Grim truths about BGE, Ehrlich plan for rate rise

April 26, 2006|By JAY HANCOCK | JAY HANCOCK,SUN COLUMNIST

It has been almost a week since Gov. Robert L. Ehrlich Jr. and Baltimore Gas and Electric announced their complicated plan to soften electric rate increases scheduled for July 1 - and people are still trying to figure it out.

This is an attempt to shed more light and address questions that readers are asking via e-mail and phone.

For those just tuning in, we're talking about a projected 72 percent increase - from $1,033 to $1,776 - in the average annual BGE electric bill. (The oft-quoted $67 a month figure for current bills is a median, not an average, which is somewhat higher.)

Note the word "electric." BGE also delivers natural gas to many households, and while the price for gas has also been rising, it is a separate product and unrelated to the calculations for electricity. Those are two of many points of misunderstanding and confusion. Here are some others:

What the 72 percent increase is, and isn't.

Electric bills contain multiple components. There's supply (the price to generate kilowatts). There's transmission (to move the kilowatts cross-country). Then there's delivery (to bring them to your door). BGE has correctly told customers that only electric supply prices will rise after July 1. The other factors - transmission and delivery fees - won't.

But the effect is that your entire bill will rise 72 percent (assuming you don't take the rate-deferral plan). Numerous customers have misunderstood the BGE chatter to mean that only the electric supply portion of their bill will go up 72 percent. Wrong. The electric supply part will go up by much more - more than double its previous price.

If your total electric bill was $80 last July and you use the same amount of juice this year, your total July bill will be about $138 - 72 percent higher. (People who elect deferral would see only a 19 percent increase, but they would have to pay back the delayed bills later.)

There's misunderstanding of the $19 monthly charge, running from June 2007 to June 2009, that would repay bill deferrals for customers who "opt in" and choose to delay the 72 percent increase due this summer.

The $19 is for what BGE says is a typical monthly bill. It is not fixed.

Your payback will vary according to how many kilowatts you burn during the two-year deferral-recovery period. The payback rate will be 2.3 cents per month per kilowatt-hour, says Mark Case, BGE's vice president of electric supply and regulatory services.

Note that the payback is not strictly tied to what individual households defer. BGE assumes everybody's usage will stay roughly the same from year to year.

But if you put a big addition on your house next year, or the summer of 2007 is much hotter than the summer of 2006, you could end up paying back a little more than you deferred.

Yes, there are interest charges associated with deferral, but they don't seem outrageous - $20 over two years (for a typical house) more than what non-deferring families will pay.

Whether or not you opt for deferral, BGE parent Constellation Energy has promised a $4-a- month credit for BGE customers over 10 years if its planned merger with FPL Group goes through.

Of course Constellation ought to give back more, sooner, to BGE customers, but $4 a month is better than nothing.

In Friday's column I urged people to shop around for other electricity deals, and numerous readers naturally asked: "Well, how the heck do I do that?"

At the moment only Pepco Energy and Washington Gas are offering electric packages to BGE customers. My expectation was that declining energy prices might prompt other vendors to try to undercut BGE's standard product (the one that will go up 72 percent). But if oil stays over $70 a barrel (oil and natural gas prices help drive kilowatt prices), that seems less likely.

Washington Gas is offering 10 percent off the post-July 1 summer generation rates for BGE's standard product, which will be 14.8 cents a kilowatt-hour, and 3 percent off winter rates, which will be 13.5 cents a kilowatt hour. Pepco's "green energy" offering - a tenth of the kilowatts are supposed to be from renewable sources - looks to be in the same neighborhood, which is to say not a big discount.

In any event, new information and, with luck, new vendors, should materialize before July 1. Washington Gas' Web site is www.wges.com. Pepco's is www.pepcoenergy.com. The Public Service Commission will list new suppliers, if any, as they show up. (Go to www.psc.state.md.us. Click "Consumers" on the left, then scroll down the page and click "Search for Licensed Suppliers" under the red "Choice" headline.)

Even if you opt for the deferral plan, you're not "locked in" to BGE's standard product.

You can still shop around. All the deferral factors - delay and repayment - would be applied against BGE's distribution charge, not against the power supply charge. So you could go with Pepco's or Washington Gas' power supply products and still get rate deferment.

Same thing applies to the $4-a- month, 10-year "merger credit." You get it whether or not you stay with the standard BGE package.

Look, this is not a good deal - not even as good as the one the General Assembly failed to approve this month, which wasn't terrific.

Constellation should be kicking in more money for rate relief. The debt to pay for deferral should land on Constellation's balance sheet, not BGE's. Because you have to sign up for deferral, some families who need it will inevitably be left out.

But the outcome will be even worse if customers weigh it without having all the facts.

jay.hancock@baltsun.com

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