- The Washington Times - Monday, April 3, 2006

Regulatory lawyers say the Maryland General Assembly’s plan to halt a multibillion-dollar utility merger is illegal, even if the lawmakers’ goal of slowing the increase in electric bills is to help consumers.

“It smacks of ‘ex post facto’ regulation,” said Richard A. Booth, a University of Maryland School of Law professor who specializes in merger law and other regulatory issues.

The Latin term describes laws that are applied retroactively and penalize action that was legal when originally taken, in this case adding restrictions to a business transaction initiated under existing rules.

The legislature also might be breaking the law by usurping authority of the Maryland Public Service Commission, an independent agency that regulates utilities, said William A. Mogel, chairman of the utility practice at Saul Ewing’s D.C. law offices.

“It is probably a violation of law,” he said. “The legislature is not supposed to interfere in the agency.”

However, the Maryland Attorney General’s Office has issued opinions vouching for the legality of the legislature’s actions.

“The state has an interest in regulating utility rates and making sure consumers do not pay exorbitant utility rates,” said Robert Zarnoch, assistant attorney general and the General Assembly’s chief counsel. “It doesn’t mean we won’t be in court.”

The Democrat-controlled General Assembly last week sent Gov. Robert L. Ehrlich Jr. a bill that would block Constellation Energy Group’s $11 billion merger with Florida Light & Power Co., appoint a special counsel to investigate the merger and give the legislature final say in approving the deal.

Lawmakers say it gives them leverage to force Baltimore Gas and Electric Co. (BGE), a subsidiary of Constellation Energy, to stall a 72 percent increase in electric rates scheduled to take effect July 1.

Power company executives, who continue to negotiate a rate-reduction plan with Mr. Ehrlich and legislative leaders, have vowed to sue if this law or others aimed at the merger are enacted.

Mr. Ehrlich, a Republican, has not said he would veto the bill, but has expressed strong opposition to it.

His veto would have to come before the legislature adjourns April 10 and likely would be overturned.

The General Assembly also sent Mr. Ehrlich a bill that would replace the governor-appointed commission with one appointed mostly by legislative leaders and a bill that would force BGE to lower rates with the $528 million it collected as part of the 1999 utility-deregulation deal.

Republican leaders have called the commission restructuring a Democratic “power grab.”

Mr. Ehrlich likely will veto the measure, but Democrats have enough votes for an override.

However, the governor has voiced support for using the $528 million to slow rate increases.

Since the increases were announced March 7, staving off “rate shocks” has become the hottest issue in a year in which Mr. Ehrlich is seeking re-election and every General Assembly seat is open in November.

BGE is not the only company set to increase rates in July. Potomac Electric Power Co.’s rates will increase 39 percent and Delmarva Power’s will go up 35 percent.

BGE’s rate increase has resulted, in part, from deregulation legislation in 1999 that capped energy rates at artificially low levels for six years.

The deregulation bill was approved by the legislature and signed into law by Gov. Parris N. Glendening, the Democrat who appointed the commission panel that crafted the legislation.

Skyrocketing energy prices also are blamed for increasing rates for all three power companies.

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