- The Washington Times - Wednesday, May 31, 2006

With 30 days to go, Baltimore Gas and Electric Co. customers still have no idea how much, or if, their electricity bills will rise July 1.

On Tuesday, Baltimore City Circuit Court Judge Albert J. Matricciani Jr. rejected a plan that would have spread a 72 percent rate increase for 1.2 million Baltimore-area residential customers over an 18-month period, beginning with a 19 percent increase July 1.

Judge Matricciani sent the case back to the state utility regulator, the Public Service Commission (PSC), which he ordered to draft another plan after holding a new hearing on the matter.

Both the PSC and BGE parent company Constellation Energy Group Inc. say they are reviewing the decision. Neither has ruled out legal action.

“The fact is that the cost of electricity will be 72 percent higher on July 1,” Robert Gould, spokesman for the Baltimore power company, said yesterday. “Somebody has to pay for that. That’s not in dispute. The question is, how are the customers impacted?”

The judge ordered the PSC to examine additional factors in a hearing that would allow cross-examination of witnesses, including whether the 72 percent increase is justified and whether potential cost savings from a proposed Constellation acquisition by a Florida utility owner could help with rate relief.

Because caps on BGE rates are set to expire July 1 and a hearing could last longer than a month, Judge Matricciani gave the PSC two options for addressing looming rate increases. The PSC could:

• Extend the current caps, which froze BGE rates at below-market levels since 1999;

• Or implement the agency’s rate-stabilization plan, which would cap the increase at 21 percent for the first eight months and spread the additional amount over 16 months. Those who phased in the increase would be charged 5 percent interest on the deferred amount. Customers would have the choice of paying the 72 percent increase upfront. If the PSC approved a new plan, any additional cost savings would be retroactively applied to customers’ bills.

Or the PSC could appeal Tuesday’s order.

“The commission is at this point reviewing our options to determine what the next step will be. We haven’t made a decision,” said spokeswoman Christine Nizer, adding that the agency recognizes the time constraints.

The lawsuit was brought by Baltimore Mayor Martin O’Malley, a Democrat running for governor.

William A. Mogel, vice chairman of the utility practice at the D.C. office of law firm Saul Ewing, called the court ruling “extraordinary.”

“The court inserted itself. Under all rules of administrative procedure, a court usually has to wait until after the agency has completed its final action,” Mr. Mogel said, referring to the agency’s pending hearing on the proposed Constellation acquisition by FPL Group.

“I think [Judge Matricciani] has done the right thing by not deciding on the merits, but I think he probably usurped the jurisdiction.”

Richard A. Booth, a University of Maryland School of Law professor who specializes in merger law and regulatory issues, said there is nothing to prevent another lawsuit challenging a new phase-in plan.

“You can’t stop people from suing, but as long as there aren’t back-room deals going on and as long as the agency does its job, they can make whatever decision they want as long as it’s got some rational basis. It’s highly unlikely that anybody would win after well-run hearings,” Mr. Booth said.

The 19 percent phase-in plan rejected in Tuesday’s ruling was brokered by Gov. Robert L. Ehrlich, a Republican seeking re-election.

The 72 percent increase was approved earlier this year by the PSC with rate increases for other utilities following a market-based energy auction.

Potomac Electric Power Co.’s 39 percent increase starts today. The utility, which serves Montgomery and Prince George’s counties, said 9,301, or 1.98 percent, of its eligible Maryland customers signed up for a phase-in plan taking effect today that would spread out the rate increases over 30 months.

Over the past six years, the cost of electricity — fueled by oil, natural gas and coal — has climbed considerably.

“If we held the auction again today, frankly, prices could be higher,” said Ms. Nizer of the PSC, noting that the energy contracts are already in place. “They are reflective of market conditions.”

Constellation earlier this week said the company’s acquisition has been put on hold amid the controversy. The Ehrlich plan included a pledge from the company to provide acquisition-related savings of $60 million a year for 10 years for consumer-rate relief.

The agreement between Constellation and FPL Group includes breakup fees of $650 million to Constellation if FPL calls off the deal, and $425 million to FPL if Constellation ends it.

Shares of Constellation closed at $51.70 yesterday on the New York Stock Exchange, up 6 cents from $51.64 Tuesday, when prices fell 53 cents from the previous day’s close.

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