Residential customers of Baltimore Gas and Electric Co. will see a 6.5 percent rate reduction next year as part of the statewide move to deregulate the electric utility industry, according to a settlement filed by the company yesterday with Maryland regulators.

Some of the rate reduction will be offset by charges to residential customers to cover the transition costs of deregulation, but BGE Vice President Robert S. Fleishman said residential customers will pay, on average, $65 to $70 a year less for electricity over the next six years.

"Nearly two-thirds of all Maryland residents said they want the freedom to choose where they buy electricity. This propsed settlement should come as welcome news that we're on course to bring customer choice to Maryland," Fleishman said.

The settlement was negotiated with Maryland Public Service Commission staff, the Maryland people's counsel and some large electrical users, such as Johns Hopkins University. The Public Service Commission must vote on the settlement.

"We have avoided a costly litigation process and were successful in reaching a compromise which will guarantee that the little guy actually receives some tangible benefits from electric utility deregulation," said People's Counsel Michael J. Travieso.

Beginning tomorrow, deregulation begins in Maryland. Electric customers eventually will be able to select their power companies much as they do their long distance telephone companies.

In opening the electrical market to competition, Maryland lawmakers mandated that residential customers must receive rate reductions of 3 to 7.5 percent for four years begining July 1, 2000.

But consumer advocates are concerned that large industries and other big consumers of electricity will receive the greater savings. Daniel Pontious, executive director of the Maryland Public Interest Research Group, said he expected that most electricity suppliers would seek industrial and business consumers and that residential buyers would see less benefit.

That also was a concern of lawmakers, who mandated the four-year rate reduction.

Before that legislation, Potomac Electric Power Co. announced it was freezing electric rates for three years beginning next year while it begins selling its generating plants--part of the process of becoming a company that delivers electricity produced by others.

In a sign of the coming competition in the new era of deregulation, the Mid-Atlantic Power Supply Association, which represents power companies that want to do business in Maryland, complained that yesterday's settlement would not produce the savings it purports because of other costs that BGE hopes to pass on to consumers.