IBEW Intervenes in Constellation-EDF Transaction

February 27, 2009

Turmoil at Constellation Energy, the nation’s largest competitive electricity supplier, has led the IBEW to intervene in the sale of some of the utility’s key nuclear assets to EDF, the state-owned French utility.

Consellation has proposed selling a 49.9 percent stake in its nuclear generation and operations business to EDF for $4.5 billion. On Feb. 19, the U.S. Federal Energy Regulatory Commission gave its approval for the transaction, but further regulatory hurdles remain for Constellation.

The Maryland Public Service Commission has opened a case to consider whether it has the authority to regulate Constellation’s sale to EDF, and also to consider the impact of Constellation’s failed merger with MidAmerican Energy Holdings Co., owned by billionaire Warren Buffet.  A proposed merger with MidAmerican was canceled by Constellation in December.  As a result of Constellation canceling that merger, the company must pay Buffet’s firm $593 million in cash and cede 10 percent of the company’s stock to MidAmerican.

The IBEW has intervened in the Maryland PSC case.  Syracuse, N.Y., Local 97 represents workers at Constellation’s Nine Mile Nuclear Station. Des Moines, Iowa, Local 499 and Rock Island, Ill., Local 109 represent MidAmerican employees.  The IBEW’s intervention in the Maryland PSC case will also directly impact workers at Baltimore Gas and Electric Co., a Constellation subsidiary which was the site of a failed IBEW organizing drive several years ago.

  “A variety of workers have expressed an interest in organizing with the IBEW again,” says Shawn Reents, International Representative, IBEW Membership Development Department.  “The deals with EDF and MidAmerican have created mounting concerns over job security, contracting out of work along with the status of their pension and healthcare benefits.  We’re at the beginning stages of talking and listening.”

The EDF sale is Constellation’s latest attempt to reverse a severe decline in profits and downgraded credit ratings that resulted, in part, from the effect of the meltdown in the U.S. financial sector on the company’s energy trading business.  Last year, the company sold the commodities business to Goldman Sachs and its natural gas unit to Macquarie Group of Australia. Despite these moves, Constellation lost $1.4 billion in the fourth quarter of 2008.

Constellation argues that Maryland’s PSC has no jurisdiction to review the sale of assets to EDF.  The IBEW and other parties have intervened in the case. The IBEW will argue that the PSC does have jurisdiction.  In addition, a bill is pending in the Maryland legislature supporting the commission’s right to review the transaction.

 The IBEW will also analyze the impact the termination of the earlier deal with MidAmerican Energy Holdings will have on customers and workers. The Brotherhood had intervened in the PSC case opened to review the deal with MidAmerican when it was first announced last year.

In 2006, the IBEW intervened when Constellation attempted to merge with Florida Power and Light, a major IBEW employer.  The deal died after the IBEW raised concerns about the review process before the PSC, and after the Maryland Legislature held a special session to examine the transaction.

Oral arguments before the PSC will begin on March 27.

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