov. Martin O’Malley (D) said in the statement.

About half of the contested money stems from average monthly surcharges of about $3 levied on BGE ratepayers to pay for the decommissioning of the two existing nuclear reactors at Calvert Cliffs.

It remains unclear if the legal battle will impact plans for the third reactor, but O’Donnell is leery. ‘‘Time will tell, but it doesn’t weigh on the positive side of the ledger,” he said.

Others think the plant’s expansion is above the political and legal fray.

‘‘My opinion is that the reactor is so valuable to a company’s future, especially at a time when we are weaning ourselves off of fossil fuels, that I don’t think anything short of legislation saying we don’t want you at all [will halt the reactor],” said Sen. Roy P. Dyson (D-Dist. 29) of Great Mills. His district includes Calvert Cliffs.

Del. Sue Kullen is less apprehensive of motive and said she appreciates the high stakes involved in the matter. She recognizes the need for Constellation ‘‘to have some leverage on the state.”

‘‘I’m hopeful that the project is going to come through,” said Kullen (D-Dist. 27B) of Port Republic. ‘‘I understand both parties’ points of view, so I’m just going to stay neutral and hope for the best.”