Maryland Gov. Bob Ehrlich last Thursday vetoed legislation passed by state lawmakers that, among other things, would limit pending power rate hikes for Baltimore Gas & Electric (BGE) customers to 15% through May 31, 2007 and fire the current set of commissioners at the Maryland Public Service Commission (PSC).

But state lawmakers on Friday overrode the veto. According to the Baltimore Sun, the Maryland Senate override vote was 34-10, while the Maryland House of Delegates voted 87-37 in favor of the override.

The measure "eliminates consumer choice," Ehrlich said in a June 22 letter to Mike Miller, the Maryland Senate's president, explaining his decision to veto the bill. Ehrlich said that BGE customers are "provided no choice as to whether they want to participate in the rate stabilization plan."

"My consideration of Senate Bill 1 has been comprehensive in nature, including Tuesday's public hearing with members of my cabinet at which all Marylanders were invited to testify," the governor said. "We heard from dozens of witnesses and listened to more than six hours of testimony."

At that hearing, speakers said that the bill is deficient because its call for the termination of Maryland state utility regulators is both unconstitutional and "unwise" and because the legislation's rate stabilization plan for BGE customers fails to include an opt out element for rate deferrals.

"Please know there are aspects of this legislation with which I agree, including making the standard offer service permanent, encouraging energy efficiency and conservation, and providing flexibility in the bidding methods used by electricity suppliers to obtain electricity," wrote Ehrlich. "A comprehensive study of state energy policy is needed, and in fact is currently being conducted by" the PSC.

But Ehrlich also cited "negative aspects to Senate Bill 1 necessitating my veto," including an elimination of consumer choice. Specifically, BGE customers "are provided no choice as to whether they want to participate in the rate stabilization plan. Consumers value choice, and, accordingly, view this issue as essential to a balanced legislative remedy. In this respect, you may recall that under the PSC plan more than 134,000 BGE customers (12% of the customer base) chose, over a 10 day period from June 5 to June 14, to forego participation in the rate subsidy plan. Yet, under Senate Bill 1, you require everyone to participate, including those 134,000 customers who previously chose to opt out of such a plan."

Ehrlich also said that the bill requires all BGE customers to pay at least $109 million in interest over ten years. "Incidentally, repayment of principle and interest applies to persons who move into the BGE region after June 1 of next year who never receive the benefit of rate deferral, while at the same time persons who obtained the deferral but move out of the area after June 1, 2007 will remain liable for these costs. These persons will likely avoid repayment, thus adding to the 'uncollectibles' that will have to be paid by other customers through increased rates."

The governor said a lack of consumer choice and a "forced credit plan fail to afford BGE ratepayers the same protections I negotiated for PEPCO and Delmarva Power customers who have a choice on whether to participate on an interest-free basis. Forced interest charges were a consistent complaint throughout the public hearing. As People's Counsel Patricia Smith testified, other deferral plans did not include interest payments and that such provisions are contrary to the interests of consumers. I agree with Ms. Smith's assessment, and respectfully suggest that you follow this model in crafting a new, more meaningful rate stabilization plan."

Meanwhile, Ehrlich noted that the vetoed measure provides $386 million for rate relief. "This $386 million was also included as part of my $600 million rate relief plan, and is no way dependent upon passage of this bill. Members of the General Assembly and BGE ratepayers have knowledge of additional concessions to be provided by the electric companies, particularly if the proposed merger between Constellation Energy Group and Florida Power & Light occurs. My plan proposed that $600 million be made available if the merger occurs. Simply put, Senate Bill 1 allows Constellation to pocket nearly $220 million that would have been available to offset interest charges."

The legislation seeks to remove all members of the current PSC and requires on a one-time basis that Ehrlich appoint new members from a list of names provided by the Maryland Speaker of the House and the president of the Senate.

"As you well know, the PSC followed the deregulation law enacted by the General Assembly in 1999 and procedures established by prior PSC members in 2003," Ehrlich said. "The competitive bidding process transpired in accordance with the law. The PSC was in constant contact with the General Assembly and the fact that there would be a dramatic increase in rates was made known to the General Assembly's leadership on many occasions prior to the 2006 session."

But the General Assembly "continues to use the PSC as a scapegoat for the failure of the 1999 deregulation law. Despite the opinion of the General Assembly's lawyer to the contrary, this provision is in all likelihood unconstitutional. Further, it is unsettling to the state's regulatory climate for the General Assembly to eliminate the members of a quasi-judicial agency with nearly a century of independence when the General Assembly disagrees with an opinion of the agency. Such action will only lead to major regulatory uncertainty, less competition, and higher costs for consumers."

Ehrlich asked that Maryland lawmakers "return to work immediately on an alternative solution that will prove more consumer friendly and will not discriminate against BGE customers." He said such a bill should contain consumer choice for BGE ratepayers, no interest for BGE ratepayers, additional concessions from the electric companies and no replacement of the Maryland's People's Counsel.

"Further, while I remain willing to examine issues relating to the appointment and tenure of the PSC that are consistent with the Maryland Constitution and help promote regulatory certainty, there should be no wholesale elimination of all of the commissioners."

The Maryland PSC this spring announced the results of the third year of bidding for the market-priced SOS for utility supply. But jaws dropped across the mid-Atlantic state 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.

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