- The Washington Times - Tuesday, March 14, 2006

ANNAPOLIS — Lawmakers yesterday moved closer to blocking a massive increase in electric bills, hearing testimony on more than a dozen bills that would sustain rate caps or phase in market prices.

“There is nothing wrong with going to market prices,” said Sen. E.J. Pipkin, Eastern Shore Republican and member of the Finance Committee that heard testimony on the bills. “The problem is you don’t have to hit people over the head with a 70 percent increase, so we are going to do something about it.”

Leaders from both parties are scrambling to address the projected increase before the General Assembly adjourns April 10.

The Public Service Commission, the state’s utility regulator, announced the increases March 7 after a competitive bidding process for electricity on the wholesale market.

Even as the Democratic-controlled Senate and House of Delegates held hearings yesterday, Gov. Robert L. Ehrlich Jr., a Republican, pressured the Public Service Commission to improve its plan to mitigate the rate shock to the 1.2 million customers of Baltimore Gas and Electric Co. (BGE). The Baltimore utility’s rates have been capped for six years.

Utility executives blamed the higher rates on skyrocketing energy costs from a combination of Middle East instability, damage from Hurricane Katrina and rising global demand.

The companies warned lawmakers that price controls could bankrupt Maryland power companies and cause power shortages like those in California in 2000.

“Efforts to set rates in other states have resulted in decidedly negative outcomes, and I would expect similar outcomes for BGE,” said Steve Fetter, an energy consultant for BGE.

Kenneth DeFontes Jr., president and chief executive officer of BGE, said a proposed 5-percent rate cap would cost the company $730 million in the first year and jeopardize the company’s credit rating.

“The people who lend us the money are going to ask us a simple question: Can you afford that?” Mr. DeFontes said.

However, the Senate committee signaled it would combine rate caps and deferred payment plans to forestall rate increases of 72 percent for BGE, 39 percent for Potomac Electric Power Co. (Pepco)• and 35 percent for Delmarva Power, which take effect this summer.

“We are probably going in that direction,” said Sen. Thomas M. Middleton, Charles County Democrat and Finance Committee chairman.

The bills include plans to delay the rate increase for BGE customers until September 2007 and then phase in market rates; limit rate increases to 5 percent or 20 percent a year; and to freeze rates while the Public Service Commission develops a new price-mitigation plan.

“A lot of bills were thrown together quickly without a lot of consideration,” said Sen. Edward J. Kasemeyer, Howard County Democrat who testified on his bill for a 20 percent cap. “I know that somewhere in there is a solution.”

Delegate Pat McDonough, Baltimore County Republican, whose plan would limit rate increases to 5 percent a year and defer the costs, faulted BGE and warned against a “potential economic catastrophe.”

BGE is “a monopoly, they’re unregulated and they’re unwashed,” Mr. McDonough said. “And our lives depend on them.”

Brad Heavner of the Maryland Public Interest Research Group pointed out that BGE and its parent company, Constellation Energy Group, had consistently made a profit with the rate caps and now would now make even more.

Florida utility FPL Group Inc. is purchasing Constellation Energy to create a massive energy provider on the East Coast.

“Start the process of re-regulating,” he said. “Deregulation has been a failure.”

“I’m not sure how we can fix the market,” said Delegate Brian R. Moe, Prince George’s County Democrat. “That has not happened to date. Where’s the competition at?”

Harry Warren, president of Washington Gas Energy Services, pointed out that his company made a competitive offer to BGE residential customers within 24 hours of the rate increase announcement last week.

“It is clear that years of artificial caps stopped competition,” he said.

Pepco yesterday issued a proposal that would allow its customers to defer rate increases exceeding 21 percent until February 2007, at which point they would pay market prices. The plan is similar to one issued last week by the Public Service Commission for BGE customers that would spread rate increases over a two-year period.

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