State gets electricity deal

Auction brings rate rise of about 50%, saving $10 million

May 06, 2006|By ANDREW A. GREEN | ANDREW A. GREEN,SUN REPORTER

While residential customers brace for a rate shock this summer, the state government held an auction for its own electricity supplies this week and got what officials call a great deal for taxpayers.

The electricity supply auction for all state office buildings in Central Maryland, plus some higher education and local government facilities, will result in a rate increase of about 50 percent this year. The auction process saved the state about $10 million this year, said Boyd K. Rutherford, secretary of the state Department of General Services.

"The dollars we save mean the taxpayers are saving money," Rutherford said.

State analysts had expected a rate increase of as much as 100 percent this year. In the "reverse auction" the state held this week, six energy companies competitively bid to see which could provide electricity for the lowest cost.

The state first used a reverse auction to procure electricity for 2004. Maryland saved between $10 million and $13 million in its first purchase, Rutherford said.

Residential customers of the state's largest utility, Baltimore Gas and Electric Co., are due for a 72 percent rate increase this summer, but a direct comparison between residential and government electricity prices is impossible because of the complexity of the state's contracts and the rate increases the state absorbed two years ago, Rutherford said.

The state negotiated different rates for peak and off-peak usage and terms that will allow the state office complex in Baltimore to go off the grid and use its own generators when economically feasible.

The rates are also complicated by the large but unusual power demands of the Maryland Stadium Authority, which uses most of its electricity on game nights during professional baseball and football seasons, Rutherford said.

BGE residential rates are set to rise July 1 with the expiration of rate caps instituted as part of Maryland's 1999 electricity deregulation. Since then, rates have been frozen at 1993 levels.

Government and commercial customers have been paying market rates for electricity since 2004. Rutherford said the rates for the Central Maryland government contracts went up about 25 percent in 2004, meaning this year's 50 percent increase makes for a cumulative increase of about 88 percent.

The total state contract, which covers about 3,200 separate accounts, is $78 million for the year.

The state chose to procure one year's worth of power so that University System of Maryland electricity contracts - most of which expire next year - can be bundled into one auction next year, giving the state greater buying power, Rutherford said.

The contract includes electric service for state government buildings, the stadium authority, the District Court of Maryland, the Baltimore City Community College and the Baltimore City Housing Authority.

Six electricity suppliers bid for the contract, and four were awarded part of the business: PEPCO Energy Services, ConEdison Solutions, Amerada-Hess and Washington Gas Energy Services.

Constellation Energy Group, BGE's parent company, was among the unsuccessful bidders.

andy.green@baltsun.com

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