A proposed electricity settlement, ironed out after nearly a year of negotiations, would protect Maryland's residential and small commercial users from price spikes and erratic supply after rate caps on power begin expiring in 2004.
Against the backdrop of California's power crisis and faulty deregulation plans in other states, the proposed agreement would be expected to provide a safety net for the state's most vulnerable customers and encourage competition in the electricity market as deregulation progresses, parties to the settlement said yesterday.
Under the proposal, which is subject to approval by the Maryland Public Service Commission, local utilities such as Baltimore Gas and Electric Co., Potomac Electric Power Co. and Allegheny Power would continue to provide electricity at regulated prices to smaller customers who do not choose an alternative energy supplier for up to four years after the rate caps expire.
The proposal also would permit utilities to charge their customers a market rate based on wholesale prices, fluctuating seasonal costs and administrative expenses. Utilities also would be allowed to lock into one- to three-year power contracts for their energy supply. The agreement essentially would extend a certain degree of regulation over the state's electric industry, since rates would have to be approved by the PSC.
"This settlement gives us an overall framework to work with," said Calvin Timmerman, director of the research and economics division of the PSC, which regulates utilities in the state.
"We're trying to balance all these interests by protecting customers, treating utilities fairly and doing something that fosters competition.
"This gives us a base, but the next step is all the specifics that are needed to make the base work," Timmerman said. "That will include details in the procurement process and developing a model for power contracts. There's still a lot of work to do."
`Widely supported'
Twenty parties including the PSC staff, the Office of People's Counsel, the utilities, various energy suppliers and the Maryland Energy Administration agreed to the proposed settlement. The PSC will hold a hearing early next month before issuing a ruling on whether it approves or wants changes in the settlement.
"It was a widely supported settlement, representing a very diverse set of interests," BGE spokesman Charles B. Welsh said. "We think the settlement is equitable to all parties, provides supply and price stability to customers, and continues the orderly transition to a fully competitive market."
