- The Washington Times - Sunday, July 16, 2006

Bad ideas have consequences, as does bad legislation. Marylanders learned that lesson anew this week when the Wall Street investment giant Moody’s downgraded the state’s electric utilities’ ratings to just above junk-bond status because of the ill-conceived energy bill last month championed by state Democrats, particularly Senate President Mike Miller. The downgrade drives up financing costs for Pepco and Baltimore Gas & Electric. This raises energy prices and reminds everyone that politically convenient energy policies harm consumers in the long run.

If Democrats had been listening, they might have known. In mid-June, their caucus in the House of Delegates along with three Republicans passed a Senate-initiated plan, which, among other things, blocked a 72 percent hike in electricity rates, dumped the current members of the Public Service Commission and ordered the new commissioners to reduce costs. The commission, consisting mostly of Ehrlich administration appointees, became a politically convenient target for Democrats once it signaled acceptance of the hike. At the time, the bill was criticized for its likely anti-consumer consequences.

“The outcome could be the opposite of what is intended,” Paul Allen, senior vice president of Constellation Energy Group, parent company to BGE, predicted on the eve of passage. Republican Gov. Robert Ehrlich immediately criticized the plan. “It puts the company in jeopardy, and it puts the rate-payers in a worse place in the long run.” Others were more pungent. “I think when rate-payers open the box, they are going to find a lump of coal,” Republican Minority Leader J. Lowell Stoltzfus said.

They were all right. The coal showed up this week. Citing “the significant decline in the supportiveness of the regulatory environments for electric utilities in Maryland and Delaware, including the extraordinary vote by the Maryland legislature to remove the entire Maryland Public Service Commission,” Moody’s cut Pepco’s senior unsecured debt to the lowest investment-grade ranking, which is just above junk bonds, and also cut BGE’s ranking. It now costs significantly more to borrow money needed to finance state energy needs; the utilities’ long-term financial outlook is dimmer, too. Thanks a lot, Democrats.

Mr. Ehrlich is justifiably on the offensive. “When you have a legislature willing to preempt the regulatory regime in such a wholesale manner, you have to expect a downgrade,” he told The Washington Times. He singled out Mr. Miller for criticism. “It’s a by-product of Mike Miller’s folly,” he said. “It is very difficult to explain Mike Miller to Wall Street.”

State lawmakers should simply accept the fact that Maryland isn’t immune from rising world energy prices. Laws which ignore that fact and thumb noses at Wall Street can only harm their state.

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