- The Washington Times - Wednesday, March 22, 2006

ANNAPOLIS — Gov. Robert L. Ehrlich Jr. and legislative leaders say they are taking a “cautious” look at a Baltimore Gas & Electric Co. (BGE) proposal to phase in a 72 percent energy rate increase and charge customers $4.40 per month for the deferred payments.

“The fact is there is no quick fix to this problem,” Shareese N. DeLeaver, a spokeswoman for the Republican governor, said yesterday. “Electric rates will go up. The question is how much and over what period of time.”

An administration official said Mr. Ehrlich is approaching the power company’s offer with “caution,” but the negotiations are moving forward.

The governor’s top policy advisers continued talks with BGE executives yesterday. The advisers also met with House Speaker Michael E. Busch, Anne Arundel County Democrat, and other House leaders.

The power company has proposed gradually raising rates over eight years, with a 36 percent increase over the first 15 months followed by a 6 percent annual increase until 2014, said Delegate Derek E. Davis, Prince George’s County Democrat and chairman of the economic matters committee.

This summer, the average BGE electric bill would increase by about 13 percent, from $81.65 a month to $92.60, Mr. Davis said. A year later, the average bill will have increased another 23 percent, to about $111.

The full 72 percent increase would have raised the average electric bill from $81.65 to $140.50.

Customers also would pay a monthly charge of $4.40 for the next eight years — a total of about $422 — to pay for the loan BGE would need to cover the cost of the deferred rate increase, Mr. Davis said.

“We do have to get our arms around the fact that energy prices are rising,” he said. “[But] we have to make sure that whatever plan goes forward is treating customers fairly and the increases are manageable and affordable.”

Mr. Davis said the other delegates on the House negotiating team are taking a close look at the BGE offer.

Staving off the “rate shocks” for BGE’s 1.2 million customers has become the hottest issue in this election year in which Mr. Ehrlich is seeking re-election and every seat in the General Assembly is up for grabs.

The increases are partly the result of the 1999 deregulation plan approved by the Democratic-controlled General Assembly and signed by Gov. Parris N. Glendening, a Democrat.

The plan included rate caps that kept electric bills artificially low for the past six years and discouraged competition from entering Maryland’s partially deregulated utility market.

The caps expire in July, when rates are set to increase 72 percent to market levels for BGE customers. Rates also are increasing 39 percent for Potomac Electric Power Co. and 35 percent for Delmarva Power.

Utility executives warn that continued price controls could bankrupt Maryland power companies and cause power shortages like those in California in 2000.

House and Senate leaders at the forefront of the negotiations say the talks are driven by lawmakers’ threats to stop Florida Power & Light from purchasing BGE’s parent company, Constellation Energy Group, for an estimated $11 billion.

They say BGE executives also are pressured by legislation that would return Maryland to a fully regulated public utility system and legislation that would recoup the $500 million ratepayer-financed subsidy the utility relievedi as part of a 1999 deregulation deal.

“They know the danger of a couple pieces of legislation that are already out there,” said Sen. Thomas M. Middleton, Charles County Democrat and chairman of the Finance Committee that is considering the bills. “Because of that I believe they are dealing with us in good faith.”

Constellation Energy spokesman Robert L. Gould declined to discuss negotiations with state officials, but he said the merger should remain a separate issue.

“It is unfortunate that the two are being linked,” he said. “It is unfortunate that the benefits of the merger are being lost in the political debate.”

He said the merger would produce more than $200 million in cost savings for the new company, savings that could be passed on to consumers in lower rates.

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