Baltimore Gas and Electric Co. asked state regulators yesterday to allow the utility to offer fixed-price contracts to its natural gas customers, triggering widespread anger from rival suppliers who said granting such a request would kill competition in the region.
BGE told a meeting of the Maryland Public Service Commission and competitors that allowing customers to buy natural gas at a fixed price for a 12-month period would help stimulate the unregulated gas market.
The utility also said the contracts would help shield consumers from price fluctuations that doubled or tripled energy bills in the winter of 2000-2001.
Other suppliers competing in the Baltimore region demanded that the PSC immediately reject BGE's request. Allowing the local utility to offer fixed-price contracts would be taking the state a step back from creating competition in the natural gas market, the companies said.
"If this is accepted today ... it would close the door on opening competition that you helped build," David Zabetakis, president and chief operating officer of Pepco Energy Services, told PSC commissioners. "We would simply go away. We would hate to see that happen, but we can't compete against BGE."
Representatives of Washington Gas Energy Services, Total Gas & Electric Inc. of New Jersey and MxEnergy.Com Inc. of Connecticut also said granting BGE's request would give the utility unfair advantages over the competition.
"BGE's customers have made it loud and clear that they want choices, and they want BGE to provide those choices," said BGE senior attorney Beverly A. Sikora.
She pointed to a recent company survey that found more than 60 percent of BGE's residential customers expressed interest in a fixed-price service from the utility. "The purpose of competition is to benefit customers, not benefit competitors."
Sikora said all supply and price risks associated with offering fixed prices to customers would be borne by shareholders of Constellation Energy Group Inc., BGE's parent.
If prices rose in a given month, BGE would not renege on its contract with customers by raising prices that month. If the company purchased too little or too much natural gas for its customers, company shareholders would have to swallow the costs.
The PSC commissioners conceded that BGE's fixed-price plan could be attractive to residential customers, but they expressed concern about its financial prudence.
"There have been price spikes in the past," said PSC Chairman Catherine I. Riley. "Why would [BGE] go to fixed-price offering now? ... In a world that is still volatile, why do you think you can do what no one else has been able to do?
"Other regulatory companies have not been able to make it work; other suppliers have not been able to make it work, BGE Home [BGE's unregulated affiliate] has not been able to make it work."
Riley was referring to the winter of 2000-2001, when natural gas prices rose so high that thousands of customers were having difficulty paying their heating bills.
As the cost of natural gas continued climbing, several alternative natural gas suppliers serving Central Maryland terminated with little or no warning what were supposed to have been guaranteed, yearlong, fixed-price contracts.
The pullout left thousands of customers to contend with higher prices and few choices for new suppliers.
In February last year, the PSC ordered all gas and electric companies in the state not to cut off utility service to low-income customers until the end of March because of the rapidly rising energy prices, a colder-than-usual winter and computer glitches that delayed state assistance to low-income families.
BGE officials said the company's knowledge of the regional gas market and its vast hedging experience would help it avoid financial harm.