Pepco fights bill to let counties shop for lower electrical rates

House passes measure to foster competition in P.G. and Montgomery

April 02, 2003|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Pepco Holdings Inc. launched a lobbying campaign yesterday to defeat a House-passed bill that would allow two Maryland counties and their municipalities to shop for lower electricity rates on behalf of their citizens.

The House bill would create a pilot program in Prince George's and Montgomery counties, where Pepco is a major power supplier.

Starting Oct. 1, the bill would let each county, or its incorporated subdivisions, sign deals with licensed power suppliers to buy electricity in bulk for residents and small businesses in their areas, a practice known as aggregation.

Prior versions of an electricity aggregation bill have been defeated in the past, but yesterday the House passed the bill, 93-44, and the Senate is expected to consider it this week.

Supporters of the bill say it will help spur electric competition in Maryland. But Pepco said the legislation could put the reliable supply of electricity in those counties at "high risk" and lead to higher prices.

"If this is such a good thing, why aren't they doing this state-wide?" said John M. Derrick, chairman and chief executive of Pepco Holdings, the Washington parent of Potomac Electric Power Co. and Conectiv Power Delivery.

"It would be disruptive to these two counties in the state, which happens to be our service territory. If a supplier goes belly-up or it encounters credit problems, the county or municipality would have to take on the credit risk under aggregation.

"Opt-out aggregation is, in our opinion, like slamming," Derrick added. "Customers would have to participate in the aggregate program unless they opted out through written notification. This basically takes choice away from them. The choice is already made for them."

Pepco Holdings sent letters yesterday to legislators in both counties urging that they reject the bill.

Maryland electricity customers have had the right to choose an alternative power supplier since deregulation took effect in August 2000. But artificially low residential price caps in each service territory have slowed the development of competition, critics say.

Pepco, according to February statistics from the state Public Service Commission, has lost the most customers to competitors, with 14.7 percent of its residential customers and 25 percent of commercial and industrial customers choosing an alternate supplier.

But Pepco still provides service to about 84 percent of all electricity customers in Prince George's and Montgomery counties.

Fewer than 1%

Fewer than 1 percent of all customers have switched in the areas served by Baltimore Gas and Electric Co. and Allegheny Power, according the PSC.

Allowing counties and municipalities to serve as an aggregate buyer for residents and small businesses, which have little buying power on their own, could help them find lower rates by buying energy in bulk, said Del. James W. Hubbard, a co-sponsor of the House bill.

Governments in Maryland already have the power to purchase electricity in bulk in behalf of schools and other agencies.

"This is all a bunch of garbage," said Hubbard, a Prince George's County Democrat, in characterizing Pepco Holdings' efforts to squash the bill.

"Standing alone, a residential customer has no power whatsoever to negotiate a better rate. This bill levels the playing field so that the counties and big cities like Bowie, Rockville, Gaithersburg and Greenbelt can save their residents and small businesses some money.

`Scare tactics'

"Pepco and all these other big utilities in the state are using scare tactics to defeat the bill," Hubbard said. "This doesn't force anybody to aggregate. It just gives the consumer a choice. We've allowed this market to attempt to surface on its own in the last five years and it hasn't happened. I guarantee you that this will open up the electricity market."

The bill has received support from the Maryland Municipal League, Maryland Association of Counties, the county executives in Prince George's and Montgomery counties, the state Office of People's Counsel, which represents residential consumers in utility matters.

Other utilities in the state have supported "opt-in" aggregation in the past, which requires each customer to actively elect to participate in an aggregating group.

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