State Seeks $87.5 Million Refund for Consumers

Maryland utility regulators filed a complaint yesterday claiming that the federal government allowed power companies to overcharge electricity customers by $87.5 million two years ago and demanding that the money be refunded.

State regulators say the Federal Energy Regulatory Commission let power companies jack up prices during peak-demand periods in 2006. A lack of competition in Maryland's deregulated electricity market allowed prices to remain high, and 17 generation plants in the state reaped excess profits in the wholesale power market, the state's 225-page complaint says.

The excess charges came to $87.5 million, according to an analysis performed for the state Public Service Commission by an independent monitor.

The complaint filed with federal regulators is part of a broad attempt by the commission to address record increases that occurred after caps came off electricity rates last year. The competition that lawmakers predicted has not materialized in the deregulated market, and wholesale power generators can charge high prices during high-demand periods.

"This is the beginning of our efforts to actively engage at the federal level, where many of our problems lie," commission Chairman Steven B. Larsen said yesterday.

The power plants cited in the complaint are exempt from price caps that apply to other generators, because they were built after 1996. Federal regulators exempted those plants to encourage power companies to invest in new generation capacity. But in the absence of competition, the rules unfairly drove up electricity prices in Maryland, Larsen said.

The lack of caps is "discriminatory, anticompetitive, unjust and unreasonable," according to the commission complaint.

"In our view, FERC exempted certain generators to help them to the disadvantage of ratepayers," Larsen said. The complaint does not name specific power companies.

The commission's allegations grew out of an investigation by an independent monitor for PJM Interconnection, the Pennsylvania-based nonprofit company that manages the power grid for 13 states in the Mid-Atlantic region, including Maryland.

Joseph Bowring, the monitor, became a hero to state regulators and consumer advocates last year when he alleged that customers in Maryland and other states had been overcharged for power. He proposed that FERC impose price caps on generating companies that were without them.

But the grid manager and FERC did not act on his concerns. After litigation by state utility commissions, PJM announced a settlement in December that would give Bowring more independence from PJM.

Larsen asked Bowring to determine the excess costs borne by Maryland power customers, and he came up with $87.5 million.

PJM spokesman Ray Dotter said he could not comment on the complaint because it is still being reviewed. FERC spokeswoman Mary O'Driscoll said she could not comment on an ongoing complaint.

A spokesman for Constellation Energy, the state's largest power generator and the parent company of Baltimore Gas & Electric, said Constellation's Maryland plants are not among those that allegedly charged unusually high prices for power.

"They did not contribute to the finding," spokesman Lawrence McDonnell said, because the plants were built before 1996.

BGE customers were hit with a 72 percent rate increase last year.