Deregulation plan defended

BGE representatives field questions from MAPSA lawyer

Utilities

August 12, 1999|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

Baltimore Gas and Electric Co. yesterday defended a proposed electricity-deregulation settlement that it endorses during the first day of Maryland Public Service Commission hearings on the proposal.

Most of yesterday's session was spent with BGE representatives answering questions by an attorney for the Mid-Atlantic Power Supply Association, a New Jersey-based coalition of power companies that wants to sell electricity in Maryland.

The hearings will continue today, and the PSC will convene them again tomorrow if necessary. The hearings, which are open to the public, are being held in the PSC's offices on St. Paul Street. The settlement is subject to approval by the PSC.

The settlement, to which BGE and the 12 other parties agreed in June, allows for a 6.5 percent rate reduction for BGE's residential customers, which would remain in effect for six years. In return, BGE would collect $528 million in "stranded costs" from all of its customers over six years as partial repayment for what the utility spent building power plants.

MAPSA contends that the structure of the deal does not allow for competition.

One BGE official testified, during cross-examination by MAPSA attorney Gary Alexander, that competition will occur, but it may not happen immediately.

During the six-year lifetime of the settlement, Maryland "will not be a truly competitive marketplace, but a transitional one," said Sheldon Switzer, BGE's director of electric pricing and tariffs.

The room was jammed with more than 70 people, including the five public service commissioners and nearly a dozen attorneys representing the parties involved in the settlement. Testimony yesterday centered on the prospect for competition after July 1, when consumers will be given choices on where they buy electricity. Switzer said the benefits from a competitive electricity industry will first be realized by commercial and industrial customers, but it may take all six years before residents notice a change.

At issue in the hearings is the amount of the "shopping credit" that consumers would use to compare companies' rates when they shop for power. In Maryland, the shopping credit is the same as the amount charged customers on their monthly bills for the production of electricity.

If a competitor could supply electricity for less than that price, the customer could save money.

According to the proposed settlement, customers would compare prices with BGE's rate of 4.3 cents per kilowatt hour. MAPSA said that price is too low for its members to try to beat.

"I know utilities can match that price, but I don't know if MAPSA members can because I don't know who MAPSA's members are," testified David A. Brune, vice president and chief financial officer for Constellation Energy Group, BGE's parent company.

"The question is, will they run to Maryland, where prices are traditionally lower, or will they go some place like Pennsylvania" where prices are higher, he said.

Today the commission is expected to hear testimony from MAPSA consultants about a counterproposal the coalition recently submitted to the PSC. MAPSA said its proposal would maintain the 6.5 percent rate cut, but would raise the "shopping credit" to 5.7 cents per kilowatt hour vs. BGE's 4.3 cents per kilowatt hour.

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