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Power, regulated or not

July 28, 2006

In West Virginia, where electric power prices are still regulated much as they once were in Maryland, Allegheny Power has asked for a $100 million power rate increase, to cover rising fuel costs.

It's a sign of things to come for Maryland, where residential rate caps set in a 1999 bill expire in 2008.

Rates in the Mountain State haven't gone up since 1994, though there was a fuel rate adjustment in 1998.

A spokesman for the utility said the increase being sought would increase the typical residential customer's bill by $7 to $77 per month, or about 10.3 percent.

As justification for the rate-increase proposal, Allegheny officials said costs for coal have increased by 21 percent in the past eight years. In the same time frame, they said, natural gas prices have gone up by 88 percent.

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Allegheny is asking for the boost to be effective in 30 days, but its spokesman said that the state's Public Service Commission could delay any increase approved for 270 days.

If you're feeling some nostalgia for a system in which utilities had to jump through many more regulatory hoops, you're not alone. Caps on businesses' rates have already come off in Maryland, effectively shutting down the Eastalco aluminum plant in Frederick.

Ironically, Eastalco was among those firms pressing for a free-market approach to power in 1999. The idea was that customers would be able to shop for better power prices from a variety of suppliers, not just those in their own service areas.

But the success of that approach would depend on having much more power available than there is now. Maryland law also prohibits counties and other local governments from cooperatively bidding on behalf of their citizens.

In 1998, Glenn Ivey, then chairman of Maryland's Public Service Commission, said that private firms, such as insurance companies, might purchase power on customers' behalf as an incentive to stay with that firm.

If there are any plans to do such a thing, we haven't heard about it, although the Hagerstown-Washington County Chamber of Commerce has helped businesses put together a power-buying cooperative.

If government needs to help that process along, every local elected official needs to get involved now. The year 2008 will be here before we know it.

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