Court lifts roadblock to BGE's rate cut

Trade group to seek second stay of plan

July 21, 2000|By William Patalon III | William Patalon III,SUN STAFF

Maryland's highest court removed a key roadblock to electricity deregulation in the Baltimore area yesterday when it lifted a June 30 stay that had stopped the sweeping plan hours before it was to take effect.

However, a trade group of power producers that has been attempting to block the plan was granted legal standing in the case, and late yesterday it asked a lower court to issue another stay, which could return deregulation to limbo.

Both sides were claiming victory in the six-month legal skirmish, which resumed yesterday morning before the Court of Appeals in Annapolis and is tentatively set to continue today before a Baltimore City Circuit Court judge downtown.

Nevertheless, an executive with Constellation Energy Group, the parent of Baltimore Gas & Electric Co., said the company would begin to implement the portions of its deregulation plan that had been in hiatus because of the stay.

"We are ready to let competition begin immediately," said Rob- ert S. Fleishman, vice president of corporate affairs and general counsel for Constellation Energy, the holding company for energy-related businesses focused on power-generation and marketing.

Wayne Harbaugh, an economist with BGE who manages pricing and supplier services, said about 1 million residential consumers in Baltimore and its five surrounding counties would see the effect of the proposed six-year, 6.5 percent rate cut in their next bills.

Customers for nearly all of the rest of Maryland gained the right to choose their electricity supplier July 1.

Many issues remain before the electricity business in Maryland is truly deregulated. Because no competing power producers are selling power in the state, consumers don't yet have the choice designed to hold electricity prices down.

In Annapolis yesterday, the seven judges of the Court of Appeals heard arguments from the players on both sides of the controversy. The Mid-Atlantic Power Supply Association, known as MAPSA, urged the judges to keep their stay in place - effectively keeping BGE from fully implementing a deregulation plan that the New Jersey-based trade group contends blunts competition.

But the judges voted to drop the stay, ruling that city Circuit Court was the proper court to rule on that request.

At the same time, however, the Court of Appeals also reversed a Circuit Court decision by ruling that MAPSA has legal standing in the case. That ruling gives the group legal status in the case, meaning it can challenge the Maryland Public Service Commission order that outlines how competition in Maryland's electricity market is supposed to take effect. BGE's settlement order was approved unanimously by the PSC in November.

Fleishman, the Constellation Energy general counsel, conceded that the company would have been much happier if MAPSA hadn't achieved the legal right to continue in that role, though Constellation was pleased the appeals court abolished the stay.

By contrast, lawyers for MAPSA said they were thrilled with how things worked out.

"We think we got everything the court was capable of awarding to us," said Kenneth Wiseman, a Washington-based partner of the Houston law firm of Andrews & Kurth LLP, which represents the trade association. "We feel as if our own rights were vindicated. We will continue to pursue avenues in the Circuit Court."

MAPSA will travel down one of those avenues this morning, when it plans to ask city Circuit Court Judge Albert J. Matricciani Jr. to order another temporary stay that would again force BGE to halt deployment of its deregulation plan.

Fleishman doesn't give MAPSA strong odds of success, pointing out the association's request for an injunction was twice denied at the Circuit Court level, and then again by the Court of Special Appeals.

Getting another delay order is crucial for the trade group, because it needs time to persuade the court to permanently halt the deregulation plan. MAPSA's central allegation is that the PSC's plan won't result in true competition because BGE will be able to offer electricity at artificially low prices - making it near-impossible for new entrants into the local market to undercut them and still make a profit.

Competitors would have to undercut BGE's rate of 4.224 cents per kilowatt-hour to save customers money - not possible if these new rivals still want to profit, MAPSA contends.

As part of the deregulation plan, BGE is to collect $528 million in "stranded costs" from its 1.1 million residential, commercial and industrial customers. The utility says those costs constitute a partial repayment for the expense of building power plants. But MAPSA alleges that the amount is no more than $250 million. By inflating the amount it says it is due, BGE will be able to offer electricity at below-production costs without hurting its profitability - underwriting the losses in power-production by drawing from its stranded-costs money, Wiseman, the MAPSA lawyer, contends.

Constellation officials reject that argument. They say MAPSA used inaccurate figures to make its calculations and say their stranded cost estimate is on target.

The real loser in all this legal wrangling is sure to be the customers of the power producers, who are missing out on the reduced rates that the PSC plan - and subsequent competition - are designed to bring, said Michael Travieso, head of the Office of the People's Counsel, the guardian of consumer rights in utility matters.

"It will bring [more] harm to the customer if this stay is issued," Travieso said.

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