Report Backs Future Power-Plant Control

Legislature Should Consider Laws to Stabilize Prices, Ensure Supply, PSC Says

Maryland should not try to buy back the valuable power plants that were sold when the state deregulated its electricity markets but should consider new laws to protect consumers, a report released by regulators yesterday concludes.

The long-awaited report by the Public Service Commission was ordered by the General Assembly in 2007 as lawmakers were reeling from high electricity rate increases that followed deregulation. It confirms what Gov. Martin O'Malley (D) and many frustrated lawmakers have acknowledged: Returning electricity generation to the companies that distribute it would be good for consumers but is unrealistic. Buying back the plants now owned by unregulated energy companies would be costly, create legal battles and be expensive to maintain, the report says.

Instead, the regulators recommend that the General Assembly consider having future power supplies be under some form of regulation to stabilize prices and guarantee that the state's electricity needs are met.

"The public interest is not served by deregulation that requires the Commission to wait passively for market forces to deliver a reliable supply of electricity at reasonable prices," the report says.

Analyzing the pros and cons of requiring Pepco to buy back the power plants it sold to the Mirant Corp., it warns against "rescrambling the omelet." Pepco serves Montgomery and Prince George's counties in Maryland as well as the District.

But the report suggests that the PSC and the legislature work together to partially re-regulate by shifting future power plants to the state, which would set prices. Maryland's still-regulated utilities could be required to build new plants or enter contracts for regulated electricity, it says. The commission said it plans to study those options next year.

The report's release came as the commission prepares to review the pending sale of Constellation Energy, the Baltimore-based parent of Baltimore Gas and Electric, to MidAmerican Energy Holdings. Another company, Electricite de France, which is a partial owner of Constellation, has made an alternative bid to acquire half of its nuclear business. BGE's service area includes Howard and Anne Arundel counties and a portion of Prince George's.

Deregulation opponents in the legislature have begun a campaign to urge the commission to make a full return to regulation a condition of state approval of the Constellation sale. Under their plan, Constellation's new owner would be required to sell its 10 Maryland plants back to BGE and regulators could impose lower rates.

The report released yesterday does not address the pending sale or analyze whether Constellation's power plants should be sold back to the state.

Sen. James C. Rosapepe (D-Prince George's), one of two senators leading the charge to use the sale review as a negotiating strategy, called the report "potentially very good news for Maryland ratepayers."

"Its objections to buying back the plants don't apply to Constellation Energy," Rosapepe said. He called the commission's objections to reacquiring the plants previously owned by Pepco "mostly tautological, irrelevant pieces of mumbo jumbo."

Maryland regulators will rule on the sale by April 15.

Constellation spokesman Robert Gould said in a statement that the company "looks forward to reviewing the report." A spokesman for Pepco said the utility is studying the report.