By Lisa Rein
Washington Post Staff Writer
Monday, August 13, 2007;
B01
The hearing on the 16th floor of the state government building in Baltimore was as charged as a cross-examination. Two Verizon officials were called to appear before Maryland's utility regulators to explain a 50 percent increase in customer complaints about their phone service. And from the first moment, it was clear a grilling was in order.
"What are you doing to improve the service?" demanded Steven B. Larsen, the new chairman of the Public Service Commission. Another commissioner, Lawrence Brenner, told the phone company representatives, "It helps if you come along willingly rather than be dragged."
Officially, the five-member panel that regulates gas, electric, telephone, water and sewage disposal services in Maryland is a lot less prominent than Cabinet agencies with larger staffs, budgets and portfolios. But as Wednesday's encounter with the telecommunications giant shows, it is emerging under Gov. Martin O'Malley (D) as an aggressive force.
In his campaign for governor last year, O'Malley criticized the commission under his predecessor, Robert L. Ehrlich Jr. (R), as too pro-business. Now, after appointing several new members, he's encouraging it to challenge rate increases and utility companies.
"These are necessities, not luxuries," Ralph S. Tyler, O'Malley's chief legal counsel, said of the utilities regulated by the commission. "They're services provided by a relatively few, very large entities. . . . It's supposed to work for the benefit of individuals who need the protection and assistance of government."
The commission under Ehrlich came under heavy fire after it granted a 72 percent rate increase to Baltimore Gas & Electric Co., Maryland's largest electricity provider. As a gubernatorial candidate, O'Malley, then mayor of Baltimore, successfully sued the commission for failing to hold a proper hearing on the rate increase and blasted it in his campaign to unseat Ehrlich.
Early in his term, O'Malley made a reconstituted commission a priority, pressuring Ehrlich's chairman to resign and tapping Larsen, a former state insurance commissioner who quashed CareFirst BlueCross BlueShield's controversial plan to convert to a for-profit company.
Along with Brenner, a former federal energy regulator, O'Malley appointed Susanne Brogan, a former commissioner who had served in the 1990s, and reappointed Harold D. Williams, the only commissioner under Ehrlich who had been picked by a Democrat. The fifth member, Allen M. Freifeld, was appointed by Ehrlich in 2004.
The new commission faces soaring energy costs, increasing demand for electricity and pressure to increase power from renewable sources such as solar and wind. Although state lawmakers delayed the BGE hike, rates jumped 50 percent July 1 after a 15 percent increase last summer. Many blame deregulation of Maryland's electricity markets, which has failed to create competition. Instead, it brought a backlash from consumers and a potential political problem for O'Malley.
"It's regulated industries that have a major impact on the lives and pocketbooks of every Marylander," said Del. Tom Hucker (D-Montgomery), a former director of Progressive Maryland, which fought the rate increases. "Deregulation was clearly a mistake. The most important thing is the posture of the commission going forward."
The governor has acknowledged that his administration could find no legal basis to roll back the recent rate increase, a political setback the commission has no power to address.
"We need to spend a lot more time understanding what happened, even though we don't have legal authority over it," Larsen said.
The commission expects to consider re-regulating the electricity market, a move that would need approval from the General Assembly. It's unclear how such a change in policy would come about and whether it could lower rates.
As he has rolled out strategies, from loans for low-income ratepayers to conservation measures, to help consumers and utilities be more energy efficient, O'Malley has asked his new regulators to examine BGE's relationship with its corporate parent company, Constellation Energy Group. He called on it to determine whether customers should receive rebates and whether Constellation should be broken up.
A BGE spokesman has said the company is "confident that both Constellation Energy and BGE have acted in full compliance with all federal and state regulatory requirements."
BGE serves about 1.1 million customers in central Maryland, including parts of Prince George's, Anne Arundel and Howard counties.
The new commission has ruled in only a few cases so far, on rate increase requests by Pepco and Delmarva Power, the state's other utilities. The commission granted lower increases in each case, a common practice.
"It's way too soon to say how they're operating," said Theresa Czarski of the People's Counsel, an advocate for ratepayers. "But I'm appreciative of their level of interest in questioning companies."
Verizon executives said last week's hearing marked the company's first appearance before the commission on a service issue. They said they needed more time to figure out why hundreds of customers have waited days and even weeks for repair crews to fix their telephones. But they were emphatic that complaints of missed appointments and delayed repairs were rare exceptions to a strong record of service.
Larsen called the case the "most immediate example" of the commission's more aggressive approach to regulation, which he said has been adopted slowly by some on the commission staff.
He said some staff members asked, "Why don't you give them a phone call?" But, Larsen said, "it was obvious to me that we needed to do something immediately."
Verizon spokeswoman Sandra U. Arnette would not comment because of the company's pending case.
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