Deregulation leaves consumers in dark

New utilities quiet on price schedules for BGE customers

Comparison impossible

Others say state deal to limit competition

June 18, 2000|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

A $5.6 million state advertising blitz in advance of the July 1 deregulation of electricity sales urges Marylanders, "You use it. Now, choose it." But customers ready to take the plunge will be hard put to pick a new supplier.

Thus far, none of the seven power companies licensed by the Maryland Public Service Commission to sell electricity in the state have posted electricity rates.

Although marketers have been allowed to solicit customers since April, Baltimore Gas and Electric Co. officials say they have yet to receive notification from power companies that any of BGE's 1 million residential customers have switched.

The situation has left some Maryland consumers frustrated.

"I've been under the impression [electricity deregulation] was the next greatest, neatest thing to happen to consumers," said Betty Cartwright, a BGE customer in Calvert County. "But for something so great, I don't really know what my options are."

Fred Brice, a BGE customer in Rosedale, said he wants to shop - and more important, save money.

But, he added, he just doesn't have the information he needs to make a wise choice. He's gone to the library to surf the Internet, and he's called the state for more information, but all that was available was a list of suppliers. "Until there are real dollars associated with these companies, I can't make a comparison," Brice said.

While suppliers have said volatile wholesale prices have made it difficult to post rates that would be locked in for at least a yearlong contract, others have said a wait-and-see attitude is most prudent for a newly deregulated market.

Still others have intimated that the silence among some of the retailers is part of an informal boycott of the electricity market in Central Maryland because they believe that a settlement agreement drafted by BGE and approved by the Maryland Public Service Commission in late 1999 insulates the utility from competition.

"There may be a little frustration among consumers who are looking for offers in the marketplace because there aren't many," conceded Wayne Harbaugh, BGE's executive director for pricing strategy.

BGE's retail affiliate, BGE Home, said it will wait until the fall before posting prices.

Glenn Ivey, chairman of the PSC, which launched the $5.6 million advertising campaign in April, said the slow start was not a surprise.

"We never expected this to be an automatic process, like flipping a light switch," said Ivey. "In other states, the transition to competition is expected to take place within a four- to eight-year range."

Proponents of the deregulation process believe that potential BGE competitors are likely to step up their marketing in the fall, when electricity prices settle down.

Currently, a company that wants to buy power on the "forward market," securing it now for delivery in the future, would have to pay about $130 a megawatt-hour. Electricity typically costs an average of $30 a megawatt-hour.

Critics believe that there will be extremely limited competition in Central Maryland for a large part of the six years that the settlement agreement with BGE - which sets the rules for deregulating the Baltimore area's electricity market - remains in force.

Michael J. Travieso, Maryland's People's Counsel, whose state agency represents residential customers and is a party to the settlement, said that, while residential consumers will benefit from a 6.5 percent rate cut during the six-year period, it's difficult for out-of-state suppliers to undersell BGE.

The lack of activity "is predictable because residential rates are reasonable and the prospects of a marketer actually offering a lower price are not very good," he said.

Gary Alexander, an Annapolis lawyer representing several out-of-state energy companies, said that, so far, deregulation is a charade.

"A whole lot of people are going to have egg on their face. The state is spending big bucks on a consumer education program which is clearly not justified. The numbers of people doing any selling, especially in BGE's territory, will be few and far between."

The Mid-Atlantic Power Supply Association (MAPSA), an out-of-state group of marketers that wants to sell electricity in Maryland, agrees.

In December, MAPSA filed a Circuit Court appeal, still pending, that challenges the terms of BGE's six-year settlement.

MAPSA contends that BGE's "shopping credit," the amount BGE will charge customers for the production of electricity, at 4.224 cents per kilowatt hour is artificially low and was designed to keep out competition.

During the same period, the utility would collect $528 million in "stranded costs" representing its unrecovered investment in generating plants, from all users - even those who choose not to buy their electric power from BGE. Residential customers would pay $194 million, or 37 percent, of the stranded costs.

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