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Constellation Energy Group on Sales Block

September 26, 2008

Two years ago, after a $12 billion merger between Florida Power and Light and Constellation Energy Group failed, President Edwin D. Hill released a news release on why the deal died.

"Mergers [in the utility industry] can be beneficial," said Hill, "if conducted with transparency and regard for the public interest." But the merger failed because companies like Constellation "with their record of poor service, abysmal labor relations and secretive dealings fail to grasp this reality."

Constellation, owner of three nuclear power plants and Baltimore Gas and Electric Co., should have heeded President Hill's warning.

If a purchase proposed in September goes through, the company will be sold for less than $5 billion to Warren Buffett's Berkshire Hathaway Inc., the parent company of MidAmerican, a utility that employs IBEW members in Iowa and California.

"Constellation Energy wasted $8 billion in two years because of its own greed and obstructionism," says IBEW Utility Department Director Jim Hunter, who was earlier involved in two failed efforts to organize Baltimore Gas and Electric Co.

Since a new nuclear plant costs $5 billion, if the sale goes through, Warren Buffett could get five nuclear reactors at three different plants and Baltimore Gas and Electric for less than the price of one new nuclear plant.

Constellation employs members of Syracuse, N.Y., Local 97 at the Nine Mile Point nuclear facility, but has successfully fought the union's organizing efforts at the Calvert Cliffs plant in Maryland and the Ginna plant outside Rochester.

Local 97 has strong successor language at Constellation should the Berkshire Hathaway or a competing sale go through.

The New York plants, once owned by Niagara Mohawk Power Corporation and local utilities, went through several sales, says Business Manager David Falletta, but "we ended up in good shape, maintaining most of our contractual protections."

Constellation's value took a dive after credit lines for its electricity trading business dried up in the wake of the crisis at Lehman Brothers and Morgan Stanley and other investment banks.

After the Berkshire Hathaway sale was announced, another bidder, Electricite de France, said that it was considering a higher bid. The French company would need a U.S. partner, since foreign companies are barred from owning a majority share of domestic nuclear plants.

Photo used under a Creative Commons license from Flickr user Michael Brcak.