BG&E wins a round in subsidy dispute

December 24, 1993|By Ross Hetrick | Ross Hetrick,Staff Writer

The Baltimore Gas and Electric Co. has won the first round in a Public Service Commission case over whether it is improperly subsidizing some of its nonutility businesses with ratepayers' money.

In a decision released yesterday on prehearing motions, a PSC hearing examiner, Joel M. Bright, refused to bar BG&E from expanding its merchandise and service business during the course of the hearing. The hearing itself will begin in January and is expected to last several months.

Mr. Bright said the PSC's authority on nonregulated businesses is limited to the effects they might have on the regulated utility business.

"In this case at this time, there is no showing that the regulated operations are jeopardized by the existence of the unregulated activities, with the only threat shown concerning possible misallocation which appears to be in the neighborhood of approximately $555,000 per year," Mr. Bright said.

To protect ratepayers, Mr. Bright ordered BG&E to keep track of money that might be improperly supporting nonutility businesses, with the possibility of using that money for future refunds to ratepayers.

The motion to keep such accounts was made by People's Counsel John M. Glynn, the state official who represents ratepayers before the PSC.

The PSC hearing stems from a study released in October by the national accounting firm of Ernst & Young. The 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.

Yesterday's decision was a setback to efforts by the Maryland Alliance for Fair Competition and the Small Business Coalition for Fair Utility Practices, two business groups that oppose BG&E's nonutility business.

Mr. Bright ruled against all the group's motions, including one for an immediate refund of $1.1 million and for barring the company from any nonutility operations.

Gary R. Alexander, an attorney for two business coalitions, said the groups intend to appeal the decision to the full five-member commission. "We are not pleased with this decision," he said.

Mr. Alexander also said the groups will raise the additional issue of whether BG&E should be using the Washington consulting firm of Bonner & Co. in its public relations effort to sway public opinion. "Hopefully, they [the commission] will rein in the company," he said.

Mr. Bright's prehearing opinion can be appealed while the rest of the case proceeds.

Larry L. LeDoyen, chairman of Maryland Alliance, lashed out at the decision and the commission. "How can they [the commission] protect the ratepayers if they don't look into new BG&E obligations?" he asked. "They have not been doing the job up to now, and they certainly are not doing the job currently."

said the decision was vindication of its position that the PSC has no jurisdiction over its nonutility operation.

"The hearing examiner agreed with us on most counts," said a BG&E spokesman, Arthur J. Slusark.

He noted that Mr. Bright did not bar the company from expanding its nonutility business. The company does not object to the order to keep tabs on costs since it was already doing that, Mr. Slusark said.

Mr. Slusark also argued that the utility has public support. "People are telling us they want us in this business," he said.

"Gary Alexander lost before the hearing examiner, he lost before the Public Service Commission, and he'll lose before the court of public opinion."

Mr. Glynn, the people's counsel, called Mr. Bright's decision "a reasonable compromise," but said he might appeal the decision because it leaves "some murkiness" about the relation to regulated and nonregulated businesses.

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