Correction to This Article
This article mischaracterized a bill sponsored by Maryland Sens. E.J. Pipkin (R-Queen Anne's) and James C. Rosapepe (D-Prince George's). The bill would allow the Maryland Public Service Commission to require utilities to buy back generating plants.

Md. Governor O'Malley Wants to Force Utilities to Build Plants to Lower Electric Bills

Gov. Martin O'Malley's legislation would partly restore regulation.
Gov. Martin O'Malley's legislation would partly restore regulation. (By Marvin Joseph -- The Washington Post)
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By Lisa Rein
Washington Post Staff Writer
Tuesday, March 3, 2009

In a push to eventually reduce energy bills and meet Maryland's growing demand for power, Gov. Martin O'Malley announced a plan yesterday that would force utilities to build power plants in the state.

The legislation, which the governor will introduce today, would partially return Maryland's energy markets to regulation, following what O'Malley (D) called a "dysfunctional" policy of competitive markets over the past decade.

He acknowledged that it could be years before gas and electric customers see relief from the high bills that have dogged his administration and risen still higher this winter. But he said that by giving the Public Service Commission the authority to order utility companies to build power plants, the state could eventually bring down rates and avoid the rolling blackouts that experts have predicted could happen as soon as 2011.

"Deregulation has had a dramatic, adverse, painful effect on electricity markets," the governor said, accusing the energy industry of "not wanting consumers to have lower rates so they can maximize profits for their companies."

Deregulation, adopted in the late 1990s, promised to lower rates by introducing competition. But the policy not only failed to stimulate new investment in power plants as demand rose, it drove up bills when rate caps were lifted, starting in 2004. A fully competitive market never developed. The District also deregulated; Virginia returned to a new form of regulation in 2007.

Continuing anger over high bills has led to several proposals in the General Assembly this year to return to regulated markets. Under O'Malley's plan, the Public Service Commission could determine when a plant is needed and direct utility companies to build it. The new electricity supplies would be regulated, with a guaranteed rate of return to the plant owner but a lower rate for consumers than they pay in today's system.

The state could determine whether a regulated plan is "in the public interest." A third nuclear reactor that Constellation Energy Group plans to build at its Calvert Cliffs plant and a natural gas plant planned for Charles County, for example, would be exempt from the new rules, because customers would have to foot the bill to build them, O'Malley said.

The governor's plan to intervene in Maryland's energy markets was denounced by a group of companies that have been trying with limited success to compete in the deregulated environment.

Competition has been brisk for commercial and industrial customers, whose rates were not capped. Two companies, Washington Gas Energy Services and Clean Currents, have carved out about 5 percent of the residential market, offering prices 10 to 20 percent lower than those of the traditional utilities. It is unclear whether the legislation would force out those and other potential suppliers.

"If they shut down the competitive market, in the next couple of years we feel certain that prices are going to rise," said Bill Kress, who represents the 11 members of the Retail Energy Supply Association.

Constellation Energy President Mayo Shattuck III said in a statement that the company is "intensely focused on all ideas that can help customers manage their bill, especially during tough economic times."

O'Malley said it is not realistic to fully undo the 1999 deregulation law, which allowed the utilities to sell their generating plants to wholesale energy companies.

A bill sponsored by Sens. E.J. Pipkin (R-Queen Anne's) and James C. Rosapepe (D-Prince George's) would require the state eventually to buy them back, effectively returning to a fully regulated market. But O'Malley said the move would be far too expensive.

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