Some balk at price to deregulate

$528 million to BGE for plant, buildings is too high, they say

Utility `stuck it to us'

Cost will wipe out savings on lower rates, say some businesses

Power companies

July 25, 1999|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

With public hearings on the recent BGE utility deregulation settlement set to begin in several weeks, some business owners say the agreement -- initially heralded as the best compromise possible -- might not be good enough.

Baltimore Gas and Electric Co. and a dozen parties involved in closed-door talks submitted a proposal to the Maryland Public Service Commission last month that would let users pick their electric supplier by next July.

Some commercial customers are balking at the $528 million competitive transition charge, or "stranded costs," that BGE won the right to claim from electricity users under the proposed settlement.

BGE initially had sought more than $1 billion in stranded costs, money it claims it should get as partial repayment for what it spent building power plants to supply its 1.1 million customers as it shifts to a competitive marketplace. BGE has 10 power plants in Maryland, including the Calvert Cliffs nuclear generating station, and three in Pennsylvania.

Some businesses and consumer advocates opposed compensating the company, arguing that the plants have appreciated in value and represent a windfall for the utility.

In the compromise reached in the settlement, beginning next July all users -- even those who choose utilities other than BGE -- would pay a share of stranded costs, determined by their usage, as part of their monthly bill for up to six years.

Residential customers -- who are due a six-year 6.5 percent cut in electric rates -- would pay $194 million, or 37 percent, of stranded costs.

BGE's largest 500 accounts, including the state's 25 largest industrial companies, were represented in settlement negotiations by the Maryland Industrial Group. The companies would be billed about $163 million, or 31 percent of the stranded costs.

Every other customer, from medium-sized chemical companies to restaurants to mom-and-pop businesses, would have to pay the balance of about $171 million.

Public hearings on the accord, which is subject to approval by the Public Service Commission, are to begin Aug. 11.

Businesses had aggressively sought deregulation in Maryland, saying competition would save them money on their utility bills and that the ability to shop for lower rates would be vital to their profits. Now some of them aren't sure when, if ever, that can be realized.

"I do support electric deregulation in Maryland, but I also believe stranded costs will neutralize any savings we may see," said Dennis J. Szymaszek, purchasing and logistics manager for Pemco Corp. in Baltimore.

Pemco operates 24 hours a day manufacturing the glaze for Lenox china and industrial coatings for household appliances and computer chips.

The company, which uses a maximum of 2.3 million kilowatt hours monthly, may wind up paying about $224,000 annually for up to six years in stranded costs, whether it stays with BGE or picks another supplier.

Business owners and a coalition of other electricity suppliers say the effect of the stranded costs charge is to allow Maryland's largest utility to stave off competition at least for the next few years.

Users may be deterred from shopping around for another supplier because they will be saddled with paying stranded costs even if they leave BGE, they say.

The Mid-Atlantic Power Supply Association, a group of electric suppliers in New Jersey, submitted an alternative proposal to the PSC on Friday.

According to the association's proposal, BGE has overstated its stranded costs by $440 million.

Also unhappy with the stranded-costs deal is the Maryland Chemical Industry Council, which represents 54 companies in the state and originally pushed hard for deregulation.

"BGE has basically stuck it to us whether we stay with them or not. It doesn't matter if we have a four-year car loan or a six-year loan, we're still stuck with buying a car we may not want," said David Mahler, environmental manager for Condea Vista Co., a Baltimore chemical company that belongs to the council.

Before the General Assembly forwarded its deregulation legislation to the PSC to work out the specifics, Condea Vista was evaluating whether it should co-generate -- build its own electricity supply source on its premises. But having to pay stranded costs "really eats into the economics" of co-generation, Mahler said.

Carolyn Burridge, a lobbyist for the state chemical industry trade group, said the organization hasn't decided if it will oppose the settlement plan. The group is unhappy that the legislature left it to the PSC and related parties to determine a stranded-costs figure and that businesses that decide to co-generate would still be assessed a stranded-cost fee.

Despite the discontent, the Maryland Retailers Association said it achieved one significant goal with the settlement: the right for businesses to customize their stranded-costs payments.

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