State urged to limit BG&E's retailing operations People's Counsel, two business groups also seek return of alleged subsidy

November 23, 1993|By Ross Hetrick | Ross Hetrick,Staff Writer

Sharpening the controversy over whether the Baltimore Gas and Electric Co. is subsidizing its merchandise stores with ratepayers' money, the Maryland People's Counsel and two business coalitions asked the Public Service Commission yesterday to restrict BG&E's non-utility operations and take steps to return the alleged subsidy to ratepayers.

"The purpose is to make the public whole for this inappropriate charge," said People's Counsel John M. Glynn, the state official who represents ratepayers before the Public Service Commission (PSC). "This is to preserve the status quo until these issues are resolved."

But BG&E, departing from its typically staid responses, reacted force fully, accusing its opponents of trying to limit competition and hurt Maryland consumers.

"We're tired of being portrayed as the bullies," said BG&E spokesman Arthur Slusark. "We feel the real issue is the anti-competitive position being pushed. . . . They want to limit the choices of Maryland consumers and force us out of a market that we are legitimately competing in."

Mr. Glynn has asked the PSC to require BG&E to keep records of merchandise expenses allegedly subsidized by ratepayers for use in future rate adjustments. This could amount to least $555,000 a year, he said. That would amount to about 2 cents

per month for the average ratepayer, according to BG&E.

Mr. Glynn also asked the PSC to bar BG&E from expanding its merchandise and service business, which includes a repair service and retail stores, without permission from regulators. BG&E, which has sold appliances since 1904, operates 11 stores that carry products ranging from washing machines to video games.

In a separate and more far-reaching motion, two business coalitions have asked for an immediate refund to ratepayers of $1.1 million, plus interest, to cover the alleged subsidy in 1992 and this year.

The two groups -- the Maryland Alliance for Fair Competition and the Small Business Coalition for Fair Utility Practices -- also want rates adjusted to eliminate the alleged subsidy.

The two groups also asked that the PSC bar BG&E from engaging in any non-utility work because, they charged, it was not authorized by the company's charter or Public Service Commission Law.

This could potentially affect operations that generate more than $127 million in revenue and range from businesses involved in nursing homes and real estate projects to kitchen remodeling.

However, Mr. Glynn was doubtful the PSC would take such a drastic action.

"It would certainly solve the problem, but it would be a hard pill for the commission to swallow after allowing them to engage in those businesses for so many years," he said.

The two motions were sparked by a study released in October by the national accounting firm of Ernst & Young. That study found that BG&E's regulated business -- which is supported by ratepayers -- provided a net $555,000 worth of services to BG&E nonregulated merchandise operation.

The Ernst & Young report, which was paid for by BG&E, was ordered by the PSC in response to arguments by the Maryland Alliance in a rate case earlier this year.

Mr. Slusark said the alliance took the offense after BG&E last year refused to leave the gas furnace servicing business, in which it has 160,000 servicing contracts.

The Ernst & Young study also found that BG&E's appliance servicing business -- included in the utility's regulated business for rate-making purposes -- contributed $8.2 million in profits to the company, equal to 44 cents a month to the typical ratepayer.

The utility has argued that those profits offset the $555,000 support that the regulated business gave the merchandise operation.

The study prompted the PSC to call for hearings on the extent to which BG&E's regulated business was subsidizing unregulated operations.

A pre-hearing conference on the case is scheduled for tomorrow.

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