Lawmakers wary of merger

More testimony sought from energy firms before deal is done

General Assembly

February 28, 2006|By ANDREW A. GREEN | ANDREW A. GREEN,SUN REPORTER

Maryland lawmakers want more testimony from Baltimore Gas and Electric Co.'s parent company and the Florida utility that is buying it to make sure consumers will be protected after the deal is completed.

Members of a Senate work group on energy deregulation said they see a clash of events that could sock Marylanders with sharply higher electric bills in the next few months -- the proposed merger, the end of rate caps and possible pollution control legislation -- and they want more answers from Constellation Energy and FPL Group executives, possibly under oath.

"There's kind of a perfect-storm aspect of this where in 43 days when we adjourn [at the end of the General Assembly session], the utility companies are going to be left dealing with all of this," said Sen. E.J. Pipkin, an Eastern Shore Republican. "This is extraordinary. You could go decades without this happening, yet here it is in Maryland, all in one year."

Sen. Leo E. Green, a Prince George's County Democrat who has been critical of the proposed merger, said he is worried about FPL's maintenance record in Florida and about the bonuses executives for the two companies stand to receive if the deal goes through.

He has introduced a resolution calling on the attorney general to represent the public in merger hearings before the Public Service Commission, and he said yesterday he is exploring legislation to require General Assembly approval of the deal.

Constellation spokesman Robert Gould said the company's executives are committed to making the merger open and transparent and would be happy to testify again before the Senate.

The Public Service Commission has a preliminary hearing today on the merger and a hearing on a rate stabilization plan to mitigate the effects lifting the caps will have on consumers. Analysts expect BGE customers will see rate increases of 40 percent to 80 percent beginning this summer. Customers of other utilities in the state have seen similar increases in stages over the past few years.

The reason rates are likely to go up so much is that BGE customers have long been paying far below market rates, Gould said. As a result of 1999 legislation that deregulated electric utilities in Maryland, rates have been fixed at 6.5 percent below 1993 levels. Since then -- and particularly in the last year -- global energy prices have risen steeply, Gould said.

"Somebody is going to have to pay for the market price," Gould said. "If BGE is forced to absorb that cost, it's going to be a significant financial strain."

Several senators and delegates have also introduced bills to mitigate the increases, and the Public Service Commission staff, at Gov. Robert L. Ehrlich Jr.'s request, is formulating plans of its own.

Some proposals would involve phasing in the increases over a number of years or modifying rates so consumers pay more in months when they use less electricity. Others call for delaying the rate increases until after the merger is approved. A plan being developed by the PSC staff would allow consumers to defer a portion of the increased rates but would force them to repay BGE with interest.

"The company is effectively going to be offering you a high-interest loan?" said Del. Brian K. McHale, a Baltimore Democrat who sat in on the work group meeting. "Thanks, but no thanks."

Gould said BGE officials are aware of the hardship consumers may face when the rate caps are lifted. To help mitigate the problem, they have committed an additional $26 million over the next few years to programs such as the Fuel Fund to help low-income consumers, he said.

Sen. Katherine A. Klausmeier, a Baltimore County Democrat, said the legislature "was sold a bill of goods" when it agreed to deregulate the electricity marketplace in Maryland. Lawmakers were promised that competition would drive down costs, but years later, retail consumers are seeing no competition, she said.

"I think we need to re-evaluate this whole deregulation situation," Klausmeier said. "If it's not working, we've got to figure out a way to fix it."

PSC General Counsel Susan Stevens Miller said the state continually holds meetings with electricity suppliers in an effort to establish a competitive marketplace, but the rate caps have made the state unattractive.

"They want to see what the market is going to look like when the price caps come off," she said. "Their argument is they can be competitive against market prices better than they can be against the below-market prices now."

andy.green@baltsun.com

Today in Annapolis

House of Delegates convenes at 10 a.m.

Senate convenes at 10 a.m.

Hearings of interest:

The House Appropriations Committee holds a hearing on legislation (HB 89) that would require the governor to include $7 million in the governor's budget for health care for immigrant children and pregnant women. The hearing begins at 1:30 p.m.

The Senate Judicial Proceedings Committee hears testimony on a bill (SB 757), which would revoke the driver's licenses of people convicted three times in a three-year period of providing alcohol to those younger than age 21. The hearing begins at 1 p.m.

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