Competition for Power

March 21, 1994

Baltimore Gas & Electric Co.'s selection of an outside power supplier through competitive bidding -- the first time in its history -- marks a step into the brave new world of price competition among energy producers.

But the step is not a bold one: the Public Service Commission had ordered BG&E to seek bids for the 140 megawatts of power due on line in 1997. And the winner is no small, independent newcomer but an old-line utility company with the highest rates in Maryland: PECO Energy Corp., formerly Philadelphia Electric. The second lowest bid among the 28 came from another established biggie, Duke Energy Corp.

So much for those highly feared independent, nonregulated power producers that were supposed to undercut the prices of the traditional monopoly utilities. In this case, the high-priced supplier simply slashed its prices -- in the export market. In fact, PECO has nearly 800 megawatts of excess power, from a nuclear plant whose construction costs were disallowed (for consumer rates) by the Pennsylvania utility commission.

That PECO power surplus has not meant lower rates for some 36,000 customers in Harford and Cecil counties, however. They are served by Conowingo Power Co., which is owned by PECO and gets its power exclusively from PECO.

Conowingo's rates remain the highest in Maryland; the Cecil County commissioners last year petitioned the state PSC to force captive Conowingo to seek a cheaper electricity source than its parent. Conowingo concluded, to no one's surprise, that PECO was the best source for cost and reliability.

With the PSC investigating Conowingo's supplier options, PECO last month floated the idea of selling the Maryland subsidiary to relieve itself of the regulatory and public relations problems. (It also asked the federal government to set a high price on Conowingo, in case the state PSC orders PECO to sell the franchise.) Three neighboring power companies, including BG&E, have expressed interest in buying the $78 million transmission and distribution system.

The big payoff for Conowingo customers may come sooner than any sale, however. PECO's price of selling electricity to BG&E will shortly become public, showing how cheaply it could supply energy to Conowingo. The PSC could lower Conowingo's rates accordingly. That would provide an additional benefit to Marylanders from the new competitive environment among power companies.

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