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Possible help for the power-price blues

June 10, 2007|By BOB MAGINNIS

Back in the late 1990s, when Maryland officials were selling the benefits of electricity deregulation, the argument in favor of it went something like this: Instead of being stuck with your one traditional supplier, you would be able to shop for a company that would give you a cheaper rate.

Competition would work its magic and users would reap the benefits, as utilities cut their prices to sign up new customers.

There were a few problems with this approach, however. On the East Coast, there wasn't enough surplus generating capacity to entice utilities to cut prices to find new customers. Power suppliers had all the customers they could serve.

And the legislation that created deregulation capped power rates, which meant that even if another utility had wanted to compete, it would have had to offer rates that were ridiculously low - too low, perhaps, to make a profit.

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Customers didn't gripe because their power rates stayed the same. And state lawmakers, including the Democratic leaders who were lead sponsors on the deregulation bill, didn't pay attention to what was happening.

And then the caps came off and Baltimore Gas & Electric, which supplies power to counties to the east, proposed a 75 percent increase in power rates.

Democratic leaders, eager to avoid the blame for that, argued that it was the Public Service Commission members appointed by Republican Gov. Robert Ehrlich who were to blame.

Apparently, they got away with it. Ehrlich was swept from office and Democratic Gov. Martin O'Malley pledged his PSC would do better.

"Better" is in the eye of the beholder, apparently. The new, allegedly pro-consumer PSC has just approved a 50 percent hike for BG&E and O'Malley is now saying he wants to offer customers more help with their power bills.

But for most customers, business and residential, it's not going to be enough. Lt. Gov. Anthony Brown, in town last week to tout O'Malley's "One Maryland" approach, said alternative energy sources and conservation were the keys to solving this problem.

Brown said that by installing a new, modern heat pump and energy-efficient light bulbs in his own all-electric home, he had cut power usage by 8 percent a month.

I don't mean to pick on Brown, but let's assume that his conservation measures had actually cut power use by 24 percent. That would still leave the average BG&E user with a 24 percent increase - a rate boost most would be happy with at this point, by the way.

For Allegheny Power users in our area, residential customers must soon decide whether they want to pay a gradually increased rate between now and when the caps expire at the end of 2008 - or take the entire hit at once.

The only good possibility, it seems to me, is one that Public Service Commission officials suggested back in the 1990s when deregulation was still seen as a good thing.

Instead of each customer "going it alone," they could join together, PSC officials said, perhaps under the umbrella of a business such as an insurance company, to buy power together.

A group of local businesses is already doing that, under the leadership of Brien Poffenberger, president of the Hagerstown-Washington-County Chamber.

Poffenberger now has more than 50 businesses in the group, buying power under multi-year pacts.

Recently, I asked him if what his group is doing is anything like what the city and county governments do when they join together to bid for heating oil or police cruisers.

Not exactly, Poffenberger said. Although group members join together for the purpose of negotiation, each member individually signs a contract with the power supplier.

Asked if the buying group is a club whose membership is closed, Poffenberger said "no."

"No, it's not too late," Poffenberger said, but added that the group tends to go to market for suppliers in the fall or the spring, when rates are lower.

There are now 60 to 70 businesses participating and Poffenberger agreed that even though the PSC has approved a number of utilities to do business in Hagerstown, few if any want to sign up individual residential customers.

Hagerstown, Williamsport, Thurmont and Front Royal, Va., already negotiate together on behalf on residents within their municipal borders, Poffenberger said. In answer to my questions, he said that other municipalities could do the same.

Poffenberger cautioned anyone with a business or residential account who joins a group not to expect a drastic reduction in the "default rate," the rate at which Allegheny will supply power.

The benefit his group's members have experienced so far, Poffenberger said, is their rates are locked in for so many years. They can calculate that into their costs, he said, secure in the knowledge that they won't be blindsided by a rate increase they didn't expect.

Here's my thought: Elected officials, particularly those in the Maryland General Assembly, had a long time to get this right - and they didn't. They should act now, with the help of people such as Poffenberger, to at least minimize the impact on citizens and local businesses. Those who fail to act should be shown the door at the voters' earliest opportunity.

Bob Maginnis is

editorial page editor of

The Herald-Mail newspapers.

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