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Maryland Lawmakers Move to Cap BGE Rate Hike, Fire PSC

Maryland lawmakers last week passed veto-proof legislation that, among other things, would limit pending power rate hikes for Baltimore Gas & Electric (BGE) customers to 15% through May 31, 2007 and hand pink slips to the current set of commissioners at the Maryland Public Service Commission (PSC).

Maryland Gov. Bob Ehrlich "got none of the amendments he said he would need to persuade him to sign the bill," the Baltimore Sun reported in its Thursday editions. But the legislation passed both chambers of the Maryland General Assembly "with more than enough votes to override a potential gubernatorial veto, and legislative leaders said they will reconvene to override if necessary," the newspaper reported.

According to the Sun, the state lawmakers "approved a key concession" sought by Constellation Energy -- the date at which all customers will pay market rates for electricity would be Jan. 1, 2008, rather than June 1 of that year, the newspaper reported. "Company officials said that change would help it maintain its credit rating, which is crucial for BGE because of the large amounts of money it must borrow to maintain its distribution lines."

In addition, state lawmakers "also agreed to change the plan for how rates would be determined from June 1, 2007 -- when the 15% cap on the rate increase expires -- until customers pay market price," according to the Sun. "In that period, consumers will either begin paying full market rates or have the chance to participate in a transitional rate-stabilization plan."

The Maryland PSC this spring announced the results of the third year of bidding for the market-priced standard offer service (SOS) for utility supply. Through a competitive bidding process, electric suppliers compete to provide SOS for Maryland customers of investor-owned companies whose rate caps have expired. A political firestorm erupted after it was disclosed that for residential customers in the BGE service territory, a typical bill would have increased by a massive 72%, or $743, annually.

Last Wednesday, Maryland senators clashed over the question of dismissing the current set of PSC commissioners.

"This PSC has done nothing wrong," argued Maryland Sen. J. Lowell Stoltzfus. State Sen. Allan Kittleman said that it's "not appropriate to fire people because we disagree with their decision..." He said that "you don't just fire the entire commission because you're mad at how they acted."

But Maryland Sen. Thomas Middleton said that "we represent the people, and if the people have no confidence in this PSC, what should we do? Tell them we can't do anything about it? We can do something about it and that's what this legislation does."

State Sen. Brian Frosh said that "I think that it's time for these guys to take off. It's time for them to go gently into the night. We have a responsibility to our constituents to make sure that the people who are calling balls and strikes are at least fair, and that's what this bill does."

The legislation "says we're going to get five people in there who aren't pro-consumer or pro-utility or pro-anything. They're just going to call it as it is."

In response to passage of the measure, the Maryland Chamber of Commerce said that the legislation, "even if well-intentioned, damages Maryland's business and regulatory environment." The state chamber of commerce listed several specific areas of concern related to the legislation. For example, it said that restructuring the PSC "creates instability in Maryland's regulatory climate."

The chamber noted that Ehrlich has seven days in which to sign or veto the bill, or else it becomes law without his signature. Local press reports on Thursday said that Ehrlich wants to convene a public hearing on the legislation next week.

BGE in April filed a comprehensive rate stabilization plan with the PSC that would allow BGE's residential electric customers to reduce and defer the pending July 1 rate increase. But the BGE filing did not decisively calm the waters.

Responding to a court order, the PSC recently said that it would implement a March 6 order that includes a rate stabilization plan for BGE customers, but which the commission said holds "substantially less benefits for the consumer" than a rate stabilization plan included in a late April order.

A May 30 Baltimore City Circuit Court decision directed the PSC to either briefly extend electricity rate caps in the state or implement the March PSC rate stabilization order. The PSC determined that "deferring the end of the rate caps would ultimately cost the consumer more and would fail to withstand a legal challenge."

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