Rate deal dies

rates:

Electricity rate increase deal fails at last minute

psc:

Divide over utility commission slowed compromise discussions

General Assembly

April 11, 2006|By ANDREW A. GREEN AND KELLY BREWINGTON | ANDREW A. GREEN AND KELLY BREWINGTON,SUN REPORTERS

Frantic negotiations aimed at averting a 72 percent rate increase for BGE customers broke down at midnight when the General Assembly's 2006 session adjourned amid acrimony.

A special session is now expected this month.

"The Senate is more important than any one bill. We'll come back when we have more time to look at this issue," said Senate President Thomas V. Mike Miller. "We'll come back with a better product."

But not all lawmakers were pleased at the prospect of a special session, which Gov. Robert L. Ehrlich Jr. said he could call as early as tomorrow.

"We had plenty of time to get it done," said Del. Dereck E. Davis, a Prince George's County Democrat. "There were just deep philosophical differences."

For much of the day yesterday, the sticking point was Senate leaders' insistence that the current Public Service Commission be disbanded and replaced with a more consumer-friendly body. But Ehrlich balked, and executives of BGE's parent company, Constellation Energy, called the demand a deal-breaker. Five minutes before midnight, when the session was due to expire, the Senate gave preliminary approval to the bill, 26-19, but couldn't muster final approval to send it to the House.

Ehrlich, who appointed four of the PSC's five members, said he wouldn't allow them "to be demonized or blamed" for not intervening to soften the rate increase, which will take effect in July.

Miller responded that "people like that should not be sitting in judgment of the pocketbook outcomes of the state of Maryland."

A Senate vote to pass a compromise plan failed about midnight. The House of Delegates let lawmakers speak a few minutes past the deadline for adjournment as they waited for a bill to come across the hall, but House Speaker Michael E. Busch reluctantly said his desk was clear - and sent lawmakers home.

As the high-stakes political battle pitting the Republican governor against the Democratic-dominated General Assembly unfolded during the past month, lawmakers found themselves handling political dynamite - the possibility that BGE's 1.2 million residential customers would see their bills spike by an average of $743 a year, starting just months before an election.

Constellation officials, meanwhile, scrambled to avoid a backlash that could have jeopardized the merger and put one of the state's largest businesses at risk.

In the midst of the wrangling, a series of e-mails involving PSC Chairman Kenneth D. Schisler surfaced, showing him collaborating with a utility lobbyist, hitting up industry officials for baseball tickets and going on hunting trips with them.

Legislators succeeded in the past few weeks at using tough tactics to win concessions from the utility. They threatened the company with harsh legislation that would have disrupted its ability to merge with FPL; during that time, Constellation quadrupled its offer of funding for rate mitigation.

The company initially offered to provide $150 million in aid and defer half of the first year's rate increase but charge consumers $4.40 a month for eight years to make up the difference.

Constellation sweetened the pot repeatedly as legislators passed harsher measures against the company and as days in the General Assembly session ran short.

"If we don't come out of here with an agreement that benefits everybody, it will be a major disappointment to the people of Maryland," Busch said earlier in the evening, as the legislative clock ticked down.

The final offer, which coalesced over the weekend, would have allowed a 15 percent rate increase on July 1. A year later, rates would have gone up an additional 20 percent to 30 percent. Customer bills would have risen to full market rates a year after that.

Under the plan, BGE would have issued debt to make up for the deferred payments. BGE would have absorbed the interest charges, and customers would have been charged a monthly fee to repay the principal.

After a 7:30 a.m. meeting yesterday among Constellation, Ehrlich and legislators, Miller and Busch went back to their caucuses to see whether they could win approval for the deal.

Although there were dissenters in both chambers, Miller had the more formidable task because Senate rules allow a relatively small number of legislators to stall debate and kill a bill.

"It's a short-term election-year fix," Sen. George Della, a Baltimore Democrat who sits on the Finance Committee, said of the rate reduction plan. "But there is more to the story. And if we don't grab a hold of the PSC, we're still in the same boat. We're still without advocates for the consumer."

For Constellation, any move to reconstitute the PSC would have been a deal killer, said company spokesman Robert L. Gould.

A change to the commission would have added an element of uncertainty to the state's regulatory environment, which could have hurt BGE's bond rating, Gould said. One rating agency, Moody's Investors Service, downgraded the utility's debt because of the risk of anti-BGE legislation becoming law.

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