Outages, fees tarred image of CEG suitor

Out-of-state ownership likely to be felt locally

December 16, 2005|By MEREDITH COHN | MEREDITH COHN,SUN REPORTER

Any possible ownership transformation for BGE's parent company has consumer advocates from around the country saying there could be changes to the way residential energy customers pay their bills, who takes their complaints and how much money is spent to keep up the system that brings them light and heat.

Executives for Constellation Energy Group Inc., the parent company of Baltimore Gas and Electric Co., and potential buyer FPL Group Inc. are not commenting on their plans - and a sale of BGE is not assured even if Constellation assets are purchased. But if BGE does change hands, local customers have only the experiences of other acquisitions and FPL's record and reputation for clues on how they will be treated.

Service typically suffers when out-of-town buyers take over local utility companies, advocates say, based on mergers elsewhere. But FPL has made no other major utility purchases outside Florida. And recent hurricanes and fuel price spikes that led to unprecedented rate increases in that state have put a mark on the company that had enjoyed a relatively good reputation for maintenance and service.

"FP&L's popularity level, or whatever it was, was not bad," said Mike Twomey, a lawyer and ratepayer advocate of FPL's subsidiary utility Florida Power & Light Co. "Their service has been, by and large, pretty good over the years. It dropped markedly this year."

He said the public was stung this year when Florida Power & Light asked for a surcharge to cover 2004 hurricane damage. That fee and another to cover rising fuel prices totaled $18.67 a month and was the largest increase in memory. Further, Twomey said, power remained out longer during this year's hurricanes.

Government officials, including those at the Florida Public Service Commission, are investigating.

A spokesman for the commission, which approved the surcharges, agreed the company suffered a blow to its image because of the fees and perceived service lapses.

For its part, Florida Power & Light officials initiated a public relations campaign to explain why the increases were necessary after three hurricanes caused unprecedented damage in the state's most populated counties. The company also finds itself defending why another customer charge may be on the way to shore up a depleted hurricane reserve fund.

On the maintenance front, the company said it hired an engineering firm to evaluate its system to find ways to lessen damage in the future and get service back on line faster.

"It's not a situation we're happy with, and we know customers aren't happy with it, but the more we can get out and explain, the more they understand," said Bill Swank, a spokesman. "It's not something we're ever going to make them like."

In Baltimore, BGE suffered a similar customer backlash in the past by consumer advocates for not doing enough to protect lines from overgrown trees. It became an issue in 2003 after the historic blackout in the United States and Canada and a devastating storm season. In response, BGE made more aggressive efforts to manage tree growth.

The company, which has more than 1 million electric utility customers and more than 600,000 natural gas customers in Maryland, could not raise rates because of caps - which come off next year.

A spokeswoman for the Maryland Public Service Commission, which held hearings after the 2003 storm season and high number of complaints, said the agency was pleased with the responses from the state's utilities.

It's hard to say if the public was pleased.

People only pay attention when something goes wrong, said Tim Brennan, a professor of public policy at University of Maryland, Baltimore County.

Across the country, utility sales have provided mixed results to local consumers.

Charlie Harak, a staff attorney with the National Consumer Law Center in Boston, which represents low-income consumer groups, said companies merge because they can achieve economies of scale, save on maintenance and service costs and, possibly, provide better service for lower rates.

But it also can mean the local offices close and there is less communication with local regulators, lawmakers and customers.

"It could go either way," Harak said. "But what has happened in similar out-of-state takeovers is that the out-of-state company tends to deplete resources, human and capital."

Tim Morstad, a policy analyst with Consumers Union in Texas, said that when British company Centrica bought Central Power & Light Co.'s retail operation in 2002, the immediate effect was local job losses in South Texas.

That led the company to close some local offices where residents had paid their bills for years. The company also established a Florida call center to field consumer questions and complaints, but residents found that some members of the office staff were not familiar with the area and the call center couldn't always provide timely responses.

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