Electricity plan called a failure

People's Counsel says deregulation falls short of goals

Little competition found

Only tiny percentage can select alternate energy supplier

January 17, 2002|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

In the first major examination of Maryland's effort to restructure the electricity market, a report released yesterday by the People's Counsel said that deregulation has failed to produce competition and new services for residential customers since it began 18 months ago.

The report recommended that until there are clear consumer benefits, the Maryland General Assembly should consider suspending electricity choice for the state's 1.8 million residential customers who could face higher prices and no alternative energy suppliers.

Legislators should also consider forcing state utilities to continue supplying power to residential customers who have not switched to another supplier once price caps begin expiring in two years, the report said.

"We don't really see benefits in a state like Maryland, which had average to below-average prices to start with," said People's Counsel Michael J. Travieso, the state advocate for residential customers in utility matters.

"There's so much instability in the sector. There's volatility in the wholesale price market. There are changing federal rules, Enron Corp.'s collapse and the happenings in California. All sorts of things that didn't exist in 1999 when the deregulation statute was adopted.

"There are real concerns about what will happen to residential customers," Travieso added. "In light of everything that has happened, there is evidence that bad things will happen to residential customers."

In the 18 months since deregulation began, 2.6 percent of the state's residential customers have switched to an alternative energy supplier and only one company is soliciting new residential customers, according to the report.

In the Baltimore Gas and Electric Co.'s service territory, the report said that only 14 residential customers had switched to another supplier.

BGE officials yesterday disagreed with the recommendations.

"We clearly think the need for the legislature to revisit electric choice is unnecessary," said Charles B. Welsh, a BGE spokesman.

"We're fairly confident that, by 2006, there will be an active and competitive market in Maryland. We don't share the [the People's Counsel's] concern that there will be higher prices and scarce supply. We think it's grossly premature for them to come to that conclusion," Welsh said.

The Maryland Public Service Commission, which oversees and regulates utility matters in the state, declined to comment because officials had not received a copy of the People's Counsel's report.

With the start of deregulation in the summer of 2000, Maryland residential customers were given the power to switch to an alternative energy supplier.

But to give the market time to develop, the deregulation law also gave residential customers some protection in the form of price freezes, rate caps and low-income assistance.

State law also required utilities to provide electric service - known as standard offer service - to customers who do not switch to another supplier until July 1, 2003. At that time, state law requires a competitive bid for SOS customers.

But with little competition available and volatility in the market, the Travieso report suggests that legislators should require state utilities to continue serving as the provider of last resort once price caps are lifted. Not doing so would leave residents vulnerable to whims of the market, the report says.

Those rate caps expire in July 2006 for residential customers in the Baltimore region and in July 2004 for other parts of the state.

"While residential consumers are benefiting from mandated price reductions and price caps, they have seen no real savings from competitive retail electric markets and have no real opportunity to switch between electricity suppliers," the report says.

Maryland's Electric Choice Program has not produced any new products, bundled services, distributed generation options, special billing or payment arrangements for customers, the report by the People's Counsel stated.

Add to that, Travieso said, risks within the energy sector that have cropped up over the past year, including power price manipulation in some markets, the financial instability of many energy companies and continuing changes to federal energy regulations.

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