Details of proposal's effects on customers

Q&a

April 22, 2006|By EILEEN AMBROSE | EILEEN AMBROSE,SUN REPORTER

Customers of Baltimore Gas and Electric Co. were left with many questions after Gov. Robert L. Ehrlich Jr. announced Thursday a plan that would allow them to choose the option of spreading over a couple of years a 72 percent rate increase due to begin this summer.

These might be some of them - and some answers:

If I opt in to the plan, what happens?

You'll get a rate increase in July, just not as big as the increase for those who do not opt in. Eventually, however, you'll catch up on higher electric bills.

The bills of those who opt in to the governor's plan would rise 19 percent in July. For a customer now paying about $67 a month for electricity, the increase would add $13.

(Constellation Energy Group Inc., BGE's parent company, said $67 is the median monthly bill for its customers, meaning that half have higher bills and half have lower ones. Someone living in an apartment unit with gas heat typically has a lower electricity bill than a family living in a multi-bedroom home using electric heat. The latter's monthly bills more commonly run into three figures.)

In June 2007, those in the plan would pay another rate increase estimated at 25 percent, or about $21 a month. Also, from June 2007 to June 2009, they would repay the deferred rate increase in increments of about $19 a month. That would include principal and interest.

By January 2008, they would begin paying so-called full market rates, which Constellation estimates would raise bills an additional $10 a month.

Customers who didn't opt in would begin paying full market rates in July.

Consumers must decide whether they can handle the huge increase up front, when rate caps come off, or whether their budget is better suited to a milder shock in the beginning, then periodic jolts.

Consumers also might consider whether they want to start paying more to the utility in the beginning or defer the rate increase and give their money a chance to earn interest elsewhere.

What's the difference over time if you opt in or not?

The total difference after three years would be about $20 more for those who opt in, Constellation says. Customers who opt in would have to repay the amount of the rate increase they deferred plus interest over two years.

That interest rate is expected to be less than 5 percent a year. For the typical residential customer, interest payments would be less than $1 a month over two years, accounting for the approximately $20 difference, said Lawrence McDonnell, a Constellation spokesman.

Why did Gov. Robert L. Ehrlich Jr. and others refer to the plan as "interest-free"?

They say the proposed merger between Constellation and FPL Group is expected to yield savings of about $4 a month per customer over 10 years. That, they say, should more than cover the interest costs of deferring payments.

Is this a done deal?

The proposal is subject to approval by the Public Service Commission, which regulates utilities. A decision could be reached within two weeks.

When can you opt in?

BGE estimated that it could accept enrollments starting May 15 and continuing through June 23

Can you opt in after July?

Customers would get a grace period for opting in that would be expected to last through the first two billing cycles. After that, BGE would make exceptions case by case. For example, members of the military who missed the deadline could get an extension.

What if you move to the area in July or later? Can you opt in to the deferral plan?

No. You would pay the market rates that would apply to residents who didn't opt in.

What happens if you defer payments, then move out of the area before you repay?

There is no escaping the rate increases. Your final bill would include the amount you deferred up to that point and haven't repaid.

What if you're on budget billing? Can you opt in? What about rate increases you have paid under budget billing in anticipation of higher rates this year?

Nearly one-third of BGE's 1.1 million residential customers - a total of 300,000 - use budget billing, in which customers spread out their cost of power over the year for more equal monthly payments.

Those on budget billing can opt in to the rate-deferral plan. They would face the same terms, but their payments would be smoothed out as usual. Any rate increases they have already paid would be factored in.

Are there breaks for low-income residents?

Under the opt-in program, low-income residents would have three years to repay the deferred rate increases instead of two. BGE gets the names of those who qualify for assistance programs from the state.

Those eligible must have incomes no more than twice the federal poverty level. For a family of four, the eligibility cutoff this year is $38,000, said Ehrlich spokeswoman Shareese N. DeLeaver.

What are the alternatives to BGE?

Besides BGE, 21 energy suppliers could offer power here. Two, Washington Gas Energy Services Inc. and Pepco Energy Services, are offering to do so, said Chrissy Nizer, manager of external relations for the Public Service Commission.

Even if you switched suppliers, you would be dealing with BGE, which owns the lines and would continue to handle distribution and transmission, Nizer said.

Because electric rate caps will remain in effect in Maryland until deregulation in July, it is not a good idea to switch now, because competitors couldn't underbid Constellation until then.

"After July, it could make financial sense," Nizer said.

For updates and new suppliers in your area, go to the commission's Web site, psc.state.md.us.

eileen.ambrose@baltsun.com

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