IT'S OFFICIAL: Electric deregulation is coming to Maryland. But this sweeping change is not well understood by many people.
Currently, electric utilities are monopolies that generate electricity and deliver it to consumers. Deregulation will allow competition in the marketplace -- companies other than utilities can vie to sell electricity to residential customers, beginning Jan. 1, 2000, and to businesses, beginning Jan. 1, 20001.
This has generated many concerns about electric rates, service reliability, environmental impact, etc. The law answers such concerns.
Under deregulation, residential consumers who stay with their current utility companies will get a rate reduction of 3 percent to 7.5 percent, and $34 million will be provided to help the poor pay their power bills. Rates will be capped for four years, after which they will be unregulated.
The exact size of the rate cut will be determined by the Public Service Commission, which will also mount a $6 million consumer education campaign about electric deregulation, alerting consumers to the advent of deregulation and helping them sort through the many marketing claims. Electric customers can form cooperatives to purchase electricity at a lower group rate.
Also, the law retains the current electric power reliability standards. Electricity suppliers must demonstrate proof of financial integrity, including bonding. The PSC will license suppliers and, if necessary, impose civil penalties, suspend or revoke the licenses of those that violate the rules. The new law protects consumers from suppliers engaging in anti-competitive, deceptive or abusive practices and discrimination.
It should be emphasized that electric deregulation was never an option, rather it was an imperative. Many nearby states are deregulating electric power. Considering that, there is no way our business community and our economy could thrive without deregulation. Electric deregulation promotes the perception of Maryland as a business-friendly state.
Under deregulation, municipalities that currently provide electricity to their residents may continue to do so.
To put Maryland's utilities in a competitive position for deregulation, legislation was passed allowing them to create separate unregulated holding companies, similar to those in 49 other states. Also, deregulation levels the playing field for Maryland utilities by providing a two-year phase in of a 50-percent reduction in the property taxes they pay on their power plants. According to Price Waterhouse Coopers, an accounting and consulting firm, Maryland's property taxes on electric utilities were more than double those of neighboring states.
The new law addresses environmental concerns by preserving all current environmental protections, such as requiring utility companies to continue providing at least the same percentage of electricity from available renewable resources as they do now.
While the bill recently signed by the governor is not perfect, I believe strongly that the electric deregulation law represents the best efforts of the General Assembly. It is a well-balanced blueprint for change, with carefully crafted protections for consumers, businesses, utilities and the environment.
This enables Maryland to step confidently step into the next century and take its place among other forward-thinking states in the competitive market of electric deregulation.
State Sen. Thomas L. Bromwell, a Baltimore County Democrat, is chairman of the Senate's Finance Committee.