Two Maryland legislators are proposing that the sale of the state’s largest power company be contingent upon a return to regulation, arguing utility deregulation over the past 12 years has resulted in excessive rate increases.
“Deregulation has failed,” said Sen. James C. Rosapepe, Prince George’s Democrat. “We’re not going to give up on re-regulation until it is done.”
Mr. Rosapepe is joined by Sen. E.J. Pipkin, Cecil Republican, in the effort to get the Maryland Public Service Commission (PSC) to make regulation a requirement in its approval of a deal by Chicago-based Exelon Corporation for $7.9 billion to buy Constellation Energy, which owns Baltimore Gas and Electric (BGE).
The senators hope government oversight for BGE, which serves 1.2 million customers, will pave the way for oversight of other companies operating in Maryland, including Pepco.
The General Assembly passed legislation in 1999 ending regulation of state utility providers, approving the measure with heavy bipartisan support.
Supporters predicted that allowing consumers to choose utility companies would generate competition and innovation among providers, and drive down prices.
Providers were required to offer capped rates for the first several years before switching to market rates.
However, when BGE was scheduled to switch in 2006, the utility sought an average 72-percent rate hike for its customers, blaming the increase on rising fuel and natural gas prices and sparking outrage among customers.
State officials negotiated a smaller rate increase, but many people said the ordeal proved deregulation in Maryland was a failure.
Mr. Rosapepe said the competition among providers has not materialized due in part to reluctance to build new power plants during difficult economic times. He also said state regulators should be able to command new construction while guaranteeing long-term contracts for providers.
Mr. Pipkin said new plants are unlikely to be built unless the state regains authority to command their construction.
“At the end of the day, serving the retail customer is better left to the public utilities,” he said. “I’m for markets, but there is no market here.
He also said the proposed Constellation-Exelon merger demonstrates “there is virtually no competition at the wholesale level.”
Exelon officials have said their purchase will include $250 million in benefits for customers, including $100 rebates.
Another utility company, Florida-based FPL Group, attempted to buy Constellation for $12.5 billion in 2006, but abandoned the deal due to regulatory concerns in Maryland brought on by the BGE rate hike.
The Maryland Senate approved a bill in 2009 that would have re-regulated utilities, only to have it fail in the House.
Gov. Martin O’Malley, a Democrat, has long been supportive of re-regulation but has in recent years called on the Public Service Commission instead of legislators to get it done.
Public Service Commission officials on Wednesday declined to comment.
The House Economic Matters Committee resisted the 2009 bill due in part to members’ concerns that it would not have an immediate effect on prices and that deregulation would become more successful as more residents became aware of their energy choices.
Reaching an agreement with Exelon to re-regulate could prove difficult, as the company was directly critical of the 2009 re-regulation proposal, which it argued would lead to cost overruns on new plants.