In the first competitive test of electricity deregulation in Maryland, price-freeze rates ended yesterday for hundreds of Baltimore Gas and Electric Co.'s largest commercial and industrial customers.
Of BGE's 412 largest customers - known as Schedule P customers - 363 have entered into long-term contracts with alternative electricity suppliers to lock in stable rates.
Starting yesterday, Schedule P customers who chose to remain with BGE are being charged spot market prices for power.
Until now, rates for BGE commercial and residential customers have been capped under a rate freeze that kicked in when deregulation began nearly two years ago. BGE's largest commercial and industrial customers began shopping around as the July 1 deadline approached, but most waited until June to lock in a contract.
"There was a flurry of activity last month," said George R. Owens, president of Columbia-based consulting firm, Energy and Engineering Solutions Inc. "For those that chose to stay with BGE, if there's a shortage of power or the weather skyrockets for several days, and the price of electricity goes up, I think they'll start looking.
"They'll see immediately on their bills next month," Owens said. "They could get hit with a huge increase. Or, they could be OK. The real challenge to this whole game is trying to predict what prices are going to do in the marketplace."
Owens and other energy consultants, who worked with large customers, said the electricity market was reasonably active with about a half-dozen energy suppliers, including BGE affiliate BGE Commercial Building Systems, offering long-term contracts. They also said that many that waited until last month to sign contracts found prices slightly higher than BGE's price freeze rates, which were set at 3.87 cents per kilowatt hour for the average Schedule P customer. Some of those who signed contracts earlier in the year found rates that were lower.
"How much an individual customer pays in 2002 depends on how they use energy and on market prices," said Ruth Kiselewich, BGE's director of special projects and supplier services. "Market prices are very volatile. What they pay any given hour or any given month can be very different."
BGE was unable to say how many Schedule P customers entered into contracts with BGE Commercial. But consultants say positive results from Maryland's first test of deregulation could bring more competition for other smaller customers down the road.
"This went very well," said Bert Wilson, a principal in South River Consulting LLC in Columbia. "I think it's because they didn't have a choice but to move. There wasn't a regulated rate cap for BGE's Schedule P customers to fall back on. It could mean a smooth transition when it comes time for BGE's other customers to choose, as well."
The next test group in Maryland will be Conectiv's commercial and industrial customers in Harford County and the Eastern Shore. They must choose by July of next year.
In BGE territory, the rest of BGE's commercial and industrial customers will be forced into the market in July 2004. Residential customers will have to choose in 2006.