Reducing the juice

Many are resigned to 72% rise in rates, while others fear they're unaffordable

March 19, 2006|By TRICIA BISHOP AND ANDREA K. WALKER | TRICIA BISHOP AND ANDREA K. WALKER,SUN REPORTERS

With a 72 percent electricity price increase from Baltimore Gas and Electric a few months away, Scott Sweeney is preparing the same way as many Marylanders: by doing nothing.

"I'm taking a sit back, wait-and-see attitude," he said. "I know it's coming, but I'm not going to worry too much about it until it hits me."

But even then, with an annual bill estimated to be $743 higher on average than usual, the radio station advertising salesman doubts he will change his habits much. "As consumers, it just sounds like there's really nothing we can do about it," Sweeney said.

Through deregulation, various states are ushering in a new era of electricity meant to lower prices, lead to more energy production and give the public a choice in power suppliers. But results thus far have been mixed, often characterized by price spikes and power shortages. Most of the competitors who stepped forward to challenge in-place utilities eventually went out of business.

Deregulation ultimately changed the airline, telephone and other industries, stimulating the competition hoped for in the power industry. Still, it took a generation for those markets to evolve.

In Central Maryland, the end to six-year-old electricity price caps in July has caused legislators to debate ways to ease the financial sting, many BGE customers to wring their hands and economists to debate whether deregulation truly works for electric power.

But few will go so far as to proclaim that consumers and businesses are about to profoundly change the way they use energy or the way they choose appliances that require it.

Witness the public's reaction to spikes in gasoline prices.

The Arab oil embargo of the 1970s pushed gasoline above $1 a gallon and helped Japanese automakers make gains on U.S. manufacturers with compact cars. But by the 1990s, Americans motorists returned to larger vehicles than ever and didn't seem to think twice about it - until pump prices temporarily passed $3 a gallon after the Gulf Coast storms last fall.

A recent study in California concluded that electricity demand, like gasoline usage, decreases about 1 percent for every 10 percent increase in price.

Electric power utilities have long been considered by many the last government-sanctioned monopoly. But intense lobbying efforts, led by electric companies such as the now-bankrupt Enron Corp., kicked off the beginning of the end to that singular status, starting first on the West Coast in the mid-1990s when California deregulated its electricity.

Soon after, the Golden State experienced shortages and price fluctuations, which eventually helped Arnold Schwarzenegger topple Gray Davis as governor in 2003. The problems were attributed to a faulty deregulation plan taken advantage of by utilities - including BGE's parent, Constellation Energy Group, and more famously, Enron - which paid billions in penalties for those infractions.

As a result of the energy crisis, California today is at the forefront in helping consumers lower power costs, with state tax credits for residents who install solar panels or trade old appliances for more energy-efficient models. And builders there have led the way in making houses that consume less energy.

Predictions for what will happen in Maryland - among two dozen states that have followed California's lead, though some have since backtracked away from it - are diverse.

"Some people might be able to moderately adjust their usage, but for the most part, consumers are kind of locked in to the amount of energy they can use," said Tyson Slocum, director of the energy program at Public Citizen, a consumer advocacy group founded by Ralph Nader.

Others claim the rise in electricity prices, if long lasting, will be the straw that breaks old habits.

Homebuyers might shy away from vaulted ceilings, which are aesthetically pleasing, but waste heat. People could use less expensive stoves, like those that burn pellets made of sawdust to generate heat, in place of electrical systems. Energy-efficient light bulbs could become more necessity than novelty.

Robert Dye, senior economist at Moody's Economy.com, points out that energy bills are much more static than gasoline costs, which make them slower to drive changes in behavior.

"They don't go up and down on a daily basis. You need a lot of momentum to push these prices. So when they go up they probably won't come down," Dye said. "This is going to have a long and lasting impact on people's purchasing behavior."

Still, the number of people turning to solar panels or heating their homes by burning corn and wood pellets, while rising, represents a tiny fraction of the whole.

Most are oblivious

"Generally, people don't respond unless you hit them in the pocketbook, that's just a fact of life," said Dennis Moran, a researcher at the University of Maryland's Center for Environmental Energy Engineering. "I think most people are oblivious to how serious the situation is in the long term."

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