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Electricity rates the hot topic for special session

June 11, 2006|by TAMELA BAKER

Analysis

ANNAPOLIS

There are times when that economic philosophy of "laissez faire" just doesn't seem quite so fair.

Maryland legislators who voted in 1999 to deregulate electric utility companies in the state did so believing that free-market bidding for wholesale electricity would, in the long run, increase competition and lower utility rates to consumers.

In the meantime, they placed rate caps on the various companies for a period to give the competition time to develop.

But the world was a different place then, said Del. Christopher B. Shank, R-Washington, who voted - with every other legislator who represented the county in 1999 - for deregulation. They hadn't banked on the Enron collapse, the wars in Iraq and Afghanistan, troubles in Nigeria or, worst of all, the terrorist attacks of 2001.

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All of those crises have caused the costs of energy, which had been relatively flat for about a decade, to soar. And the competition the legislators anticipated didn't materialize.

Now that those rate caps are beginning to come off, utility customers in various parts of Maryland are getting a particularly jarring jolt.

Residential customers of Baltimore Gas and Electric, for example, face rate increases of up to 72 percent, or more than $700 per year for the typical residential customer, beginning July 1 as the utility attempts to catch up to market prices.

While most Washington County residents get their power from Allegheny Energy and are not affected by BGE's price increases, Allegheny's caps come off in 2008 - and officials there are closely watching a special session of the Maryland General Assembly this week to see how the legislature deals with BGE before crafting a strategy to stave off sticker shocks of their own, Allegheny spokesman Allen Staggers said.

"I don't think anybody anticipated the jump" the market rate would bring for BGE, he said.

Lost opportunity



Shortly after the potential BGE rates were announced in March, state legislators engaged in a flurry of conversations about how they might soften the blow for residential customers who were about to be slammed with double-digit rate increases, smack in the middle of their re-election campaigns.

But attempts by legislators - and by Gov. Robert Ehrlich - to broker a deal with all sides faltered in the final hours of the General Assembly's regular session in April. Though the House approved a bill, the Senate failed to act on it - leaving House Speaker Michael E. Busch so furious he literally was shaking.

Ehrlich reminded Busch and Senate President Thomas V. Mike Miller of his version of those events in a letter last week announcing his intention to call a special session of the General Assembly, now slated to officially begin Wednesday at 10 a.m.

"You will recall the bipartisan progress we made together in the General Assembly's legislative session to assist customers with electricity costs," Ehrlich wrote. "The House of Delegates passed our agreed-upon plan by an overwhelming bipartisan majority, but the State Senate refused to consider the plan and adjourned without a solution."

Afterward, Ehrlich negotiated a deal with BGE's parent company, Constellation Energy, similar to the failed legislation. But a lawsuit by the City of Baltimore - led by Mayor Martin O'Malley, Ehrlich's chief Democratic rival in this year's election - made the plan "untenable," Ehrlich said. The Public Service Commission opted to revert to a previous plan that would allow customers to defer a portion of the rate increase for a while, but at a price: They eventually would have to pay interest on the deferred portion.

Politics, politics



The issue has, at various times, pitted Busch and Miller against Ehrlich, Busch and Miller against each other, O'Malley against Ehrlich, and Democrats against Ehrlich's appointees to the Public Service Commission, which approves rates.

Not to be left out, Montgomery County Executive Doug Duncan, the other Democratic contender for governor, weighed in Friday with a letter to General Assembly members.

In it, he blamed Ehrlich and his appointees to the PSC for having too many ties to BGE and Constellation, and urged the legislators to adopt his own nine-pronged plan to "work towards the long term solution that will keep this situation from recurring year after year and will eventually begin to bring prices down, not up."

First plank of the plan? Remove and then reconstitute the PSC.

With all three contenders for the governor's mansion trading blame for the rate increases just as what promises to be one of the most contentious election campaigns in recent memory heats up, the political stakes in this week's special session are particularly high, Staggers said.

Shank said he thinks any move to dismantle the PSC would "destabilize the regulatory environment just when Allegheny Power is trying to regain standing" in credit markets.

"We're watching very closely what happens" in the General Assembly, Staggers said. "Once that's resolved, I would fully anticipate working with the (Public Service) commission on what we will do.

"We know our customers are concerned about higher rates."

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