BGE wins rate case

Judge rejects group's challenge to deregulation plan

No decision on appeal

Power suppliers say agreement is unfair, won't aid consumers

September 22, 2000|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

After 10 months of court wrangling, a Baltimore Circuit Court judge has upheld an electricity deregulation plan that gives 1.1 million residential customers in the region a rate reduction but that critics claim gives Baltimore Gas and Electric Co. an unfair advantage over competition.

In rejecting the Mid-Atlantic Power Supply Association's appeal to force a revision of the deregulation plan, Judge Albert J. Matricciani Jr. called the settlement agreement "a reasonable decision" by the Maryland Public Service Commission and said he found "no error in the Commission's actions."

While MAPSA can appeal the decision, the group said yesterday it is not sure it will.

The ruling allows BGE to continue collecting $528 million from its customers as partial repayment for money the company spent to build power plants and to continue charging residential customers 4.224 cents per kilowatt hour for electricity. The ruling also affirms a PSC approval that allowed BGE to transfer ownership of its power plants - which produce 6,200 megawatts of electricity - to its unregulated affiliates.

"Obviously, we're deeply disappointed, and not only disappointed, but disturbed," said Suzanne Daycock, executive director of MAPSA, a trade group of power suppliers. "We seem to have been the only group that's actually been fighting for residential customers. Maryland residential customers will have one choice. I don't envy them that choice.

"Frankly, I'm dumbfounded. Whether we appeal this decision will really rest on whether or not our members believe it is worth throwing any more good money at a market that is, right now, abysmal."

But BGE and PSC officials applauded the court ruling yesterday, saying it showed that MAPSA's arguments had no merit.

"It lifts any lingering uncertainty from dealing with customer choice for electricity in Central Maryland," said Robert S. Fleishman, vice president of corporate affairs and general counsel for Constellation Energy Group, the parent company of BGE. "The judge's order was very well-reasoned. It dealt with all the issues MAPSA raised, went through them one-by-one and came out with a decision that we think is the right one."

Said PSC Chairman Glenn F. Ivey: "We look forward to continuing educating people with what this transition means so that they can learn how to make good choices."

However, no competing power suppliers have offered to sell electricity to Baltimore-area residents.

The deregulation plan was approved by the PSC in November. Thirteen other parties also agreed to the settlement, including the Office of the People's Counsel, guardian of consumer rights in utility matters, and other industrial and private customers.

But MAPSA, which participated in the settlement discussions, opposed the settlement.

The trade group argued that the plan allows BGE to price its electricity at an artificially low level so that competitors can't match it without taking a loss. MAPSA also contested the $528 million in "stranded costs" the settlement permits BGE to collect from its residential, commercial and industrial customers. MAPSA said that figure is 50 percent to 100 percent too high.

MAPSA accused the commission of adopting a deregulation plan drawn up by BGE instead of calculating its own figures. BGE's figures, MAPSA said, prevent competitors from providing the same services and making a profit.

MAPSA filed its appeal in December but was twice denied when it sought a stay in Circuit Court.

MAPSA then asked the Maryland Court of Special Appeals for a stay and was denied, and finally turned to the Court of Appeals, which on June 30 ordered the stay for deregulation in Baltimore and the five surrounding counties only hours before the sweeping agreement was to take effect.

When that stay was lifted in July by the Court of Appeals, the case was sent back to Circuit Court, which granted MAPSA another stay. But on Aug. 4, Matricciani lifted that stay and ruled that MAPSA failed to show it was likely to prevail at trial - a requirement that the trade group had to meet for the stay to remain.

BGE immediately sent out new bills to its customers reflecting the rate cut, which assured customers a 6.5 percent rate reduction from BGE for six years, meaning a household will save an average of $70 a year on its electricity bills.

On Aug. 23, Matricciani held a hearing on the merits of MAPSA's case.

In issuing his opinion on that hearing, Matricciani said the PSC followed the Electric Customer Choice and Competition Act of 1999, as passed by the Maryland General Assembly, in establishing a framework for deregulating the electricity market.

The judge referred to a 1967 case that defined the scope of reviewing state agency rulings, which stated that "judicial review essentially should be limited to whether a reasoning mind reasonably could have reached the factual conclusion the agency reached."

Based upon expert testimony and calculations provided in the record, Matricciani wrote that the PSC "adequately meets the requirements of this standard, sufficiently sets forth the bases for its conclusions, contains the required factual determination and does not unjustifiably rely upon the competing interests involved in the negotiated settlement to support its approval of that agreement."

Fleishman said the ruling was not surprising given that courts generally give deference to the technical expertise of administrative agencies given the power to deal with complex issues like deregulation.

"If they [MAPSA] decide to appeal the decision, we're confident the appellate courts would reach the same conclusion," Fleishman said. "They had many opportunities to try to resolve their differences and they chose litigation as their path. ... They have been rebuffed many times now."

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