Utility fights ruling by PSC

BGE seeks rehearing on interest payments

Baltimore threatens suit to block rate plan


BGE officials are balking at a Public Service Commission ruling that they may not charge interest to residential customers who enroll in a plan to delay an average 72 percent electric rate increase this summer and filed a request yesterday for a new hearing on the issue.

BGE lawyers contend that eliminating the interest charge of about 5 percent would increase the company's cost of borrowing to pay for the phase-in plan and could ultimately lead to higher electricity prices for consumers.

The regulatory agency ruled last week that BGE could begin enrolling customers in the phase-in plan this month, in advance of a sharp increase July 1 in electricity rates. That is when rate caps imposed in 1999 as part of Maryland's electricity deregulation initiative come off and prices rise to market levels.

The company said in a filing yesterday that it is not seeking immediately to delay or change the deferral plan, because little time remains before the rates rise. BGE said it will continue to implement the phase-in proposal so customers will have time to enroll, but that it reserves the right to challenge the commission ruling.

"BGE's decision to request a rehearing is not meant to - nor will it - delay any customer-related aspect of the rate stabilization plan," Robert L. Gould, a spokesman for Constellation Energy Group, BGE's parent, said in a statement.

"While the PSC deserves credit for attempting to achieve a balanced resolution to a difficult and complex issue, aspects of its order threaten to weaken BGE financially and could ultimately - and unnecessarily - lead to higher customer costs," Gould said. "By deferring customer interest payments related to rate deferral, the PSC is forcing BGE to borrow far more - perhaps tens of millions of dollars more."

The impending rise in electric rates has become a volatile political issue and caused a frenzy among state lawmakers who tried to develop an election-year solution to stave off the increase.

After lawmakers ended their annual General Assembly session last month without approving a plan to ease the effects of the rate increase, Gov. Robert L. Ehrlich Jr. negotiated a settlement with the company. The governor's plan called for the rate increase to be phased in over 18 months, with a monthly fee assessed to those who enrolled in the program.

Ehrlich said initially that customers would not be charged interest, but BGE officials later acknowledged that that they would pass on the cost of borrowing money - estimated at 5 percent yearly - to consumers. The company said the interest would be more than offset by a $4 monthly credit that all ratepayers would receive if Constellation's merger with Florida-based FPL Group Inc. is completed.

Last week's PSC decision was challenged on a second front yesterday when the administration of Baltimore Mayor Martin O'Malley threatened to sue to block the deferral plan from taking effect - the most recent attack by a Democrat on the proposal crafted by Ehrlich, a Republican.

City officials said the administration will file an appeal in Baltimore City Circuit Court today, arguing in part that the regulatory body broke the law in scheduling a public hearing for a time when most BGE customers could not attend.

The public hearing on the rate deferral plan was scheduled for 2 p.m. Thursday and lasted four hours. State law requires evening hearings for utility rate increase applications, city officials say. But it was unclear yesterday whether that requirement would apply to the deferral plan.

PSC spokeswoman Christine E. Nizer declined to comment on the city's threatened lawsuit, but said she believes the requirement does not apply in this case.

City Solicitor Ralph S. Tyler said the city would also argue that the commission should have allowed a more thorough examination of the plan, including discussion of BGE's proposed merger with FPL Group and whether the current cost of electricity justifies a 72 percent rate increase.

"Part of the effort of this suit is that we are performing what the Public Service Commission should have done," said O'Malley, who is seeking the Democratic nomination for governor this year.

Under the Ehrlich plan, customers who chose to enroll in the deferral program would see their rates rise 19.4 percent in July, followed by a 5 percent increase in January 2007, a 25 percent increase in June 2007 and a subsequent rise to market prices in January 2008. Customers would be charged a monthly fee - $19 a month on average - to repay the principal and interest.

In approving the plan last week on a 4-1 vote, the PSC accepted a suggestion by People's Counsel Patricia Smith that consumer interest charges be eliminated.

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