Power Industry Holds Firm on Rate Jumps

Appearing before the Senate Finance Committee, Baltimore Mayor Martin O'Malley blamed Ehrlich's appointees on what he called the "much weakened" commission for not cracking down on the proposed hikes.

"The regulated are now the regulators," said O'Malley, who is seeking the Democratic nomination for governor. "Governor Ehrlich fired the watchdogs and put the foxes in charge of guarding the henhouse."

Chairman Kenneth D. Schisler, who was appointed by Ehrlich in 2003, unilaterally fired five of the agency's top employees two years ago. Two former BGE employees and two former Allegheny Power employees are now in charge of four divisions at the commission.

Schisler, a former Eastern Shore delegate, dismissed such criticism as "demagoguery."

"I understand the need to create a scapegoat," Schisler said. But the commission has "done nothing but implement flawlessly" the system created by his Democratic predecessors to implement the deregulation plan approved by the General Assembly in 1999.

The massive rate increases, he said, are the result of artificially low prices combined with higher energy costs from events beyond Maryland's borders, such as Hurricane Katrina.

Skeptical lawmakers used yesterday's hearings to vent their frustrations with rising rates for customers in light of what they said was a "sweetheart deal" for BGE and its parent company, Constellation Energy Group Inc.

The company's revenue has nearly doubled in two years, to $17.1 billion in 2005, and shareholders would benefit from the pending $11 billion merger deal with the Florida-based FPL Group.

"Can you help me explain that to my constituents?" asked Sen. John C. Astle (D-Anne Arundel).

"I think I can," said Mary Dempsey, Constellation's managing director of public affairs.

"I'm not so sure," Astle added before Dempsey could answer.

Dempsey went on to explain that the company's shareholders, not BGE ratepayers, would compensate executives working on the deal.

Kenneth DeFontes Jr., BGE's president, said legislation to limit rate increases to 5 or 20 percent would put his company at "substantial financial risk."

If the company were forced to borrow to make up the difference, DeFontes said, its bond rating would deteriorate, making it more difficult to buy power and respond to customers.

DeFontes was joined in his opposition by former Federal Energy and Regulatory Commissioner William Massey, who was on the commission during California's energy crisis, which brought rolling blackouts to the state.

"It's an unfortunate series of events," Massey said. "We've watched this happen."

Del. Dereck E. Davis (D-Prince George's), the lead lawmaker on energy issues in the House, has introduced legislation to slow down what he called the revolving door between utility companies and the Public Service Commission. O. Ray Bourland and Bryan Moorhouse, for instance, spent two decades at the utility commission before joining Allegheny Power's government affairs office. Bourland is back at the commission as executive secretary, and Moorhouse has returned as chief hearing examiner, as reported yesterday in the Baltimore Sun.

"Our job is to represent the interests of consumers and companies that use electricity and the utilities themselves. We have to weigh all those interests," Bourland said. "Having people on staff and the commission that have experience with all those constituencies is useful."

Davis praised Bourland and said the legislation was not intended to impugn anyone's character but to create a "separation from one career to the next" and ensure "the lines aren't blurred about who works for who."