For the first time in its history, Baltimore Gas and Electric Co. has been ordered by state regulators to create a competitive bidding process for selecting a company to supply electricity to Maryland customers.
The company that sparked the case, Cogen Technologies Inc. of Houston, called the decision a disappointment and said it expects BG&E to "stack the deck" against non-utility power producers.
The ruling issued yesterday by the Public Service Commission stems from a case in which Cogen was trying to force BG&E to agree to buy electricity from a power station Cogen proposed to build in South Baltimore.
The Houston-based company argued that it could provide the electricity less expensively than BG&E, which planned to build combustion turbine generators at its Perryman site in Harford County.
But instead of picking BG&E or Cogen to build the generating plant, the commission threw open the process to all interested parties and told BG&E to select the lowest-priced proposal. BG&E has until July 15 to submit a draft of its bid solicitation proposal to the commission.
BG&E will be able to submit a bid before the proposal moves to the PSC for final approval, said BG&E spokesman Arthur J. Slusark.
The PSC, which regulates all utility companies in Maryland, granted BG&E permission to begin construction of a generating unit at the Perryman site, but BG&E said it would wait for the results of the competitive bidding before starting construction.
"A competitive bidding program would be more rational, efficient and fair than BG&E's current approach to non-utility generator developers," the PSC decision said.
The order was signed by commissioners Frank O. Heintz, Claude M. Ligon and Lilo K. Schifter. Two seats on the five-person commission are vacant.
Until now, BG&E had built its own plants or negotiated privately with other companies to supply electricity to its system. But with the commission's order yesterday, the process will be more open and probably will result in BG&E's building fewer plants.
"The whole atmosphere has changed," Mr. Slusark said. "I'm encouraged that they are moving toward a more rational bidding process," said Maryland's People's Counsel John M. Glynn, the state official who represents ratepayers. He said BG&E could continue to build plants if it can prove they are efficient.
But the process has to guard against problems associated with government bidding, in which the cost sometimes overrides the quality of a product, Mr. Glynn said. "That is a legitimate concern," he said.
"It was a disappointment to me," Robert C. McNair, chairman and president of Cogen, said of the ruling. The PSC "anointed the fox to be the guardian of the chicken house," he said, noting that BG&E would set the conditions of the bidding.
For more than three years, Cogen has been battling BG&E for a chance to build a 500-megawatt generating plant in South Baltimore and sell electricity to the utility. Mr. McNair said Cogen has spent more than $4 million in engineering, legal and other costs in the effort.
BG&E had proposed building gas-fired generators in Harford County rather than buying power from Cogen. But Cogen challenged that proposal, citing a federal law that requires a utility to buy power if it can do so at lower cost than generating the power itself.
Mr. McNair was critical of other independent power producers that had asked for competitive bidding. He said those companies could have submitted proposals at the earlier hearing. "It has been open to everybody and anybody who wanted to submit a proposal," he said.
However, a spokesman for one of the companies that asked for competitive bidding said his company decided not to submit a proposal earlier because it did not want to be an adversary of BG&E.
"The view was that the selection and evaluation should be done in review by the utility and not in the context of litigation," said Barry J. Sheingold, a consultant to Enron Power Corp., a Houston based energy company.
Mission Energy Co. of Irvine, Calif., was another of the independent power companies that intervened in the appeal. Spokesmen for Mission and Enron said their companies probably would participate in planned competitive bid.
The commission's action was the result of an appeal by BG&E of a Jan. 22 order by PSC hearing examiner Daniel P. Gahagan, who had ordered the company to give Cogen another chance to submit a proposal to supply power for less than the Perryman project. BG&E appealed the decision, contending that it was unfair to give Cogen an exclusive right to bid on the project.