Md. Electric Rates Are Opposed

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By Ann E. Marimow
Washington Post Staff Writer
Thursday, March 9, 2006

Seven years ago, Maryland's General Assembly rushed to end electricity regulation, allowing power companies to compete with the promise of better deals for consumers. Yesterday, legislators scrambled to try to soften planned rate increases of as much as 72 percent that have resulted from the system they created.

In response to the increases announced Tuesday by state utility commissioners, lawmakers are developing dozens of proposals, ranging from a bill that would scrap deregulation entirely to a more modest approach that would buffer low-income residents from rises in rates.

Among the other ideas: phasing in Pepco's planned increase of 38.5 percent for the average household and extending a freeze on rates paid by Baltimore Gas and Electric Co.'s residential customers, who were jolted by the news that utility commissioners were allowing typical bills to rise by 72 percent.

The General Assembly has added leverage with BGE because its parent company is awaiting the utility commission's approval of an $11.5 billion merger with the Florida-based FPL Group. Legislators are considering several measures that would create obstacles to that merger.

"The utilities are going to be expected to suffer some of the pain as well. It won't just be the ratepayers," said Del. Dereck E. Davis (D-Prince George's), who is chairman of the House committee handling the electricity legislation.

Davis and other political leaders acknowledged, however, that their powers are limited because utility companies have a legal right to pass along higher energy costs to customers. Putting off the higher rates for months or years could mean that customers would eventually pay more.

Theresa Czarski, a state-appointed consumer advocate, cautioned legislators against reimposing limits on rates that could force utilities to borrow money to cover costs or make reductions in service.

"You want to make sure to strike a balance, that what you're doing doesn't so severely impact the utility financially that customers pay more in the long run," she said.

Legislators knew bigger bills for Maryland residents were on the horizon with the end of rate caps this year for BGE's customers and two years ago for Pepco customers. But they were stunned by the size of the increases announced Tuesday.

In July, the average electric bill for BGE's 1.1 million residential customers would increase by $743 a year. Starting in June, the typical household bill for Pepco customers would increase by $468 a year.

"Deregulation is a failure, and the big losers are customers," said Sen. Leo E. Green (D-Prince George's), one of the few legislators who voted against it in 1999. "We got nothing out of competition."

The Public Service Commission has tried to help BGE's residential customers, including those in Howard and Anne Arundel counties and parts of Prince George's County, by giving them the option of spreading the increase over two years. In the first year, customers would pay 21 percent. The deferred amount, and 5 percent in interest, would come due the second year.

The commission is considering whether to pursue something similar for Pepco, which has 500,000 customers in Maryland.

Gov. Robert L. Ehrlich Jr. (R), who appoints the utility commissioners, called on them two months ago "to do everything possible to minimize the burden on customers," said his spokesman, Henry Fawell. "That said, he remains very concerned about the impact this will have on customers."

Maryland is not alone in its post-deregulation experience. Other states that moved from a regulated monopoly to a free-market system, such as Delaware and Pennsylvania, are confronting similar increases because the competitive market has not materialized, said Charles Acquard, executive director of the National Association of State Utility Consumer Advocates.

The issue of rising electricity bills quickly became election-year fodder yesterday, and the timing of the increases left legislators shaking their heads in frustration. The new rates would take effect as state lawmakers and gubernatorial candidates campaign in advance of the fall primary and general elections.

Staff writers Dina ElBoghdady and Matthew Mosk contributed to this report.


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