BGE bombshell could become story of the year

Public Editor

March 19, 2006|By PAUL MOORE | PAUL MOORE,PUBLIC EDITOR

When the story of Baltimore Gas and Electric Co.'s looming price increase broke, two numbers shocked its 1.2 million residential customers: a 72 percent annual rate increase that would add $743 a year to the average bill.

Maryland lawmakers intended deregulation as a means to generate competition and lower prices. Instead, when the five-year rate cap expires on July 1, deregulation will hit consumers like a ton of bricks.

Covering the many aspects of the BGE story - from the painful ramifications for those on fixed incomes, to possible General Assembly action, to the effect on BGE parent Constellation Energy's plans to merge with Florida Power & Light - may be The Sun's most important mission this year.

As reporter Paul Adams has described, the energy market is vastly different from what legislature and regulators envisioned when deregulation was approved in 1999.

The deregulation bill, sponsored by leading Democrats and supported by Gov. Parris N. Glendening, was approved when oil was cheap and natural gas prices were also low. Most believed that Maryland was too dependent on (then) more costly coal and nuclear power, and that the state needed access to cheaper electricity to stay competitive. Few then envisioned that oil would hit $60 a barrel and make coal and nuclear power look dirt cheap.

As Adams reported in his Feb. 20 front-page article about the first deregulated power auction - "Electric rate jolt coming" - the combination of events such as Hurricane Katrina and deregulation means profound changes for all BGE customers. Adams' article was the first to explain what was coming.

Readers have appreciated the newspaper's in-depth coverage.

"I want to thank The Baltimore Sun for its fantastic coverage of the BGE situation," said reader Christine Chisholm. "I can't name all the reporters individually, but I'd like every one of them to know that I appreciate their efforts."

From Brooke Mazurek: "Thanks for your reporting. I am only 16 years old and have no house of my own and have no electric bills to pay. ... For people who can barely afford to bring food home to their families, this $743 increase is going to tear them apart."

Not everyone praised The Sun's reporting. A March 12 front-page interview with Constellation Energy CEO Mayo A. Shattuck III brought this from reader Bill Metzger:

"You need to find out for all the BGE rate-payers the answer to the following question: How much money are Mayo Shattuck and all the vested VP's of Constellation Energy making off the FP&L deal? Ultimately, the BGE rate-player is footing the bill."

In my view, the interview was an interesting dissection of business strategy but left many readers, such as Metzger, with the sense that Shattuck was not pressed hard enough about the anger and desperation many energy consumers feel.

Business columnist Jay Hancock's recent pieces have focused on how the consumer will be affected. A review of Hancock's columns shows that he raised questions as early as 2001 that are especially relevant today.

In an Oct. 3, 2001, column, "Lapse by Md. regulators means higher electric bills," Hancock questioned why each Maryland BGE consumer had begun paying an extra monthly charge of $4.60 - called a "stranded cost" - to compensate for what BGE and Constellation claimed was a major decline in the value of the Calvert Cliffs nuclear plant. The problem, as Hancock noted, was that nuclear plants were no longer a loss but a growing asset. Today, Calvert Cliffs is extremely profitable.

When the "stranded cost" payment expires July 1, it will have generated $528 million for Constellation from the same BGE ratepayers who had already footed the bill for building Calvert Cliffs.

Hancock's March 8 column brought readers up to date about Calvert Cliffs. "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.'"

In his March 12 column comparing BGE and Detroit Edison, Hancock shows how consumers in deregulated Michigan are paying a third less than BGE's customers will because regulators forced Detroit Edison to hold onto its own coal and nuclear generators - passing the low cost to ratepayers.

Hancock also wrote: "Maryland politicians tried to promote competition by making BGE shift ownership of its low-cost plants to someone else - in this case to its parent company, Constellation Energy. The result: The Constellation plants sell electricity to anybody for any price they can get, reaping nice profits in today's inflated market instead of passing savings from low production costs to BGE customers, as would have happened without deregulation."

The BGE/Constellation story will only get hotter as the summer heat envelops Baltimore.

Paul Moore's column appears Sundays.

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