EXHIBIT NO. 99
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June 29, 1999
To Investors and Analysts:
On June 29, 1999, Baltimore Gas and Electric Company (BGE) and other interested
parties filed a comprehensive deregulation settlement document with the Maryland
Public Service Commission (PSC). The settlement agreement settles two cases
currently before the Public Service Commission - a petition by the Office of
People's Counsel to reduce BGE's electric rates by up to $141.7 million annually
effective July 1, 1999 and a comprehensive electric industry restructuring
proceeding that deals with transition costs, customer price protections and
unbundled rates for electric services.
Under the settlement, all Maryland electric customers (residential, commercial
and industrial) will be able to shop for electricity beginning July 1, 2000.
This accelerates the legislative timetable for customer choice. Under Maryland's
restructuring legislation, one-third of residential customers would be eligible
to choose alternate suppliers beginning July 1, 2000, with incremental one-third
blocks of residential customers on July 1, 2001 and July 1, 2002. Commercial and
industrial customers are able to choose alternate suppliers six months earlier
than the January 1, 2001 date contained in the legislation. Customers may choose
to buy their electric energy from BGE under a standard offer service or from
another supplier. In either case, BGE will continue to deliver the energy to all
customers within its existing service territory.
This settlement, which requires PSC approval, also provides:
o There will be no adjustment to electric rates at the present time.
o BGE will accelerate depreciation on its generation assets by $150
million (pre-tax) during the period July 1, 1999 - June 30, 2000 in
order to mitigate a portion of its potentially stranded costs.
o Starting on July 1, 2000, BGE will unbundle rates to show separate
components for delivery service, transition charges, standard offer
service (generation), transmission, universal service and taxes.
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o Residential customers' base rates will be cut by approximately $54
million on July 1, 2000, and residential rates will be frozen at these
levels for a period of six years (through June 30, 2006).
o While commercial and industrial rates will not be reduced, these
customers will have up to four service options which fix the electric
rates and transition charges for a period that generally ranges from
four to six years. Electric delivery service rates for commercial and
industrial customers will be frozen for a four-year period (through
June 30, 2004).
o BGE will be allowed to recover $528 million of its potentially
stranded costs through a competitive transition charge (CTC). This
amount represents a final determination of all stranded cost claims
related to its generation assets. BGE had requested recovery of $897
million. BGE has agreed to apply 75% of any future savings associated
with securitization to reduce the CTCs paid by its customers.
o Generation related regulatory assets and nuclear decommissioning costs
will be included in delivery service rates effective July 1, 2000 and
will be recovered under existing amortization schedules.
o On July 1, 2000, BGE will transfer, at book value, its 10
Maryland-based fossil and nuclear power plants and its partial
ownership interest in two coal plants and a hydroelectric plant in
Pennsylvania to an unregulated subsidiary of Constellation Energy
Group, BGE's parent company. Constellation Energy shall retain or
absorb 100% of any revenues or gains and losses associated with the
operation, transfer or subsequent sale of these generation assets.
This agreement settles the major issues related to deregulation, moving BGE and
Constellation Energy one step closer to competing in a deregulated electric
marketplace.
The settlement agreement includes Baltimore Gas and Electric Company and the
following parties: the Building Owners and Managers Association of Metropolitan
Baltimore, Inc., Board of County Commissioners of Calvert County, Maryland,
Department of Defense/Federal Executive Agencies, Enron Energy Services, Inc.,
The Johns Hopkins University and The Johns Hopkins Health System Corporation,
Maryland Energy Administration, Maryland Industrial Group and Millennium
Inorganic Chemicals Inc., Maryland Office of People's Counsel, Maryland
Retailers Association, National Railroad Passenger Corporation, Power Plant
Research Program of the Maryland Department of Natural Resources, and the
Maryland Public Service Commission Staff.
BGE expects to have a final decision on the proposed settlement no later than
October 1, 1999.
