Power Rate Relief in Md. Squelched in Final Minutes
Senate Snags Costly On Nail-Biting Day; Special Session Possible

By Ann E. Marimow
Washington Post Staff Writer
Tuesday, April 11, 2006

A deal that would have brought homeowners across Maryland a measure of relief from soaring electricity bills this summer collapsed in the final minutes of the General Assembly session last night as lawmakers adjourned without an agreement.

Gov. Robert L. Ehrlich Jr. (R) said he is considering calling the legislature into a special session as early as tomorrow that would last until lawmakers approve a plan addressing the rate increases. He might also pursue options on his own, aides said.

Ehrlich, legislative leaders and the state's largest utility labored into the late hours over legislation that would have held increases to 15 percent this year and phased in the rest of the 72 percent rate increase for Baltimore Gas and Electric Co. customers by January 2008.

Pepco customers in Montgomery and Prince George's counties would have had the option of spreading out an increase of 38.5 percent, starting at 15 percent in June.

The deal would have kept in place the state's current utility regulators but required the governor to appoint new members to replace some members of the Public Service Commission as early as next year. The agreement would also have allowed a merger involving BGE's parent company, Constellation Energy Group, to move forward.

Early optimism about the agreement, four weeks in the making, began fading in the late afternoon as time ran short on the 90-day session that ended at midnight. "Every hour that goes by, it looks rather gloomy," said Sen. Thomas M. Middleton (D-Charles).

At 9 p.m., the outlook was bleak when lawmakers got their first look at the legislation. Senators in both parties voiced deep concerns about the measure during an impromptu Finance Committee hearing held in the Senate lounge.

"I can't take this bill home. The 72 percent never goes away; it just gets delayed," said Sen. Lisa A. Gladden (D-Baltimore).

An hour later, with little progress being made in committee, Chip DiPaula Jr., the governor's chief of staff, was called in to make a pitch for immediate action.

"This is the best option," DiPaula said, standing before senators who were seated on red leather couches in front of a fireplace. "If we don't solve this, it's going to be a lot worse."

When it looked as though House legislators would have to take up the measure on their own, Middleton ushered his committee to a reception room to quickly move the bill to the Senate floor without debate.

"There's not going to be any discussion? None?" asked Sen. E.J. Pipkin (R-Queen Anne's).

Throughout the night, support seemed wan among rank-and-file legislators who called the package a temporary election-year fix.

"It might sound good for the first year, but then there's more to the story," said Sen. George W. Della Jr. (D-Baltimore). "Rates steadily go up, and in the long term we continue to be captive to the grid."

Concerned about the delay in the Senate, a House committee approved its own slightly different version of the bill. That left the two chambers barely an hour to vote on the measures and reconcile their differences.

An hour before the legislature adjourned, Ehrlich told a live television audience that he would immediately call a special session if lawmakers failed to find a solution. He said he was satisfied with the agreement being considered. "A great result probably was never in our grasp here, given where we began," Ehrlich said.

Those concerns overpowered support from legislative leaders and the governor, and the agreement flamed out by a single vote on a procedural move in the Senate minutes before the midnight deadline.

From the moment electricity rate increases were announced by the Public Service Commission to the final confetti drop yesterday, the question of how to delay dramatic increases was foremost on legislators' minds. Electricity bills reflecting higher rates will arrive in mailboxes this summer, when many lawmakers will be campaigning for reelection.

"Some people are not going to be happy," said Senate President Thomas V. Mike Miller Jr. (D-Calvert). "It's hard to swallow any type of increase, but there's got to be an increase."

Throughout talks with Constellation, legislative leaders used as leverage the threat of bills to derail the companies' planned merger.

Constellation agreed to borrow money and provide $60 million annually for 10 years to pay for phasing in the rate increases. The company would have provided customers a credit to cover interest costs, but ratepayers would have paid as much as $3 extra a month toward the loan.

In turn, legislators were prepared to back off the bills that would have held up Constellation's $11 billion merger with Florida Power and Light Co.

But top lawmakers held out last night for changes to the Public Service Commission. The utility regulators, who approved the rates, have come under fire by Democrats for being too close to the industry they oversee. E-mails disclosed last month showed Chairman Kenneth D. Schisler's friendly relationship with a Pepco lobbyist.

Miller said that the General Assembly was prepared to drop a bill to immediately fire commissioners but that lawmakers still needed to ensure "honest ombudsmen" at the agency. A compromise under consideration would have allowed commissioners to keep their jobs during a review of the merger but require the governor to appoint new members during the 2007 legislative session. It also would have allowed the attorney general -- not the governor -- to appoint the People's Counsel, who serves as an advocate for consumers.

The marathon day began with high-level talks at 7:30 a.m. in the governor's suite of offices on the second floor of the State House. It had a slow start, with long periods of downtime as legislative analysts crafted the technical language needed to set the deal into motion.

Under the terms of the squelched deal, BGE customers would have paid 15 percent more in July and another 29 percent extra in June 2007. Customers would not have had to pay the full market price until January 2008.

Pepco and Delmarva Power customers could choose to spread rate increases over 18 months. Rates would have increased 15 percent in June, 15.7 percent in March 2007 and the rest by December 2008. The company has agreed to cover customers' interest costs.

Some lawmakers said before the votes that they were troubled that relief for BGE customers would rest on approval of the merger.

"How can we gamble this entire deal based on the success of a merger over which we have no control?" said Del. Patrick L. McDonough (R-Baltimore County). "If the merger fails, the money is gone."

Others said the frenzied push for passage last night was a flashback to 1999 -- the year the General Assembly passed legislation to deregulate the electricity market with the hope that competition would result in lower prices for customers. The promised competition has not materialized in part because the deregulation deal capped customer rates. Those caps will be lifted this summer for BGE's 1.1 million customers. Rate caps expired in 2004 for Pepco customers.

Sen. Brian E. Frosh (D-Montgomery) said the legislature was in danger of repeating its past mistakes because the pending deal does not give counties and municipalities the ability to shop for power on behalf of residents or require conservation.

The measure does call for a study of such efforts to spark competition, but Frosh said that "they've been studying it for seven years, and they've never done either because the utilities view it as taking money out of their pockets."