About a million households in the Baltimore region will see rate reductions in their energy bills, after a judge lifted yesterday a temporary stay order that had delayed electricity deregulation in the metropolitan area.
The Mid-Atlantic Power Supply Association, a trade group of power producers, is trying to force an overhaul of Maryland's deregulation plan, alleging that it's a sham that maintains Baltimore Gas and Electric Co.'s monopolistic grip on the Baltimore metro marketplace. The trade group, commonly referred to as MAPSA, had asked that the July 21 stay remain in force until its civil case comes to trial.
However, after a hearing yesterday morning, Baltimore Circuit Judge Albert J. Matricciani Jr. ruled that MAPSA failed to show it was likely to prevail at trial - a requirement that the trade group, as the plaintiff, had to achieve for the stay to remain. The trial opens before Matricciani on Aug. 23.
Now free from the fetters of the stay, BGE isn't waiting to roll out its deregulation plan to households in Baltimore City and the five surrounding counties. The company will cut rates for residential customers in those areas by 6.5 percent, meaning a household will save an average of $70 a year on its electricity bills.
The rate reduction is retroactive to July 1, when consumers in most of the rest of the state saw reduced electricity costs, and remains in force for six years. About 60,000 bills reflecting the reduced rates go out in today's mail, BGE said.
"We are pleased for our customers," BGE President Frank Heintz said yesterday afternoon. "Now we'll be able to put in place the residential rate reduction."
As is true of other U.S. industries that for years were heavily regulated, the nation's utilities - with Maryland as a latecomer - are enduring the wrenching change of deregulation.
Theoretically, an industry should thrive once the shackles of regulation are gone. Forced to become nimble and compete, such firms must cut costs, boost efficiency and hold down the prices of products and services they sell - benefiting consumers.
Thirty-six firms have filed for permission to sell power in Maryland, including two BGE affiliates. To date, however, none is actually selling electricity - not even in regions that had been unaffected by the stay.
That these companies are not selling power in Maryland is proof that the deregulation plan, as currently configured, stymies the competition it's supposed to promote, Kenneth Wiseman, a Washington attorney representing MAPSA, argued during the hearing.
For one thing, through some creative accounting permitted under the deregulation plan, BGE is pricing electricity at an artificial level so low that rivals will not be able to sell at the same level without incurring losses, MAPSA has repeatedly alleged.
And second, as part of the settlement between BGE, the Maryland Public Service Commission and other parties giving rise to the deregulation plan, BGE will be allowed to recover $528 million in "stranded costs" - compensation for money spent on power plants that have subsequently declined in value.
MAPSA contends that this amount is inflated - stating that recovery should be no more than half that - and argues that it creates a profit sanctuary enabling BGE to underwrite money-losing electricity sales.
The latter is an allegation that rankles BGE executives, who maintain that their stranded-cost estimate is more than reasonable.
Wait until fall
They say outside power producers will begin selling electricity in Maryland by late this year - once summer gives way to fall.
BGE's erstwhile rivals are waiting to jump into the Maryland market because they will be buying electricity on the wholesale market and reselling it here to consumers at a profit - which is tough to do during summer, when hot weather and short supplies of power can often cause large and unexpected spikes in wholesale electricity prices, said Wayne Harbaugh, a BGE economist in charge of pricing and supplier services.
The stay that was lifted yesterday was the second one to delay deregulation in Maryland.
On June 30, only hours before the sweeping plan was to take effect statewide, the state Court of Appeals, Maryland's highest court, stayed deregulation in the metropolitan region until July 20. The Court of Appeals stay was lifted that day.
But at MAPSA's insistence, Circuit Judge Matricciani imposed a stay the next day.