Provision To Regulate New Power Plants Passes

Constellation Settlement Endangered, Some Fear

The Maryland Senate agreed unanimously yesterday to require that all new power plants in the state be regulated, despite warnings that the potentially big change in energy policy would scuttle a $2 billion legal settlement with Constellation Energy Group.

Although Senate leaders did not vote against the amended bill, they quickly pledged to try to scrap the provision. The bill would allow the energy company to give 1.1 million electricity customers a one-time, $170 credit and other relief from high rates. The re-regulation vote was widely viewed as symbolic.

"A mistake was made on the Senate side," said Gov. Martin O'Malley (D), who announced the truce with Constellation last week, calming a long battle over electricity costs in Maryland. "I never thought it would be so hard to give back $2 billion to consumers."

O'Malley said he is "hopeful" that the version of the bill that the House of Delegates passed 98 to 41 last night would get the legislation "back on track," without a re-regulation provision. Senate President Thomas V. Mike Miller Jr. (D-Calvert) told his chamber that the bill would come back to it "in some fashion" by Monday, the last day of the session.

The office of Attorney General Douglas F. Gansler (D) confirmed yesterday what many senators acknowledged, that their action jeopardized the truce with the energy giant. Deputy Attorney General John B. Howard Jr. said in a letter to Senate leaders that the amendment "substantively changes the terms" of the settlement.

Analysts for Constellation told stockholders that if the Senate action scuttled the settlement, the company's pledge to seek financing for a new nuclear reactor at its Calvert Cliffs plant would be threatened.

Senators said their action, however symbolic, was a rebellion intended to return control over electricity prices they gave up in 1999 when they agreed to open Maryland's power markets to competition.

"We sent a very strong message to the utilities, to the Public Service Commission and to the public that the short, painful era of electric deregulation is coming to an end," said Sen. James C. Rosepepe (D-Anne Arundel), co-sponsor with Sen. E.J. Pipkin (R-Queen Anne's) of the amendment, which would also require all new power plants built in Maryland to first offer their electricity for sale in the state.

Frustration over deregulation has been mounting in the legislature since rate caps began to be removed four years ago, resulting in soaring bills for Pepco and Baltimore Gas and Electric customers. The competition lawmakers had sought has not materialized. Utilities must buy power from unregulated power companies that are free to charge what the market will bear.

Among the benefits of the settlement with Constellation, the corporate parent of BGE, is that the company, not customers, will be liable for the billions of dollars it will cost to decommission the Calvert Cliffs plant in 2034.

Lawmakers considered many measures in the winter to return the state to regulation. None seemed likely to pass, though, with Public Service Commission leaders saying they needed more time to study the options.

Then yesterday, the House passed a bill, separate from the Senate action, to allow Pepco and an electricity cooperative in Southern Maryland to join forces to build a power plant. The plant would be regulated by the Public Service Commission.

As in the Senate, sponsors said they hoped to return the oversight lost in 1999. They also want to increase the state's electricity supply. The measure passed 83 to 56 over objections from lawmakers in both parties that Maryland customers would pay for construction of a plant. The bill heads to the Senate.