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Anatomy of a Shakedown

When Akron-based First Energy Corp. sought a $4.7 billion merger with Allegheny Energy, which serves Maryland customers through its Potomac Edison subsidiary, in February 2010, it received a taste of Martin O’Malley’s shakedown tactics.
As a condition of approval, the O’Malley controlled Maryland Public Service Commission, in January 2011 placed several conditions on the merger.  One condition in particular mandated that First Energy assist in developing a Tier 1 renewable energy source capable of generating 13,000 megawatts. 

In December 2010, Malcolm Woolf, head of the Maryland Energy Administration—appointed by O’Malley—testified before the Public ServiceCommission in favor of requiring First Energy to support a Tier 1 renewable energy project.  It was the first time Woolf ever testified before the commission since O’Malley appointed him in 2007.
Later, in December 2011, First Energy announced it had entered into a long-term power purchasing agreement with Maryland Solar, which is developing a large, 160-acre solar farm on the grounds of a former state prison in Hagerstown.   The Public Service Commission granted a special waiver to Maryland Solar to allow it to begin construction, without obtaining a certificate of public convenience, in order for the company to access a federal renewable energy grant program before it expired. 
The Maryland board of Public Works, composed of Governor O’Malley, Comptroller Peter Franchot and State Treasurer Nancy Kopp approved a very favorable lease agreement for the land to Maryland Solar in July 2011, by a 2-1 vote.  Franchot voted against the deal.
Maryland Solar is a subsidiary of Beowulf Energy, which is overly guarded about information about its operations.   O’Malley’s former chief of staff, Michael Enright is Beowulf’s managing director. 
So here we have a company looking to do business in state of Maryland being shaken down by the O’Malley machine in order to enrich his crony, and assist the Governor achieve a political goal by amassing more renewable energy.
The $550,000 First Energy donated to the O’Malley controlled Democratic Governor’s Association between 2010-2011 didn’t hurt either.  Of course, when the Baltimore Sun looked into the massive amount of cash companies with business interests in Maryland poured into the DGA after he took the helm, O’Malley said there were no connections between the donations his decisions as governor. 
Governor, meet grain of salt.
First Energy wasn’t the only energy company to get a taste of the O’Malley way in 2011.  Chicago-based Exelon, which purchased Constellation Energy, which owned Baltimore Gas and Electric got the same treatment.  After Exelon agreed to $1 billion in extra concessions, O’Malley finally gave his blessing to the merger.  The concessions included Exelon paying $30 million for offshore wind development—a key political goal for O’Malley—, $2 million to state universities to fund wind energy research.  
Maryland Public Policy Institute energy expert Tom Firey described the Exelon deal:
Thomas A. Firey, a Maryland Public Policy Institute senior fellow, said the focus on alternative energy seemed political and counter-intuitive to market forces.

“If a wind farm or other alternative energy project makes sense, it will happen anyway,” Firey said. “And, if they don’t make sense, then it’s really just well-dressed corporate welfare.” 

Firey said it seems like the deal was more focused on securing funding for politically popular items like wind farms and poultry litter plants than getting further rate relief or rebates for BGE ratepayers. He also cautioned that there could be fallout from the deal that makes Maryland look unfriendly for businesses. 

“It’s a shakedown for which the public really doesn’t get much,” Firey said. “And, it’s yet another red flag for any businesses down the road thinking of doing business in the state not to come here. It’s Annapolis machinations at its best.”

Maryland has a reputation as state with a dreadful business climate.  It is, unless you’re politically connected.





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