Ruling is expected by end of year on disputed expansion

BG&E'S NONUTILITY BUSINESS

November 25, 1993|By Ross Hetrick | Ross Hetrick,Staff Writer

A Public Service Commission hearing examiner said yesterday that he would decide by the end of the year whether Baltimore Gas and Electric Co. should be allowed to expand its nonutility business during the next seven months.

The hearing examiner, Joel M. Bright, made his decision during a conference to investigate whether BG&E has improperly subsidized some of its nonutility businesses with ratepayers money.

Two business coalitions and the Maryland People's Counsel, the official that represents ratepayers, had asked that BG&E be kept from expanding its nonutility operation because of alleged misallocation of ratepayer's money.

"This is to prevent the problem before it gets started," said Kirsten A. Burger, assistant People's Counsel.

But BG&E countered that Mr. Bright does not have the power to restrict its expansion.

"That is not an issue as far as we are concerned," said BG&E spokesman Arthur Slusark. "We are not required by the Public Service Commission [PSC] to get authority to either expand the current business or to enter a new business."

BG&E plans to launch a marketing effort within a month to promote its business of repairing and providing service agreements for heat pumps and central air conditioning systems. BG&E began that business earlier this year.

Mr. Slusark said the service has been requested by BB&E customers and that more than 100 contractors have expressed interest in working for the utility in the expanded service. "The real issue is the anti-consumer positions" of the business coalition, Mr. Slusark said.

Mr. Bright's decision would be a recommendation sent to the five-member Public Service Commission.

Normally, prehearing conferences are used to determine scheduling and procedure for a hearing. But Gary R. Alexander, an attorney representing two business coalitions, used the session to push for a refund of $1.1 million to ratepayers, a restriction on expanding nonutility businesses and a prohibition on BG&E operations that fall outside its role as a utility.

"It would send a message that this commission is on top of things. There is no reason to delay action," said Mr. Alexander, who is also a state delegate from Prince George's County.

But while Mr. Bright said he would consider restricting further expansion before the hearings begin in late January, he said the issues of refunds and whether BG&E should operate nonutility businesses would probably have to wait for the end of the proceeding in the summer.

The PSC hearing stems from 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 in 1992 to BG&E's 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 for Fair Competition, one of the business groups that Mr. Alexander represents. The other business group is the Small Business Coalition for Fair Utility Practices.

Those two groups want to see a refund of $1.1 million to ratepayers to cover 1992 and this year.

Harvey J. Reed, BG&E's associate general counsel, called Mr. Alexander's arguments that BG&E's charter does not allow it to operate nonutility business, "fallacious."

He also said customers are not victimized because the Ernst & Young study also revealed that the company's service operation, which is part of the regulated portion of the business, generates a $8.5 million profit.

The issue of BG&E's subsidy will also be an issue in next year's General Assembly. Del. Theodore Levin, D-Baltimore County, has prefiled a bill that would extend the power of the PSC to include nonutility subsidiaries of power companies.

"In this particularly case they are competing with the little heating contractor and appliance stores," he said.

State Sen. John A. Pica Jr., D-Baltimore, said he also plans to introduce a bill that would restrict BG&E's nonutility operation. Details of the bill are not complete.

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