15% cap on rate rise gains favor

Rest of BGE electricity increase would be phased in over 3 years

General Assembly

March 15, 2006|By ANDREW A. GREEN AND KELLY BREWINGTON | ANDREW A. GREEN AND KELLY BREWINGTON,SUN REPORTERS

A plan to limit electricity rate increases to 15 percent this summer with the remainder of the rise phased in over three years is gaining momentum among legislators reacting to a public uproar over the end of price caps.

The proposal has bipartisan support in the General Assembly, which is controlled by Democrats. It would provide consumers with a longer transition to market-rate electricity prices than would a Public Service Commission-approved plan that would send rates soaring 72 percent this summer, an average of $743 per household.

To keep rates down, legislators said, they want to recoup $528 million that customers of Baltimore Gas and Electric Co. have paid to the utility in the past few years to compensate for an anticipated loss in the value of its power plants, a loss that never materialized when energy prices surged.

Saying they might need a major bargaining chip to gain concessions for consumers, legislators threatened to hold up the proposed merger between Constellation Energy Group Inc., BGE's parent company, and Florida's FPL Group Inc., to force the Maryland utility to the bargaining table.

"We need to step back and make sure we have all the proper information and details to make sure the ratepayers receive the full return on their investment over the last 100 years," said House Speaker Michael E. Busch, an Anne Arundel Democrat.

Meanwhile, top aides to Gov. Robert L. Ehrlich Jr., who has been criticized by political opponents and some members of his party for not coming up with a plan to limit the increase, met yesterday with the four members of the Public Service Commission appointed since the governor took office in 2003.

The fifth member - Harold Williams, an appointee of Ehrlich's Democratic predecessor, Parris N. Glendening - said he was not invited to the meeting and also complained that the PSC staff had failed to provide alternatives that would have mitigated the sharp increase in rates.

Ehrlich Chief of Staff James C. "Chip" DiPaula Jr. said the meeting resulted from a chance encounter with Public Service Commission Chairman Kenneth D. Schisler, who was in Annapolis to discuss electricity issues with legislators.

DiPaula said the three other Ehrlich appointees to the PSC were also in town and attended the meeting. He said he did not intend to exclude Williams and would have been happy to meet with him.

"Right now we are in aggressive pursuit of solutions," DiPaula said.

Jack Schwartz, an assistant attorney general who advises the Maryland Open Meetings Compliance Board, said he could not comment on whether yesterday's meeting violated the Open Meetings Act.

In general, he said, state law says that if a majority of the members of a public body meet to discuss public business, the meeting must be open.

DiPaula said the governor is working with the commission and the legislature to craft a new plan to help consumers. He did not provide details.

Last week, the PSC approved a plan that would automatically defer all but 21 percent of customers' increased bills for two years but force them to pay 5 percent interest on the difference. Customers would be able to opt out of the plan.

Lawmakers of both parties aren't waiting for the governor toformulate a plan.

Sen. E.J. Pipkin, an Eastern Shore Republican, said he expects the Senate to take up legislation to force BGE to return to ratepayers the $528 million they paid after deregulation for the anticipated loss of value from its power plants, known as "stranded costs." A refund would probably be enough to prevent a catastrophic rate increase, he said.

The money was included in the 1999 deregulation legislation because legislators expected BGE's power plants - especially the nuclear plant at Calvert Cliffs - to lose value. Instead, Calvert Cliffs is more valuable than ever, helping make BGE's parent company an attractive target for a buyout, Pipkin said.

"I want to take the money back from Constellation and give it back to the customers of BGE," said Pipkin, the Republican nominee for the U.S. Senate in 2004. "That's where it came from, and I think that's where it should go back to."

BGE President and Chief Executive Officer Kenneth W. DeFontes Jr. said the utility has invested more than $1 billion in its infrastructure in recent years and that the "stranded costs" concept has been thoroughly examined in the courts.

Legislators in the House and Senate heard testimony yesterday on more than a dozen bills to protect consumers from the BGE rate increase, which has quickly become the dominant topic in this year's General Assembly session as lawmakers seek to avoid a shock to voters' pocketbooks months before the fall election.

"In November, the public isn't going to be talking about stem cell research; they aren't going to be talking about slots," said Del. Patrick L. McDonough, a Baltimore County Republican, referring to major issues the legislature has faced. "They are going to be asking, `What the hell is this bill all about and what did you do?'"

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