Electric industry to be altered PSC unveiling plan to replace monopoly with competition

Utilities

December 03, 1997|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

State regulators are expected to unveil a plan today to reshape and deregulate the utility industry, a move that will change the way Marylanders buy electricity and likely lower prices.

Under the plan to be presented to a legislative task force in Annapolis, Public Service Commission Chairman Russell Frisby is expected to endorse replacing the current, largely monopolistic system with a competitive market similar to that adopted by the long-distance telephone industry.

Specifically, the PSC chairman is expected to propose a "pilot program" that would unleash competition among electricity suppliers in parts of the state in 1999 and introduce choices for all Maryland consumers in 2001.

"Deregulation is a trend that's growing among the states, and it's inevitable. It's just a matter of timing," said Roger W. Gale, president of the Washington International Energy Group, a consulting firm that advises utilities on how to brace for competition. "This is the biggest change to hit the industry since Thomas Edison began selling electricity in New York City in 1882."

Maryland already has a limited pilot program allowing consumers to choose a natural gas supplier, but electric deregulation is considered much more complex because of so-called "stranded" costs associated with power generation plants that could become obsolete under deregulation.

Gale added that 50 percent of the U.S. population lives in states where electric industry deregulation has been proposed or is in its embryonic stages.

Among the states in the vanguard of the trend are California, New York, Pennsylvania and Massachusetts.

In neighboring Pennsylvania, one-third of the customers will be able to choose electricity suppliers in 1999. A pilot program involving 5 percent of the state's residents and about 40 energy suppliers is in place.

The PSC's presentation will follow a more than two-year study by the commission on how to reshape the industry, dovetailing with the work of a legislative task force created by political leaders in July. The task force, set to release its own findings later this month, was created to draft legislation for the General Assembly session that opens next month.

"I'm confident that the PSC will recommend that Maryland go deliberately full-speed ahead on this," said Senate President Thomas V. Mike Miller Jr., who helped form the task force and a related advisory panel. "But, at the same time, I recognize that there are huge issues to deal with, and we don't want to make any mistakes."

Miller and industry analysts contend that deregulation will lower prices because Baltimore Gas and Electric Co., the sole supplier to residential customers in the metropolitan area, will have to freeze or drop prices to compete.

"In the long term, competition will be advantageous, and consumers will get lower rates," Gale said.

But, in a report issued by the PSC in May, the commission predicted that electric rates for consumers might not decrease even with competition, because Maryland's electric rates are already competitive with national averages.

A PSC spokeswoman declined to comment on details of the report or whether the issue of lower prices would be addressed.

However, Miller was resolute.

"Prices will go down, no ifs, ands or buts," he said.

Even BGE appears willing to embrace competition, in part because the company has taken steps to brace for the future, said Ronald S. Tanner, a utility industry analyst at Legg Mason Wood Walker Inc. who tracks the util- ity.

"A competitive electricity market will strengthen Maryland's economy and benefit all customers provided it is structured properly at the outset," said Christian H. Poindexter, BGE's chairman and chief executive.

Pub Date: 12/03/97

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