While the country watches the California power meltdown, the key to whether Marylanders will escape similar skyrocketing prices, near-bankrupt utilities and even darkness rests in the hands of electricity traffic cops based 25 miles north of Philadelphia.
Their job is to run the largest power grid in North America and guarantee a steady flow of electricity to 22 million people across five states and the District of Columbia.
To accomplish that, these technicians of power - at what is known as the PJM Interconnection - manage the buying and selling of electricity, spur power plant construction, enforce strict rules on member utilities and keep a constant vigil over the mid-Atlantic region's growing energy needs.
State and industry officials are banking on PJM's 73 years of experience to make sure deregulation succeeds in Maryland, or at least doesn't produce the debacle that it has in the Golden State.
Experts caution that there are no guarantees, however, and though Maryland and California deregulation laws differ in important respects, critics say the similarities are enough that the state's utilities and their customers could face higher power prices in years to come.
"Now that you've opened the electricity market, markets will perform the way they are supposed to, which is to make the most money that they can," said Janee Briesemeister, a senior policy analyst with Consumers Union, a consumer advocacy group that tracks the utility industry.
"If the market is setting a price, you will always risk that the market will set a very high price. Just look at California. Anyone not paying attention to that and looking to their own state would be considered foolhardy."
With Maryland barely six months into its deregulation plan, California's crisis has caused anxiety closer to home. In the weeks since the first rolling blackout hit California, calls from community and business leaders and Maryland legislators have swamped key figures who helped create the Baltimore region's deregulation plan, including the Maryland Public Service Commission, the Office of the People's Counsel and the state's biggest utility, Baltimore Gas and Electric Co.
The central question is whether what is happening in California will happen here.
Most experts say it won't, but they caution that predictions, especially about something as complex as deregulation, are never a sure thing.
The flaws in California's 1996 deregulation plan now appear starkly apparent, but five years ago, it was hailed as the model for the rest of the nation. Drawn by the promise of competition and lower prices, other states rushed onto the bandwagon.
`I'm not convinced'
"I just don't think there are enough protections and enough of a track record to tell my constituents to rest easy and that there's not going to be a problem," said Sen. Paul G. Pinksy, a Prince George's County Democrat who questioned the deregulation law Maryland lawmakers passed in 1998. "I'm not convinced. I think it was ill-conceived when we did it."
There are striking parallels between the two states.
In what they thought was a way to ensure competition, California lawmakers forced the state's three largest utilities to sell their generation plants to other companies. The utilities also got to recoup the money they had invested in those plants and hadn't recovered - so-called stranded costs - from rate payers.
To insulate customers from price jolts, ceilings were placed on what utilities could charge for power, at least until the stranded costs were collected. Finally, lawmakers forced the utilities to buy electricity on the daily spot market through a new California Power Exchange. Utilities were forbidden to enter into long-term, fixed-rate contracts with power suppliers, leaving them vulnerable to a volatile, wholesale market.
In Maryland, the utilities were required to shift their generation plants to an unregulated entity by selling them, as Potomac Electric Power Co. did, or by transferring them to an unregulated subsidiary, as BGE did. The utilities also were allowed to collect stranded costs.
Customers got rate reductions for three to six years to protect them from price fluctuations. State lawmakers said that provision was included to give competition time to grow.
The big way Maryland's deregulation differs from California's is that in Maryland, the utilities were given the freedom to hedge their bets against price volatility. Utilities such as BGE can enter into long-term contracts with power suppliers and mitigate their risk by locking in prices.
"When California required its large utilities to buy on the spot market, they thought they could accelerate competition that way," said Gregory Carmean, executive director of the Maryland PSC. "They never saw the downside. They never thought that would put the utilities at risk."
That mistake proved disastrous, especially because California was already headed for a power shortage.
