Md. letting BGE zap customers

March 08, 2006|By JAY HANCOCK | JAY HANCOCK,SUN COLUMNIST

Regulators are on your side, Baltimore Gas and Electric customers.

They saw BGE household electricity prices about to spike 72 percent. They heard your protest, felt your outrage and ordered a plan that not only gives BGE the price jumps it wants but lets it collect interest on the unpaid balance if you can't handle your bill.

It's consumer protection, 21st-century style. Can't afford what The Man has to sell? We'll allow you to go deeper in debt.

This is not what Maryland needs or deserves.

Government hasn't come close to addressing the double-punch of BGE's looming rate shock and plans for BGE's parent to be acquired by a Florida power com- pany.

The "rate stabilization plan" announced by the Maryland Public Service Commission would stabilize rates the way the Corps of Engineers stabilized the 17th Street Canal levee in New Orleans.

BGE electricity prices will soar 72 percent after a five-year cap expires July 1, regulators disclosed yesterday. Unless ratepayers opt out, they go on an installment plan that limits immediate increases to 21 percent and lets BGE collect interest on the balance, which must eventually be paid.

Easy terms available! Bad credit OK!

But, you ask, what's the alternative? Wouldn't it involve reversing deregulation and possibly renegotiating the 1999 settlement that BGE and parent Constellation Energy reached with Maryland regulators?

Wouldn't that raise specters of state expropriation and add to Maryland's stellar reputation at the U.S. Chamber of Commerce?

Yep, but desperate times call for desperate measures.

BGE wants to pull nearly $400 million annually from the Central Maryland economy through its rate increases. BGE is an economically critical monopoly. The deregulation that allowed these increases was deeply flawed; it was sold on the notion that electricity prices would fall.

Regulatory intrusion that might be outrageous in another industry can be justified here.

And BGE/Constellation is likely to be open to renegotiation. Thanks to scores of millions of dollars in merger-related bonuses, Constellation bosses probably want to complete the company's marriage to Florida's FPL Group even more than they want to stick Maryland ratepayers with price trauma.

Gov. Robert L. Ehrlich Jr. and the General Assembly ought to make merger approval conditional on a better deal for Maryland families than a 72 percent price pop and easy financing.

If they're squeamish about molesting a corporate citizen, they should ask some impolite questions that could shed light on whether the 1999 deregulation was fair, whether a 72 percent increase is justified by higher fuel prices, as BGE argues, and how much BGE and Constellation would suffer if they got anything less.

Why will the municipally owned Hagerstown Light charge residential electric customers about 30 percent less after July 1 than shareholder-owned BGE?

Hagerstown Light shops in the same electricity markets as BGE, but Hagerstown households will pay only about 9.7 cents a kilowatt hour, based on what Hagerstown Light boss Karl Kohler told me yesterday, while BGE households get socked with 14.1 cents. What's up with that?

How can Constellation be booking record profits when it keeps complaining that the current, capped BGE rates are far below market prices? (For a hint, see next question.)

How much profit is Constellation making on the low-cost generation plants that BGE customers paid for and that Constellation took over after deregulation in a cash-free paper shuffle?

BGE's old generation assets were almost all coal and nuclear - the very cheapest way to make juice in today's market. But instead of passing the low costs on to ratepayers, as in the old days, BGE/Constellation gets to charge a deregulated price in a market driven up by high oil and natural-gas generation costs for other electricity vendors. Result: a huge markup.

On the same subject, what's the value of Constellation's Calvert Cliffs nuclear generators these days?

Over five years BGE customers have paid some $500 million to Constellation based on the bogus notion, pushed hard by the company, that Calvert Cliffs would plummet in value after deregulation and that Constellation deserved to be compensated for the "loss."

You know what happened. Re-licensed in 2000, unburdened by huge costs borne by today's oil and gas generators, Calvert Cliffs is worth a mint. There probably was no "stranded cost."

I don't know the answers, but I'm trying to find out. Meanwhile, BGE/Constellation, how about rebating the $500 million as a step toward easing the rate shock?

jay.hancock@baltsun.com

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