The IBEW Raises Questions About the
MidAmerican/Constellation Deal

November 14, 2008

The IBEW is raising questions about Warren Buffett’s plan to rescue a high-flying energy company that has hit hard times in the financial downturn.

Constellation Energy, which owns generating plants, an energy trading business and regulated utility Baltimore Gas and Electric, is the nation’s largest competitive electricity supplier. But its heavy reliance on credit dealt the company a potentially fatal blow when several of its lenders – Lehman Brothers chief among them – either collapsed or revoked its credit in September. So when MidAmerican Energy, owned by billionaire Warren Buffett, rode in with an offer of instant cash and a $4.7 billion merger deal to save it, the proposal looked like a godsend. The promised two-year rate freeze also sweetened the deal in the eyes of the public stressed by a recessionary economy.

But the acquisition needs approval by the Maryland Public Service Commission, the state where Constellation is based. And although the IBEW has taken no position on it, the organization has a few questions, mainly about the impact of the merger on reliability and dependability at BGE. The IBEW filed a petition to intervene in the case with the Maryland PSC on Oct. 23.

“Service to consumers, jobs and critical infrastructure are among the many important aspects of this possible partnership that must be fully and properly considered,” said International President Edwin D. Hill in a statement issued that day. “Our priority is to ensure that the best interests of consumers and all workers at both companies are fully protected, particularly in light of the current economic turmoil.”

The IBEW intervened the last time Constellation attempted to merge with another company – Florida Power and Light in 2006 – and the deal died after the IBEW raised concerns about its possible effect on ratepayers.

“Mergers have to be in the public interest,” said Utility Department Director Jim Hunter. “Utilities have about 60 percent of the work forces they had in 1990, while the need for electricity has doubled since then.”

And while the IBEW represents more than 4,200 members at MidAmerican-owned utilities and properties, employees of BGE – the only large investor-owned utility in the country that is not organized – are getting nervous.

“MidAmerican companies have guaranteed wages and benefits,” Hunter said. “BGE workers have no contract, so they have no protections.”

Hunter said they are worried that the rate freeze that might sound good to BGE customers and Maryland elected officials could come at the cost of service reliability. As IBEW members have learned through the lean years of deregulation, corporate savings often comes at the expense of operations and maintenance budgets.

The IBEW is awaiting word from the public service commission on a schedule that will allow it to request and collect company documents that will offer more information about BGE’s position. Hunter said the IBEW has scheduled a meeting with Constellation employees on Jan. 10 at Baltimore’s Local 24 union hall to discuss the planned merger.
   

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