PSC must review rates

Judge: Hearing has to address whether size of increase justified


The Public Service Commission must hold a new hearing on a plan to defer part of BGE's pending 72 percent rate increase - but this time it must consider whether so large an increase is justified, a Baltimore circuit judge ruled yesterday.

Circuit Judge Albert J. Matricciani Jr. gave the commission two options to prevent the rate increase from taking effect July 1 without a new plan to help consumers.

The PSC could extend rate caps that have been in effect for six years, he said, or could move forward with a rate stabilization plan it approved in March. If it chooses the latter, the agency could credit customer bills later to make up any difference, he said.

The decision was a near-total victory for the City of Baltimore, the plaintiff in the suit. Officials of BGE parent Constellation Energy, Gov. Robert L. Ehrlich Jr. and PSC Chairman Kenneth D. Schisler had all previously derided the city and Mayor Martin O'Malley, a candidate for governor, as engaging in election-year posturing without basis in law.

In his opinion, Matricciani referred to the "absurdity" of the PSC's contention that it was too late for the city to raise questions about the cost of power and said that he "does not believe that the commission acted in the public interest or with fairness to customers."

"The commission's failure to conduct a proper adjudicatory hearing resulted in its issuance of a defective order, which contained neither findings of fact nor conclusions of law supported by substantial evidence on the record," Matricciani wrote.

He rejected the city's request that the PSC be forced to consider the compensation due to Constellation executives if a proposed merger between Constellation and the Florida-based FPL group goes through, but he agreed that the PSC should consider potential savings from the merger, how costs are allocated between BGE and Constellation, BGE profits and "other facts reasonably related to the rate increase and the payment deferral plan."

It is "difficult for the court to conceive of the commission conducting an adequate review of the relevant facts and circumstances" of the rate deferral plan without inquiring into those and other issues, Matricciani wrote in a decision released two hours after a court hearing yesterday on the case.

O'Malley called the ruling "a victory for working families."

"This case has always been about the law and, sadly, forcing the Public Service Commission to do its job," the mayor said in a statement. "Now - with the public watching - the PSC will have to do its job according to the law. And if they can't or won't, we need to find one that will."

Members of the PSC have been under fire from Democrats and some Republicans who accuse them of being too closely aligned with the utility industry. Last week, the Democratic county executives of Anne Arundel, Baltimore and Howard counties called on the legislature to hold a special session to revive a bill replacing the PSC members. The executives said they feared that if the city was successful in its suit, the five commissioners - four of whom are Ehrlich appointees - would be incapable of providing a fair hearing.

City Solicitor Ralph Tyler said the city will begin today to request from BGE and Constellation the data it will need to make its case and find an alternative to the 72 percent increase.

Constellation spokesman Robert L. Gould said the company is reviewing the decision but officials see it as "a step closer to resolution of the issue."

"We are hopeful that we can get prompt resolution," Gould said. "To that end, we urge the PSC to deal with this issue promptly, given that time is of the essence."

PSC spokeswoman Christine E. Nizer said the commission is reviewing the order and considering its options, including an appeal.

"We're obviously disappointed," Nizer said. "We still feel the commission acted appropriately to help customers mitigate the rate increase, but we respect the judge's decision, and we'll review the order to determine the next appropriate step."

The rate increase is coming with the expiration of rate caps instituted as part of Maryland's 1999 deregulation of the electric industry.

In March, the PSC crafted a deferral plan that would have allowed customers to put off part of the increase but repay the difference with interest over the coming years. But neither Ehrlich nor legislators thought the plan was adequate, so they spent the last weeks of the General Assembly session attempting to get a better deal for ratepayers.

The legislature failed to pass a plan in the final minutes of the General Assembly session, so Ehrlich worked out a new deal with Constellation that would limit this summer's rate increase to 19.4 percent.

Customers would be brought up to market rates over 18 months and would begin paying monthly fees in June 2007 to make up the difference. Customers who chose to participate would pay higher bills during the two years the fee would be charged than if they had chosen to pay the whole increase at once.

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