Lower electric rates

BGE: Deal gives utility's customers rate

July 17, 1999

NEXT SUMMER, 1.1 million Central Maryland residents will be free to choose their electric-power supplier. The era of regulated, monopolistic electric utilities will end.

That's the biggest impact of a settlement reached June 29 after months of negotiation between Baltimore Gas and Electric, industrial power users and the People's Counsel of the Public Service Commission. It's a good deal for everyone involved.

Residential customers will gain stability in their electric bills. Those who elect to stay with BGE will have their rates cut by 6.5 percent next July 1, and then frozen for six years. Most important, they will gain the right to shop around to find a better supplier.

Industrial and commercial customers will have their rates frozen; depending on which of four options from BGE they pick, these companies could see their electric bills fall, too. Or they could take their business elsewhere.

BGE gains a big advantage in Central Maryland's emerging marketplace for electric power. Competitors will have to offer a better deal than the 6.5 percent rate cut and six-year freeze that BGE has agreed to give its customers.

The company also will get half of what it wanted in compensation for construction costs ($1.1 billion) that it won't recover when BGE's regulated rates end next year. Residential customers will only pay about one-third of these "stranded costs"; businesses will pay the rest. This modest "competitive transition charge" on electric bills will shrink, and then disappear in 2006.

Other power suppliers seeking new customers in Central Maryland also gain from this settlement. They will be able to solicit new accounts next summer, instead of having to wait until 2003 for full deregulation to take place.

It's impossible to predict the outcome of electric deregulation. Some fear the biggest winners will be companies with huge electric bills, not residential customers. Still, a 6.5 percent cut followed by a six-year rate freeze sends a signal that BGE thinks lower prices for all its customers are possible.

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