Part of O'Malley's Plan Hits Snag in Senate
Lawmakers Reject Proposal, Wanting More Set Aside for Relief From Electric Rates

By Lisa Rein
Washington Post Staff Writer
Wednesday, April 2, 2008

The Maryland Senate dealt a blow yesterday to a key piece of Gov. Martin O'Malley's energy conservation plan, rejecting a bill that would divide a new fund of electric power industry payments between rate relief and efficiency programs.

The proposed Maryland Strategic Investment Fund would be financed by $140 million or more in fees on power plant owners who soon will have to purchase credits to release the carbon dioxide emissions believed to cause global warming. Beginning in the fall, Maryland and nine states in the Regional Greenhouse Gas Initiative will require the industry to buy and sell carbon credits at auction in an effort to reduce pollution.

Senators defeated the measure 25 to 21 after more than an hour of vehement debate that underscored lingering anger over Maryland's switch to an unregulated market for electricity. Residential bills for customers of Pepco and Baltimore Gas and Electric have spiked since rate caps started to come off in 2004, and the competition lawmakers predicted from deregulation has not materialized.

Senate leaders said they hoped to revive the bill by a parliamentary maneuver as early as today. A similar measure is pending in the House of Delegates.

Yesterday's defeat does not cancel the auction for carbon dioxide credits. But it leaves in limbo how the state will spend the proceeds.

O'Malley administration officials have advocated conservation strategies as one way to address Maryland's rising demand for power, which regulators predict could lead to brownouts by 2011.

But senators from both parties see the new energy fund as a vehicle to offer customers relief from high rates, and they opposed the bill because it devotes only a portion of the money -- about 35 percent -- to direct credits of $1.81 a month. Under the bill, most of the remaining money would be used by the Maryland Energy Administration to set up programs to encourage conservation, including home audits that can determine whether appliances or rooms could be more

energy-efficient. About $10 million a year would go toward helping low-income residents pay electric bills.

"Our constituents are going to pay at least $140 million a year on their energy bill to reduce the carbon in the air," said Sen. E.J. Pipkin (R-Queen Anne's), who led a fight in a committee last week to return about $5 a month to customers. "This money should have been returned to ratepayers."

Pipkin and other Republicans said the state would be creating an unwelcome bureaucracy in the Maryland Energy Administration to administer conservation programs that customers could adopt on their own. They pointed to a public relations disaster for Allegheny Power, which serves Western Maryland, that occurred when it distributed energy-efficient light bulbs to customers without telling them they would have to pay for them. The program was later scrapped.

"It's a lovely piece of legislation, in theory," Del. Patrick L. McDonough (R-Baltimore County) said during debate in the House. "Everybody is for a green world. . . . But it does not in any way impact the consumer."

Supporters of the governor's plan said it would be foolhardy to give customers a short-term credit on their bills without putting a system in place to help them save energy costs in the long run.

"We're writing a check to Constellation Energy" by not reducing demand for power, Sen. Paul G. Pinsky (D-Prince George's) said of BGE's parent, the region's largest energy company. "Let's take the long view. If we give all the money back, we're putting our heads in the sand and avoiding the problem."

Del. Brian K. McHale (D-Baltimore) told House lawmakers that "there is no silver bullet to deal with the dramatic challenges that are on the horizon."

Rick Abbruzzese, a spokesman for O'Malley (D), called the conservation bill "important legislation that will allow us to invest in our long-term energy future and, at the same time, provide some rate relief to Maryland families."

The Senate did approve two other energy measures. One would increase the share of Maryland's portfolio from renewable sources such as solar and wind. The other would write into law the goal of reducing the state's overall energy consumption by 15 percent by 2015.

Staff writer Philip Rucker contributed to this report.

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