BGE offers new plan

But it falls short, lawmakers say

fee replaces interest

General Assembly

March 29, 2006|By ANDREW A. GREEN AND KELLY BREWINGTON | ANDREW A. GREEN AND KELLY BREWINGTON,SUN REPORTERS

Constellation Energy Group executives presented lawmakers with a new plan yesterday for phasing in the 72 percent electricity rate increase scheduled to hit this summer, but legislative leaders said it still falls short of the protections consumers will need.

The plan, a revision of a proposal Constellation officials made last week, would allow a 15 percent increase in Baltimore Gas and Electric increases July 1, with more hikes phased in over 18 months. Customers would not be charged interest on the deferred payments, but would be assessed an estimated $8.54 fee on their bills every month for eight years to pay the utility back for the forgone revenue.

Constellation CEO Mayo A. Shattuck presented the offer in a morning meeting with Gov. Robert L. Ehrlich Jr., Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch.

It was the first time Annapolis' top three leaders have met to discuss the rate increases, an indication of the seriousness of negotiations expected to dominate the closing days of the General Assembly session.

Ehrlich said he was heartened by the meeting but still thought Constellation needed to do more.

`Major ... progress'

"It's a step in the right direction," Ehrlich said of the company's new plan. "Major league progress from a week ago."

Another meeting is set for tomorrow as lawmakers from both parties try to prevent sticker shock for BGE's 1.2 million customers just months before Election Day.

But Miller and Busch said that the plan was inadequate and that it would not stop them from aggressively pursuing legislation to fire the members of the Public Service Commission and give the legislature veto power over a pending merger between Constellation and FPL Group Inc. of Florida.

Both bills are widely viewed as a slap at Ehrlich, the state's first Republican governor in 36 years, who ran on a platform of reducing Maryland's regulatory burden and enacting more business-friendly policies. The impending rate increase has focused attention on the state Public Service Commission, which critics say has swung on Ehrlich's watch toward utility companies to the detriment of customers.

"A lower rate of increase over a longer period of time, and they might be in the ballpark," Miller said yesterday, referring to the Constellation proposal. "Unless someone comes forward with a better plan than what came forward today, the House bill [to allow a veto of the merger] will be on the floor of the Senate."

A Constellation spokesman said after the meeting that negotiations would continue but that the plan depends on the approval of an $11.4 billion merger between the company and FPL Group.

Phase-in

According to a confidential draft of the proposal, the 72 percent rate increase would be phased in over 18 months, instead of the 15 months utility executives proposed last week.

Under the new proposal, BGE's 1.2 million customers would get hit with a 15 percent increase July 1, a 4.5 percent increase in January 2007 and another 20 percent increase in June 2007. Customers would see market rate prices starting in January 2008. The proposal would defer the first-year increase - estimated at $750 million over eight years - by charging customers $8.54 a month.

To offset that cost, the utility would borrow the money. Instead of passing interest along to customers, as originally proposed last week, the company would absorb the estimated $108 million. According to the company's draft, savings from the proposed merger would result in a benefit to customers of about $346 million.

"This latest proposal speaks to the seriousness of the issue and how serious we deem it to be," said a Constellation spokesman, Robert L. Gould. "We believe we have put together an extremely aggressive and compelling plan that would drastically reduce the rate shock that customers would be seeing in July. And we have been very clear: The merger plays a clear role in all this."

But Busch, the House speaker, said Constellation's new plan to mitigate the shock to consumers "just shuffled some things around" rather than making meaningful concessions.

And after the meeting, Miller, who had previously been cool to the House's merger bill, said he could see the legislature enacting it and the Senate's PSC bill within days.

The Senate gave preliminary approval yesterday to a bill that would remove all five members of the Public Service Commission April 9 and replace them the next day with a board controlled by the legislature. It appears poised for final approval in that chamber as early as today.

The coming rate increase - an average of $743 a year per household - is the result of a deregulation plan and settlement agreement approved by the legislature and other officials in 1999 and 2000. As part of the deal, rate caps have been in place for six years but are now due to expire just as world energy prices have spiked because of Hurricane Katrina and global instability.

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