Maryland electric utility companies' monopoly on local power plants might be coming to an end.
Following a trend that is gaining momentum nationwide, Baltimore Gas & Electric Co. said yesterday that it had signed a letter of intent to buy electricity from a plant that will be built and operated by an unregulated profit-making company.
The agreement calls for Arlington, Va.-based AES Corp. to build and run a coal-fired generating station in Baltimore County or Harford County this decade. BG&E will then buy the power from AES and pass along its costs to customers.
AES' proposal also calls for a plant that will produce and sell steam. AES spokesman Ned Hall said the company hasn't picked a site or a steam customer yet.
Though AES expects to make money on the deal, BG&E won't make a profit on the transaction, said utility spokesman Arthur Slusark. State regulators allow utilities to pass through only their costs on such purchased-power deals.
Mr. Slusark said BG&E doesn't want to follow the traditional pattern of building a plant itself, then charging the costs plus a little profit to customers, because the company doesn't want to take the risk of making a new capital investment.
BG&E signed the agreement with AES at a time when the Baltimore utility is fighting a regulatory battle against another independent power producer that wants to force BG&E to sign a similar agreement.
State regulators this month are collecting testimony on charges leveled by Houston-based Cogen Technologies that BG&E is ignoring their co-generation proposal in favor of a BG&E plan to build additional generators at Perryman. BG&E has said Cogen's plan is too expensive and too far away from the Harford County residents the utility is trying to serve.
Though similar agreements for independent power projects have fallen through in Maryland, industry experts say the trend away from utility-built power plants is working its way across the country, and might eventually mean utility companies will give up on power production themselves.
About 6 percent of the nation's energy supply is generated by independent companies, double the share the independents had five years ago, according to the industry trade group National Independent Energy Producers. And that share will continue to soar, since half the power plants that have come on line in the past two years have belonged to independents, said NIEP spokeswoman Nancy Sutley.
Ms. Sutley said companies such as AES are prospering because federal laws require utility companies to buy electricity from co-generation plants when the independent companies charge less for their energy than the utility would charge for similar new production.
She said co-generated energy costs less than power produced by utility companies because the competitive companies "have a lot more incentive to negotiate discounts with electrical equipment suppliers, since they don't get to just pass through their costs."
Ms. Sutley, the policy director of the NIEP, said she expects utility companies to move out of the power generation business and maintain a monopoly only on distribution lines.
Potomac Electric Power Co., the Washington-based utility that also serves Prince George's and Montgomery counties, recently announced that it would buy power from a plant to be built in Prince George's by another independent producer.