Leaders warn against rushing to cap power rates

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ANNAPOLIS -- Leaders of both parties are urging caution as the Democrat-controlled legislature and the Republican administration scramble to block a massive increase in electric bills, now that rate caps are expiring.

"This is a creation of the legislature, and the legislature ought to be careful not to make the same mistake twice," said House Minority Whip Anthony J. O'Donnell, Southern Maryland Republican. "We ought to be very cautious when we talk about further caps."

House Majority Leader Kumar P. Barve, Montgomery County Democrat, suggested that lawmakers take a wider view of world energy markets before rushing to cap rates.

"I got complaints two years ago," said Mr. Barve, who has seen Potomac Electric Power Co. (Pepco) raise rates in his county about 21 percent since 1999. "The fact is the price of fuel is going up."

He cited Middle East turmoil and rising energy demand in emerging Third World markets such as China and India as factors contributing to higher prices worldwide.

Several bills have been introduced to prevent or postpone Maryland's higher energy rates, including a plan to return to a public utility system, since the increases were announced March 7.

Residential customers will see their average electric bill increase 72 percent for Baltimore Gas and Electric Co. (BGE), 39 percent for Pepco and 35 percent for Delmarva Power. The new rates take effect in July.

The Public Service Commission, the state's utility regulator, had capped the rates for six years.

Staving off "rate shocks" has become the hottest issue in this election year in which Gov. Robert L. Ehrlich Jr., a Republican, is seeking re-election and every seat in the General Assembly is up for grabs.

The increases are partly the result of a 1999 utility-deregulation plan passed by the Democrat-controlled legislature and signed by Gov. Parris N. Glendening, a Democrat.

The plan included rate caps that kept electric bills artificially low for the past six year and discouraged competition from entering Maryland's partially deregulated utility market.

Utility executives warn that price controls could bankrupt Maryland power companies and cause power shortages like those in California in 2000.

Mr. Ehrlich has pledged to fix the pending crisis with a plan to stall rate increases.

The Public Service Commission has proposed allowing customers to pay a lower rate increase -- a 21 percent rise a year -- but also pay 5 percent interest on the deferred charges.

"The 72-percent [increase] will not stand," Mr. Ehrlich said. "The fact is, the model instituted [in 1999] was flawed. We will deal with the here and now, and we will make progress on this issue."

The governor has held a series of meetings with top aides and commission members to address the issue. He met Thursday with House Speaker Michael E. Busch, Anne Arundel Democrat.

Lawmakers have introduced an array of fixes, including plans to delay the increases until September 2007, then phase in market rates; limit rate increases to 5 percent or 20 percent a year; and to freeze rates while the commission develops a new price-mitigation plan.

Another proposal would stop Florida Power & Light from purchasing Constellation Energy Group, the parent company of BGE. Lawmakers say their threat of blocking the estimated $11 billion deal could give the state leverage in negotiating small rate increases.

"We have to take the needs of everyday Marylanders into account," Mr. O'Donnell said. "But caution is the linchpin of any action in this area."