Rate phase-in draws fire

BGE plan would spread increases and offer aid

March 23, 2006|By KELLY BREWINGTON | KELLY BREWINGTON,SUN REPORTER

A confidential draft plan from Baltimore Gas and Electric Co. that would spread a huge utility rate increase over eight years fails to protect customers in the long run, lawmakers said yesterday as they resumed threats to delay a proposed power company merger to negotiate a better deal for ratepayers.

But legislators said that the concept is just a start and that they hope to see a firm proposal by the end of this week.

"The next 48 hours, there will be an intense set of meetings to iron out a plan," said Sen. E.J. Pipkin, a Republican from the Eastern Shore who has taken part in negotiations. "There is an undercurrent of movement to outline something by the end of the week."

The draft, which was circulated yesterday, outlined an offer from executives of BGE and parent company Constellation Energy Corp. to phase in an estimated 72 percent rate increase and provide about $150 million to aid customers, particularly poor Marylanders.

Electric bills are scheduled to rise in July, when six-year caps on electric rates are lifted. The limits were imposed as part of a transition to a deregulated energy market, and lawmakers are scrambling to blunt the impact of consumer costs that could soar just months before an election.

The BGE proposal would defer half the first year's estimated $750 million increase over eight years. The company would borrow money to pay the difference, passing on to customers the projected $4.40-a-month interest cost.

Ratepayers would be hit with a 13 percent increase in July and a 15 percent increase in January. In June of 2007, rates would increase an additional 15 percent, with another increase to follow.

Lawmakers working on a relief plan for consumers hope to use a proposed $11.4 billion merger between FPL Group of Florida and Constellation as a bargaining chip to drive rates down.

Pipkin wants to recover an estimated $528 million that BGE customers have paid the utility to compensate for an anticipated loss in the value of its power plants - a loss that never occurred because energy prices soared.

Yesterday, Pipkin called the discussions with energy officials "a good first step," but he also filed a bill that would halt the merger unless Constellation returns the so-called stranded costs of the anticipated loss in plant value to be used to lower rates.

"The stranded costs was a bad deal," he said. "It's like buying a used car and on the way home, the engine falls out and you take it to the dealer, but he says, `A deal's a deal.' That's not right."

"Constellation shareholders are set to profit from the upside of this merger," Pipkin said. "The consumer stands to lose. And we shouldn't go into another deal without fixing the problem we currently have."

Senate President Thomas V. Mike Miller, who held a meeting this week with energy executives, said the BGE eight-year proposal would not sit well with customers.

"There's still going to be initial sticker shock," he said. "The average homeowner cannot afford a year's worth of cost increases."

Miller said he wanted to see the company lower or eliminate the interest rate charge on consumers, but he said it was impossible for customers to avoid paying higher rates at some point.

"Somebody is going to have to pay something back," Miller said. "There's no free lunch."

Miller also jabbed the governor for not doing enough to negotiate a lower increase. "We need someone on the second floor [of the State House] working on this issue every day, 24 hours a day," he said.

Ehrlich, who has made "72 percent will not stand" his refrain in the past week, has also met with utility officials, while his staff sat down yesterday with House Speaker Michael E. Busch.

Constellation spokesman Robert L. Gould said the company would not comment on this week's negotiations other than to say any plan would require balance between consumers' and BGE's finances.

"The key to us is to address the customer concerns while at the same time making certain BGE remains financially strong," he said. "That is a very real concern for us."

The company's plan is one of many legislative leaders and industry executives have been considering since the state utility commission announced the planned increase this month.

With a solution elusive, lawmakers are growing irate.

Sen. George W. Della Jr., a Baltimore Democrat, erupted on the Senate floor last night, saying that lawyers hired by utility companies were crowding out consumer interests.

"There are more lobbyists on this issue than senators in the Senate," Della said, eliciting rousing applause from lawmakers.

"I would hate like the devil to walk out of this chamber having done nothing but pass resolutions ... and have the residents of Maryland see the CEO of Constellation walking away with a $20 million golden parachute," he said, referring to the end next month of the Assembly session. "If I sound like I'm frustrated, I am."

Della told lawmakers that they should demand a better plan from the utility company

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.