Impact of a higher `credit' is argued at PSC hearing

Higher electric bills? Not necessarily, MAPSA consultant says

Utilities

August 13, 1999|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

The Maryland People's Counsel and a consultant for a group of potential competitors to Baltimore Gas and Electric Co. sparred yesterday over the impact of a higher "shopping credit" in the second day of electricity-deregulation hearings.

Michael J. Travieso, the state-appointed People's Counsel representing consumers, said that a higher credit would lead to higher prices for consumers.

But consultant Terry L. Murray, representing the Mid-Atlantic Power Supply Association, which favors the shopping credit, testified that Travieso's contention is "not solidly founded in economic theory."

"Whatever it costs to produce energy will control pricing in the marketplace," she testified.

"I'm not trying to get rid of the rate reduction," she said. "But I don't think it is reasonable" to reduce competition in order to give consumers below-cost pricing.

A 6.5 percent rate cut for residential consumers is part of the proposed settlement.

The issue of how much consumers would pay for electricity -- and whether competitors could offer a lower price -- surfaced as the main issues in the hearings before the Maryland Public Service Commission. The hearings continue today.

The amount charged customers on their monthly bills for the production of electricity is known as the "shopping credit."

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

Baltimore Gas and Electric, the Maryland Office of the People's Counsel and 11 other parties that support a proposed electricity deregulation settlement maintain that the 4.3 cents per kilowatt hour detailed in the agreement, which consumers will use to compare companies rates when they shop for power, is reasonable.

According to the proposed settlement, the consumers' comparison price would rise to 5.02 cents per kilowatt hour during the six-year life of the settlement. MAPSA, whose members want to sell power in Maryland, strongly opposes the proposed settlement and contends that BGE has artificially lowered its shopping credit to keep out competition.

The group has asked the PSC to raise the shopping credit to 5.7 cents per kilowatt hour when consumers start choosing their power provider next July.

Also yesterday, Thomas W. Kinnane, a MAPSA attorney, accused the Office of the People's Counsel -- during his cross-examination of one of its consultants -- of preferring a rate cut "regardless of the impact on competition" because the office doesn't expect consumers to shop for power.

And, some of the commissioners expressed concern yesterday about the shopping credit and whether it would foster competition.

"You can't just say, `Don't accept the settlement.' We need some sense as to where we can go with" the shopping credit, commission Chairman Glenn F. Ivey told Murray, the MAPSA consultant.

Later, Ivey asked Jonathan F. Wallach, a consultant to the Office of People's Counsel, to "try and help [the commission] find if the shopping credit is really the right number to bring competition."

The settlement is subject to approval by the five-member PSC, which is expected to render a decision by October.

Pub Date: 8/13/99

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