Utilities, PSC appeal decision

Md.'s highest court is asked to reconsider verdict of April 8

Case could affect deregulation

Guidance is sought over regulatory policies and how they were issued

April 20, 2002|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

State utilities and their watchdogs have asked the Maryland Court of Appeals to take the rare step of reconsidering an opinion it issued April 8 on regulatory policies that prohibit utilities from sharing resources and assets with their affiliates.

In what has become a 2-year battle over the guidelines for Maryland utilities and their affiliates, the companies are now pushing the state's highest court for a review of the merits of the case, particularly whether the PSC policies put them at a competitive disadvantage against out-of-state rivals.

Regulators, on the other hand, are urging the court to re-evaluate its ruling that Maryland Public Service Commission should have used a broader, more time consuming procedure to issue its guidelines.

Whatever the court decides, the outcome could help determine how electricity deregulation moves forward in the state and could change the way the PSC conducts business.

"It's time for the courts to rule on the merits of the utilities' objections," said lobbyist Gary Alexander, who said he planned to file a motion Monday in support of both requests for reconsideration. "In order for choice and competition to work in Maryland, there must be a strong and effective code of conduct in place to level the playing field for competitors.

"It's also important for the court to address the procedural question because it could affect a lot of PSC orders before June 2000 dating back to 1978," said Alexander, whose clients include companies that want to compete against the state's utilities. "The PSC has to have flexibility. We agree with both motions."

The court decision grew out of a PSC order, issued June 30, 2000, restricting traditional gas and electric utilities' right to share brand names, personnel and assets with their unregulated affiliates.

The order created a code of conduct that forced affiliates to pay royalties to the utility for using its logos or trademarks. It also limited how utilities could share personnel, attorneys and assets with their unregulated affiliates, and prohibited joint promotions and marketing.

Fourteen utilities - including Baltimore Gas and Electric Co., Potomac Electric Power Co. and Allegheny Energy Inc. - immediately took the commission order to court. They complained that the rules created unfair advantages for out-of-state competitors. The PSC order was upheld in Wicomico County Circuit Court, and the utilities appealed.

On April 8, the appeals court invalidated the code of conduct on grounds that the PSC had used the wrong procedure in adopting it.

The court ruled that instead of using "generic proceedings" to issue an order, the PSC should have held formal proceedings with public notification, public response and legislative review of the directives to adopt regulations that affected all utilities. Such a process could take as long as six months.

The court order touched off a scramble in Annapolis, where in the last hour of the legislative session, the General Assembly passed a financing bill with a hastily added amendment that allows the PSC to issue orders or regulations - effectively nullifying the court ruling. The legislation is retroactive to June 1, 2000.

Utility spokesmen said yesterday that the companies would not ask the governor to veto the legislation.

"We are not mounting any campaign to dissuade the governor from signing the bill," said BGE spokesman Charles B. Welsh. "It's not clear to us what the long-term impact of the bill will be at this time. We believe that we can work with the PSC on any procedural issues. Our focus now is on addressing the affiliates standards of this case."

Allegheny spokesman Guy Fletcher agreed, saying, "Our goal all along is to have the case decided on its merits."

The bigger issue, utility officials said, is that the code of conduct improperly allows the PSC too much authority over unregulated businesses.

In their motion, regulators asked the appeals court to reconsider its ruling on PSC procedure in light of the legislation deregulating natural gas and electricity in Maryland.

The court ignored the Electric Customer Choice and Competition Act of 1999 and the Natural Gas Suppliers Licensing and Consumer Protection, which specifically authorized the PSC to act by order or regulation, the PSC and Office of People's Counsel joint motion said.

"The court failed to address both acts by the legislature," said Susan Stevens Miller, PSC general counsel. "While the House bill protects everything after June 1, 2000, the decision could still affect all orders before that date."

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