- The Washington Times - Wednesday, July 12, 2006

ANNAPOLIS — Gov. Robert L. Ehrlich Jr. yesterday chastised the Democrat-controlled General Assembly for enacting an energy rate reduction plan that has prompted Wall Street to downgrade Maryland’s utilities to near-junk status.

“When you have a legislature willing to pre-empt the regulatory regime in such a wholesale manner, you have to expect that sort of downgrade,” said Mr. Ehrlich, a Republican seeking re-election.

He singled out for criticism state Senate President Thomas V. Mike Miller Jr., who pushed for the legislative takeover of the utility-regulating Public Service Commission (PSC) that Moody’s Investment Services cited as a chief reason for the downgrade.

“It’s a byproduct of Mike Miller’s folly,” the governor said. “It is very difficult to explain Mike Miller to Wall Street.”

Mr. Miller, Prince George’s County Democrat, dismissed Moody’s decision Tuesday to downgrade bond ratings for Baltimore Gas and Electric Co. (BGE), Delmarva Power and Potomac Electric Power Co. (Pepco).

“I think [Moody’s] better check their facts,” Mr. Miller told The Washington Times, declining to comment further.

A Miller aide said the Senate president stands by the Democrats’ energy plan, which lawmakers enacted last month by overturning Mr. Ehrlich’s veto.

Moody’s near-junk rating increases the utilities’ borrowing costs while the Democrats’ plan forces the power companies to finance higher energy costs that they cannot immediately pass on to customers.

Consumers eventually will have to pay for higher energy prices and higher debt interest.

The energy plan was intended to stave off a 72 percent rate increase by BGE that was scheduled to take effect when the rate caps set in 1999 expired this month.

The plan extends a cap on BGE’s rates for 11 months after a 15 percent increase this month and automatically enrolls the utility’s 1.1 million residential customers.

It allows the PSC to devise another rate mitigation in June to stave off higher market prices. Customers could choose whether to “opt in” to that plan.

Meanwhile, the plan allows BGE rates to reach market level in January 2008.

Under the plan, BGE customers eventually will pay higher market prices for electricity while making payments for deferred charges in $2.19 monthly installments for 10 years — a total of $263 per customer.

The $2.83 in monthly fees currently in BGE statements would be cut to offset the debt and interest payments.

Baltimore Mayor Martin O’Malley, a Democrat running for governor, did not waver in his support of the legislature’s plan.

“The mayor supports replacing Governor Ehrlich’s failed Public Service Commission with independent and competent regulators,” O’Malley campaign manager Rick Abbruzzese said. “The mayor supports rate relief.”

Last week, the Maryland Court of Appeals halted the firing of the PSC while the judges decide whether lawmakers overstepped their authority by dismissing executive appointees.

Mr. Ehrlich said the court ruling would help stabilize Maryland’s utility market and, he hopes, restore the power companies’ credit.

“That decision right now is in the hands of the court of appeals and I hope the court renders the appropriate and correct decision,” he said.

Moody’s said the dismantling of the commission threatens all Maryland power companies dealing with rising energy prices.

“Rate relief will be less constructive in the currently contentious environment even if the attempt to replace the commission does not succeed,” Moody’s said, adding that “the outcome of next year’s power supply auction could be similarly controversial if wholesale power prices increase.”

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