Regulators face power imbalance

PSC ill-equipped to do battle with utility companies

Short on staff, funding

Similar problems trouble commissions across the nation

April 01, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

In the complex world of electric restructuring that has transformed a traditionally staid industry into an ambitious free market, the role of Maryland's top utility cop is changing as rapidly as the sector it oversees.

No longer responsible only for ensuring that consumers get safe, reliable and affordable energy, the Maryland Public Service Commission is facing far greater challenges as it scrutinizes longtime monopolistic utilities that are racing to merge, build and strengthen. But despite the enormity of its task, the agency is operating at virtually the same level of staffing and funding it was a decade ago - leaving critics to question whether the PSC is outgunned and overwhelmed.

In 1999 the PSC was handed the complex task of overseeing electric deregulation in Maryland, which began int July. This year alone, Potomac Electric Power Co. announced plans to merge with Delaware-based Conectiv in 12 months to become the region's largest delivery company; Allegheny Energy Inc. bought an energy trading unit to become one of the top 10 power marketers in the country; and Constellation Energy Group Inc. wants to spit into two independent billion-dollar companies.

"We are feeling it," said Gregory V. Carmean, executive director of the PSC, which also oversees taxi, telecommunications, water, gas and sewage companies. "The commission has been pressed for total resources. We're understaffed. Our turnover ratio has increased. And, we've had so many more responsibilities added."

As electricity deregulation spreads across the country, state regulatory commissions are facing similar problems.

Still responsible for the regulation of electricity delivery, commissions are grappling with new issues such as alternative suppliers, the "unbundling" of services like power generation and transmission, interconnections and trading partner agreements.

And the companies themselves are changing. They are selling off or transferring power plants to subsidiaries. Generation companies on the East Coast are selling electricity to West Coast utilities.

With open access to transmission lines, power suppliers across the country can sell power anywhere.

State commissions with insufficient budgets, small staffs and limited resources are trying to rein in all that chaos. They're also trying to make sure that a crisis like California's - with rolling blackouts, near-bankrupt utilities and sharply higher rates - doesn't happen in their own back yards.

"With deregulation, you would think we would need less regulators," said Harvard University energy expert William Hogan. "But I would say that the new world that's being created by all this reorganization and restructuring is paradoxically more difficult and requires greater expertise.

"When all this was one thing, they were just regulating what the final price of electricity was to the household. But when you take the pieces apart, you want to make sure each piece operates independently and you want to make sure you know how the pieces operate together," Hogan said.

In Maryland, the PSC's toughest challenge after starting deregulation last year could come from Constellation.

Under Constellation's plan to split in two, the company that retains the Constellation name would be a fast-growth unregulated business that would both generate and sell power nationwide. The other would be the regional electric company, BGE Corp., which would include Baltimore Gas and Electric Co.

The transaction, which would give Goldman Sachs Group Inc. partial equity in the new Constellation, involves dividing assets, subsidiaries, personnel, equipment and office space and equipment down to the very last chair.

It requires the Federal Energy Regulatory Commission to approve the transfer of generating plants to the new Constellation Energy Group; the Nuclear Regulatory Commission to allow the transfer of Calvert Cliffs nuclear plant's operating license; a Justice Department antitrust review; and an Internal Revenue Service ruling.

It also requires close examination from the PSC, although whether Constellation needs the commission's approval is a point of contention. The PSC says yes, Constellation says no, but both sides have agreed to cooperate.

"We have a long-term commitment to this area," said Constellation's general counsel, Robert S. Fleishman. "We want to make sure that the PSC has adequate information so that they are satisfied that there is no negative impact."

At Constellation, a $3.8 billion company, more than 100 professionals assigned to various committees and subcommittees are meeting weekly to accomplish the enormous undertaking. The company has also hired a consulting firm, has 23 in-house lawyers and the money to hire outside counsel.

In contrast, the Maryland PSC has an annual budget of $9.4 million and about 130 attorneys, accountants, economists, engineers, administrative and support staff who work on multiple issues.

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