- The Washington Times - Thursday, March 9, 2006

Just about every stakeholder in Maryland agrees that expected soaring electricity rates are a problem but when it comes to what can — or should — be done, utilities and state lawmakers are at odds.

The central issue turns not on if, but when, residential consumers will pay — and how much.

Baltimore Gas and Electric Co. (BGE), which serves 1.2 million customers in Maryland, says it opposes General Assembly proposals to extend rate caps, which are set to expire June 30, or gradually phase in the transition to market rates.

“At a time you have a situation where you’re going to either legislate or regulate in the marketplace, that never has a good outcome. Certainly that would be the case here,” BGE spokesman Rob Gould said yesterday.

Deferred payment plans, which would limit the initial amount the utilities could raise rates but would allow them to later recoup costs through additional charges, could damage the company because it would be forced to borrow the difference and could hurt its bond ratings, Mr. Gould said.

“These proposals are simply bad policy, particularly as it relates to the impact it would have on the company and our customers in the long run,” he said.

Lawmakers quickly responded after the Public Service Commission, the state agency that oversees utilities, said Tuesday that electricity rates would climb between 35 percent and 72 percent based on the results of a bidding process through which BGE, Potomac Electric Power Co. (Pepco) and Delmarva Power purchase electricity on the wholesale market.

The Senate and House of Delegates have scheduled hearings on proposed legislation for Tuesday.

Like BGE, Pepco, which has about 500,000 customers in Maryland, cites higher market prices and increased demand for natural gas, which fuels many power plants, as the main factor behind the rate increases. The company remains “open” to legislative proposals, but also worries that deferred payment programs could hurt it, said regional President Thomas H. Graham.

“It’s a people business, it’s a people issue and we are very sympathetic to that,” Mr. Graham said. “But we also have to consider the financial implications.”

Mr. Graham is asking lawmakers to change the way that utilities buy electricity, suggesting that if they were allowed to purchase smaller amounts more often, companies could save money when prices are high.

Consumer groups acknowledge that customers will have to face higher electricity rates.

“Consumers can do two things. One, they need to use less electricity — turn down their thermostats, make sure their homes are properly insulated, turn off the lights. They also need to contact their legislators and tell them to fix the mess they made,” said Charles A. Acquard, executive director of the National Association of State Utility Advocates in Silver Spring, referring to the 1999 deregulation of the state’s electric utilities.

To help in the long run, Mr. Acquard said he supports extending the length of electricity supply contracts — currently regulated by the Public Service Commission in staggered intervals of one, two and three years — to five or 10 years as a way to shield companies from ebbs and flows on the wholesale market.

Mr. Acquard said, utilities should do all they can in the short run to protect consumers.

“I think BGE has the obligation to try to ease the pain as much as possible, whether it’s a phase-in plan or it’s continuing the cap,” he said.

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