Rate Alarms Ignored, Lawmakers Scramble

By Ann E. Marimow
Washington Post Staff Writer
Sunday, April 2, 2006

Maryland lawmakers raced to pass legislation last week to wring concessions from the state's largest electric company and effectively fire utility regulators who signed off on the electricity rate hikes that have panicked politicians and ratepayers.

But the measures, along with negotiations involving the governor and legislators to slow down one company's rate increases, do nothing to ensure better prices in the future and fall short of rewiring the free-market system that lawmakers created in 1999.

And they leave Pepco customers in Montgomery and Prince George's counties on their own to cope with electricity bills that are set to increase an average of $468 annually, starting this summer.

"We're only talking about getting money . . . to get us through the election. But this time next year, we could face the same problem," said Del. Herbert H. McMillan (R-Anne Arundel), who wants to return to a regulated energy market.

Political leaders are "all talking about putting a Band-Aid on a hemorrhaging problem," he said. "It's not fixing anything."

The electricity rate increases -- as much as 72 percent for Baltimore Gas and Electric customers -- caught Gov. Robert L. Ehrlich Jr. (R) and the General Assembly by surprise. Under deregulation, the rates are no longer determined by state regulators but by the price of electricity bought at auction.

There were warnings that, if heeded, might have prevented policymakers from scrambling for solutions one week before the legislative session ends.

Four years ago, a state consumer advocate warned that electricity deregulation had failed to deliver the competition -- and lower prices -- promised and that state legislators needed to prepare for sharp price increases when rate caps expired in 2004 for Pepco and this summer for BGE.

Lawmakers dismissed the findings by the Office of the People's Counsel as premature. The Ehrlich administration later fired the messenger, Mike Travieso, and remade the Public Service Commission that evaluates rate requests in what the governor describes as a pro-business mold.

Now, policymakers are asking why competition hasn't developed. But the legislation and negotiations that have consumed Annapolis for the past two weeks do little to address that underlying problem, which reflects the reality of a national wholesale market overseen by federal regulators.

"Will a market develop, and will it develop to the benefit of ratepayers? That is a side, but relevant, discussion here," Ehrlich said, emerging from negotiations last week with legislative leaders and executives from Constellation Energy Group, BGE's parent company.

"That's a pretty in-depth discussion, and right now, most of our discussion is focused on the merger and rate stabilization."

CONTINUED     1           >

© 2006 The Washington Post Company