Deregulation of utilities gains steam

Assembly seeks end to state control of electric industry

Benefit to businesses

Residential rate limit, environment, taxes are key concerns

February 03, 1999|By Timothy B. Wheeler and Gady A. Epstein | Timothy B. Wheeler and Gady A. Epstein,SUN STAFF

Raising prospects for sweeping change in the way Maryland consumers pay for electricity, utilities and their business customers have reached agreement on legislation to end state regulation of the power industry in three years.

House and Senate leaders said yesterday that they would introduce companion bills by the end of the week reflecting the complex compact between business and utility industries. The bills were hammered out after almost a year of closed-door talks.

With neighboring states already moving to give their customers choices about where they buy their power, proponents said Maryland's economic viability is at stake as major manufacturing plants look to lower their electric bills -- or move to where costs are cheaper.

"If we don't pass it [deregulation] this session, we're going to be putting Maryland in an inferior position regarding our business climate," said House Speaker Casper R. Taylor Jr. "We're going to be putting in jeopardy tens of thousands of jobs."

To ease consumers' fears of higher power bills, legislative leaders said residential customers' rates would be frozen or capped for at least three years, after which the price of electricity would float with the market.

But other lawmakers made it clear there are several major issues to be resolved -- in- cluding taxes and environmental protection -- before they would vote to throw the electric power market open to competition.

"We've got to make sure that our constituents -- the residential consumers -- aren't paying the tab," said Sen. Thomas L. Bromwell, chairman of the Finance Committee. "The fact there's a bill here and all the heavy hitters have agreed on it doesn't mean it's going to pass."

Indeed, two Montgomery County legislators have drafted a competing deregulation bill embraced by consumer and environmental advocates.

The state's Public Service Commission, which now regulates electric rates, already has ordered a three-year phase-in of power competition, starting July 1, 2000.

"The Electric Customer Choice and Competition Act," as the leadership bill is titled, would set the ground rules for the commission's handling of the complex issues surrounding deregulation. It reflects a compromise for industry, which failed last year to get legislation accelerating deregulation.

"They would like to have this yesterday," said Michael Powell, a lawyer for 24 of Baltimore Gas and Electric Co.'s largest industrial customers, including General Motors and Domino Sugar. He said manufacturers hope to lower their bills by 10 percent to 15 percent once able to shop for power suppliers.

L. Wayne Harbaugh, BGE's project manager for electric restructuring, said the utility also supports the leadership bill. But he said BGE would oppose opening the state to competing power suppliers unless the General Assembly passes separate legislation easing taxes on in-state utilities.

As it stands now, the bill "empowers" but does not require the PSC to freeze or cap electric rates paid by residential and other consumers for at least three years.

The competing legislation, sponsored by Montgomery Democrats Del. Leon G. Billings and Sen. Brian E. Frosh, would require the commission to put a ceiling on rates, meaning they could be reduced by competition.

Other key differences:

The leadership bill would allow the state's utilities to win temporary rate increases to help pay for the plants they built when the regulated system guaranteed them customers and profit.

This issue of "stranded costs," which led to higher residential electric bills in some deregulated states, is one of the most vital pocketbook issues in deregulation. The Billings-Frosh bill would allow such temporary rate increases only if the utilities auction off their power plants at a price lower than book value.

The leadership bill has no mandatory environmental safeguards, such as requiring the use of renewable energy resources or imposing a surcharge on power from out-of-state plants that burn cheaper, dirtier fuels. Instead, the bill would call for money to be spent promoting conservation and energy efficiency.

The Billings-Frosh bill requires that sellers of electric power in Maryland use some renewable energy resources.

Pub Date: 2/03/99

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