Electricity deregulation thorny problem for assembly

January 17, 1999|By Barry Rascovar

YOUR eyes glaze over. You can't stifle a yawn. Your mind hit the "overwhelmed" button eons ago and is focusing on a sunny beach in the Caribbean.

Electric utility deregulation. It's the Sominex of the 21st century. Yet legislators in Annapolis have to tackle this issue.

Does it matter to you?

Yes, if you care about the size of your electric bill -- and whether you'll be able to get electricity service in that brave, new world known as "deregulation."

If lawmakers mess it up, Marylanders could see their utility bills soar. Poor people might not be able to get electricity during cold months. Pollution-spewing power plants could get a new lease on life. And some Maryland businesses may move to states where electric power is cheaper.

That's the negative side of deregulation. The idea is to end price controls imposed by the Public Service Commission and end the monopoly enjoyed by a few big power companies -- in this area, Baltimore Gas and Electric Co.

The aim is to let market forces determine the price of electricity for consumers. Instead of depending on one supplier, you'd have several to choose from.

Competition in the electricity field is supposed to mean lower prices, better service and rapid advances in technology. That's the ideal, anyway.

Results in other industries that have been deregulated are mixed.

Airline fares were deregulated and indeed prices dropped, new companies emerged, but service to many parts of the country became sparse or nonexistent.

Deregulation of the telephone industry worked well in long-distance service, where there is intense competition, lower prices and a rush to new technologies. But in local phone markets, prices remain high and the Baby Bells retain their regional monopolies.

Electric power deregulation is far tricker. No state has come up with a winning formula.

Under an order from the Maryland PSC, one-third of electric users will be able to choose their own service provider beginning July 2000. By July 2002, all Maryland customers will have a choice of suppliers.

Only one part of the electric business is being deregulated -- power generation. The transmission lines will remain the responsibility of BGE -- and will continue to be regulated.

BGE's fear is that legislators could effectively put them out of business in their haste to usher in an era of competition. What happens to the $2 billion in expensive power plants built with corporate bonds that have yet to be paid off? These payments now are factored into every customer's monthly bill. In a deregulated environment, that wouldn't be the case.

What's to ensure that new competitors from out of state won't rush into Maryland and grab BGE's biggest industrial customers, leaving the least-profitable residential customers to BGE. That could lead to higher, not lower, residential bills.

Thousands of jobs could be at stake if BGE is stiffed by legislators. It could so weaken the company that it would be an easy takeover target. Another local corporate headquarters could bite the dust.

Not only must lawmakers level the playing field for both BGE and its new competitors, they must also rewrite Maryland's utility tax laws. That's where things could fall apart.

Especially knotty are the local tax implications. Big power plants pay enormous property tax bills. Calvert County is particularly dependent on BGE's Calvert Cliffs nuclear generators. This tax revenue could be jeopardized, depending on how the General Assembly revises the law.

Many big industries want rapid deregulation that ignores BGE's plight in favor of immediate competition and lower prices. Environmentalists are alarmed that these new competitors could use old, pollution-belching power plants elsewhere to provide cheap rates in Maryland. Advocates for the poor are wary that new competitors, in their quest for profits, won't give a hoot about guaranteeing universal service or averting cutoffs in winter months.

In theory, a market-driven electric industry should give Marylanders cheaper power. But getting there could pose huge headaches. Lawmakers may not be able to find all the answers before they adjourn in April. If that happens, the PSC may have to push back the starting date for deregulation so lawmakers are sure they aren't creating confusion and disaster for their constituents.

Barry Rascovar is a deputy editorial page editor.

Pub Date: 1/17/99

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