Rate deal reached

Those who opt in would see 19% increase this year

Ehrlich opponents criticize his proposal as insufficient

Plan participants would pay fees next year, market rates in '08

April 21, 2006|By ANDREW A. GREEN AND JOHN FRITZE | ANDREW A. GREEN AND JOHN FRITZE,SUN REPORTERS

Gov. Robert L. Ehrlich Jr. announced a plan yesterday that would hold the electricity rate increase for BGE customers to 19 percent this summer, but those who chose to participate would see their bills rise sharply a year later and face an even heftier charge if a proposed merger involving the utility's parent company falls through.

Consumer advocates and Ehrlich's political opponents criticized the governor's plan as offering insufficient relief. But the governor said the proposal, the product of two weeks of negotiations with officials at Constellation Energy Group, BGE's parent company, is a victory for working Marylanders.

"It's a vast improvement over what would have occurred," Ehrlich said. "Going from 72 percent overnight to a phase-in with a lot of help to those who can least afford it is simply a much better arrangement."

Under any scenario, customers will pay close to 72 percent eventually. In fact, customers who choose to participate in the plan would face higher bills in June 2007 than if they had opted out. Over three years, though, customers would pay about the same amount either way. The plan calls for BGE customers to sign up if they want to delay the rate increase.

The main Democratic opponents of the governor - Baltimore Mayor Martin O'Malley and Montgomery County Executive Douglas M. Duncan - said the proposal fell far short of what is needed. O'Malley's campaign likened it to a "loan shark" transaction, and Duncan said the governor is too closely aligned with electricity company interests to do better. Senate President Thomas V. Mike Miller said lawmakers are considering calling themselves in for a special legislative session to see whether they could do better.

The plan announced yesterday is less generous than one lawmakers rejected at the end of the regular 90-day General Assembly session this month.

That plan included a similar phase-in of rates but much lower monthly fees and would have been applied to all customers unless they chose to opt out - a prospect that would have cost BGE significantly more money. The legislative proposal collapsed amid concerns that it required tacit approval of the merger between Constellation and FPL Group Inc. of Florida.

To implement the new deal, which would require approval of the Public Service Commission, BGE would borrow money to cover the deferred payments. If all of the company's 1.2 million customers chose to participate, BGE would have to borrow about $588 million. But Mark Case, BGE's vice president for regulatory and supply, said the company estimates that about half of customers will choose the plan.

If the pending merger between BGE's parent company, Constellation Energy Group, and FPL, is completed, BGE will commit to $60 million a year in rate reduction for 10 years, Constellation spokesman Robert L. Gould said.

That amounts to about $4 a month per customer.

"This merger needs to move forward," he said.

A typical ratepayer who participates in this plan would see his average monthly bill go from $67 a month in June to $80 in July. If the same customer chose not to participate, the bill would increase to $115.24 but would decline by about $4 a month starting in January when the merger savings kick in.

But those who take the deal will face further increases over 18 months to bring them up to market rates, with an additional monthly fee of $15, bringing their total bills to about $115. If the merger doesn't go through, customers in the plan would see their bills rise to $84 in January, with an additional 25 percent increase in June 2007. The monthly fee without the merger would be $19 a month.

Low-income customers would be able to pay lower monthly fees over a longer period of time.

Whether or not the merger succeeds, those who participate in the plan would see higher rates starting in June 2007 than those who opt out. But the savings in the first year would be large enough that an average customer would roughly break even over the three-year period the plan would be in place.

Brad Heavner, executive director of the Maryland Public Interest Research Group, which advocates for consumers on utility issues, said the company should be offering more to ratepayers and that lawmakers should be doing more to fix the state's broken electricity market instead of simply deferring increases until after the election.

"None of it is a good deal for the ratepayers," Heavner said. "We shouldn't be paying this now or later. Putting off a bad deal until later is still a bad deal."

Tom Hucker, executive director of Progressive Maryland, an advocacy group representing unions, religious organizations and others, called Ehrlich's proposal "a bad joke of a plan."

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