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Attached to this letter are summaries of the electric customer CTC options and
the electric CTC rates and Standard Offer Service (SOS) prices.
Please direct any inquiries to:
Kevin J. Miller David A. Brune
Manager - Financial Planning Vice President - Finance & Accounting,
Constellation Energy Group Chief Financial Officer and Secretary
410-234-5434 Constellation Energy Group
410-234-5511
We make statements in this letter that are considered forward-looking
statements within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934. These statements are related to the effects of the
proposed deregulation settlement on Constellation Energy Group's future
operating results.
Sometimes these statements contain words such as "believes," "expects,"
"intends," "plans," and other similar words . These statements are not
guarantees of our future performance and are subject to risks, uncertainties,
and other important factors that could cause our actual performance or
achievements to be materially different from those projected.
These risks, uncertainties and factors include, but are not limited to:
general economic, business, and regulatory conditions; energy supply and demand;
competition; federal and state regulations; availability, terms, and use of
capital; nuclear and environmental issues; weather; industry restructuring and
cost recovery (including the potential effect of stranded costs); commodity
price risk; and year 2000 readiness. Given these uncertainties, you should not
place undue reliance on these forward-looking statements.
Please see our filings with the Securities and Exchange Commission for
more information on these factors . These forward-looking statements represent
our estimates and assumptions only as of the date of this letter and we
undertake no duty to update any forward-looking statement to reflect the
occurrence of unanticipated events.
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Summary of Electric Customer CTC Options
Distribution Generation Price
Price Freeze Protection Annual Rate
Customer Tariff CTC Period Period Period Cut
- --------------- ---------- ------ ------ ---
Residential 6 years 6 years 6 years $53.8M
(1998 Sales-11.0 million MWH)
Commercial & Industrial:
G/GS - <60kW demand:
(1998 Sales-2.9 million MWH)
Option 1 6 years 4 years 4 years None
Option 2 5 years 4 years 4 years None
GL - demand of 60kW or more:
(1998 Sales-6.3 million MWH)
Option 1 4 years 4 years None None
Option 2 5 years 4 years 4 years None
Option 3 5 years 4 years None None
(declining)
P - primary voltage - demand of 1,500 kW or more:
(1998 Sales-6.4 million MWH)
Option 1 4 years 4 years None None
Option 2 5 years 4 years 1 year None
Option 3 6 years 4 years 2 years None
Option 4 5 years 4 years None None
(declining)
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Summary of Electric Customer CTCs and
Standard Offer Service Rates (Shopping Credits) by Option
Initial Initial SOS
Customer CTC Subsequent Price Subsequent
Tariff (cents/kWh) Trend (cents/kWh) Trend
- ------ ----------- ----- ----------- -----
Residential:
R .800 Declining - 6 years 4.224 Increasing - 6 years
RL .800 Declining - 6 years 3.732 Increasing - 6 years
(Time of Use)
Commercial & Industrial:
G:
Option 1 .576 Flat - 6 years 4.766 Flat - 4 years
Option 2 .674 Flat - 5 years 4.668 Flat - 4 years
GS:
Option 1 .576 Flat - 6 years 4.478 Flat - 4 years
Option 2 .674 Flat - 5 years 4.380 Flat - 4 years
GL Secondary:
Option 1 .805 Flat - 4 years N/A N/A
Option 2 .661 Flat - 5 years 4.401 Flat - 4 years
Option 3 1.500 Declining - 5 years N/A N/A
GL Primary:
Option 1 .805 Flat - 4 years N/A N/A
Option 2 .661 Flat - 5 years 3.976 Flat - 4 years
Option 3 1.500 Declining - 5 years N/A N/A
P:
Option 1 .742 Flat - 4 years N/A N/A
Option 2 .610 Flat - 5 years 3.828 Flat - 1 year
Option 3 .522 Flat - 6 years 3.916 Flat - 2 years
Option 4 1.400 Declining - 5 years N/A N/A
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