- The Washington Times - Tuesday, June 13, 2006

ANNAPOLIS — Gov. Robert L. Ehrlich Jr. yesterday said he would not veto legislation that would fire governor-appointed utility regulators and postpone a massive rate increase by Baltimore Gas and Electric Co. (BGE), but he criticized the plan nonetheless.

“When you postpone reality, you compound the problem,” said Mr. Ehrlich, a Republican seeking re-election. “This hurts the consumer and puts the [power] company on the brink of bankruptcy.”

The Democrat-controlled General Assembly could vote on the bill as early as today in a special session.

Senate President Thomas V. Mike Miller Jr., Prince George’s County Democrat, and House Speaker Michael E. Busch, Anne Arundel County Democrat, wrote the legislation, which is expected to pass because their party enjoys a more than 2-to-1 majority in both chambers.

However, Mr. Miller predicted a challenging session today and pleaded for party unity.

“The speaker and I have joined hands and are united,” he told a joint hearing of the Senate Finance Committee and House Economic Matters Committee. “It is important that we set aside differences.”

The committees yesterday heard six hours of testimony from state officials and utility executives on the legislation, which would delay until June 2008 a 72 percent increase in BGE’s rates for its 1.1 million residential customers. The rate increase now is set to begin July 1.

The bill also would replace the utility-regulating Public Service Commission’s (PSC) five governor-appointed members with commissioners selected by legislative leaders.

Baltimore Mayor Martin O’Malley and Montgomery County Executive Douglas M. Duncan, both Democrats running for governor, appeared separately before the committees and lauded the bill.

But utility executives said the bill is too vague about their ability to recoup lost profits, which they said could reach $1 billion.

BGE President Kenneth W. DeFontes said his company’s credit rating could “decline beyond the point of being retrievable” if energy costs continue to rise while BGE charges below-market rates.

“We must absolutely change the bill to prevent this from happening,” said Mr. DeFontes, who also is vice president of BGE’s parent company, Constellation Energy Group.

Ehrlich administration officials said they were told to skip the hearing because legislative leaders didn’t invite them and had rebuffed the governor’s offers to help draft a new plan.

Many lawmakers were skeptical of statements by BGE executives.

“We’ve heard about the Wall Street balance sheet,” said Sen. E.J. Pipkin, Eastern Shore Republican, noting BGE’s power plants appreciated $1.6 billion since 1999. “But the reason we’re here is the consumer’s balance sheet.”

Warren G. Descheneaux, the Department of Legislative Service’s top policy analyst, said the bill will allow BGE rates to reach market levels in June 2008. However, the bill does not guarantee that 2008 rates will be significantly lower than the 72 percent increase set to take effect next month, he said.

The bill would cap BGE rates for 11 months after a 15 percent increase July 1, deferring about $573 million in charges and accruing $109 million in interest to cover the debt. Customers would pay about $2 more on their monthly bills for 10 years to pay off the roughly $683 million debt.

The rate increase has resulted, in part, from the 1999 deregulation measure enacted by the legislature and signed by Gov. Parris N. Glendening, a Democrat. The laws capped BGE rates below market levels for six years as energy prices increased.

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