Deal broken

April 12, 2006

Right till the very end of the General Assembly session, after a daylong drama of harried consultations, Gov. Robert L. Ehrlich Jr., House Speaker Michael E. Busch and Constellation Energy Group executives believed they had clinched a deal to stave off 72 percent electricity-bill increases for Baltimore Gas and Electric customers. Instead, the deal was dashed minutes before adjournment - in the state Senate, where hardly anything happens absent the hand of Senate President Thomas V. Mike Miller.

Yesterday, Mr. Miller's motives were still opaque, but the prospect that substantive leverage to induce Constellation to offer short-term rate relief may be lost was disturbingly clear - particularly for the Maryland households that would pay the price. For the senators who killed the deal, this is an immense gamble.

But, in the Senate's defense, there was plenty to dislike in the 11th-hour deal: It traded an 18-month phase-in of the full rate increase (partially repaid by customers over 10 years) for a virtual free pass before the state Public Service Commission for Constellation's merger with Florida's FPL Group.

BGE's 1.1 million residential customers would still end up with drastically higher electricity bills. Constellation would be assured that its friends on the PSC would remain on board during merger hearings. And the company would get this big bargaining chip: Its offer of $600 million in rate relief (on paper) would depend on the merger gaining both state and federal approval.

BGE customers naturally are just focused on what can be done now to put off the looming electricity-bill increases, and the governor said yesterday that he is trying to resurrect the deal without the legislature. But in the long run, the merger is what's critical, and it remains a pig in a poke.

Witnessing the Senate Finance Committee's grappling for the first time with the complexities of the deal Monday night less than three hours before the session's end was truly scary. Committee members didn't seem to fully understand the bill and bemoaned the absence of expert counsel. Even Sen. E. J. Pipkin, a Queen Anne's County Republican and a former Wall Street bond trader, complained that he couldn't comprehend bond language in the bill that was apparently written by BGE's counsel. The very eerie sense was that it was 1999 all over again - when the legislature blindly traded six years of discounted electricity for the unknowns of deregulation.

That bullet now has been dodged, barely, and in principle it's a good thing. The Constellation-FPL merger must be intensely examined by the state, and safeguards should be put in place to protect BGE from Constellation's riskier ventures. That was not apt to happen under Monday night's deal. But it also may not happen now and substantial rate relief may have disappeared. Marylanders deserve both. The best course now would be a special legislative session in which this undertaking could get proper consideration. If the governor proceeds alone, he will have to step up and act not as a neutral deal-crafter but as a strenuous advocate for the public interest.

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