Crafting a BGE bill as session draws near

Lawmakers seek to avoid lawsuit, get help for consumers

June 08, 2006|By ANDREW A. GREEN | ANDREW A. GREEN,SUN REPORTER

As lawmakers prepare for next week's special session on BGE rates, they find themselves with two potentially conflicting goals: Get the best deal possible for consumers and don't get sued.

Legislators have begun hashing out the components of a bill that would soften a pending 72 percent rate increase and bring more scrutiny to utility operations, with much of the discussion centering on the legality of the proposals. BGE's parent company, Constellation Energy Group, threatened to sue this spring over measures similar to the ones legislators are contemplating, but Assembly leaders say they're confident they can craft a plan that will hold up in court.

"We have our proposal and ... its legal sufficiency has been upheld throughout the attorney general's office," Senate President Thomas V. Mike Miller said.

But, he added, "Anyone can file a lawsuit."

With just weeks to go before rates are set to rise July 1, legislators are looking to rewrite some of the terms of the 1999 law that deregulated the electricity industry and established the rate caps that are soon to expire.

Among the ideas being considered are temporarily extending the rate caps; forbidding the company to charge consumers fees for the eventual decommissioning of the Calvert Cliffs nuclear reactor; rescinding administrative charges BGE was granted in 1999; and requiring Constellation to return $528 million in so-called stranded costs - payments consumers made to compensate it for the anticipated but unrealized drop in value of its power plants.

If lawmakers recouped the payments, the money could be used to lower customer bills.

Those issues would likely become flash points for intense debate during the special session, which is tentatively scheduled for next week. A large minority of legislators objected to similar measures during the spring General Assembly session and are likely to do so again on the grounds that they run afoul of the legal foundations of the American system of free enterprise.

"This nation spent the better part of 50 years post-World War II engaged in a cold war against a system that did these kinds of things on a regular basis," said Del. Anthony J. O'Donnell, the House minority whip from Southern Maryland. "And here we are with a state government appearing to do it. Mind boggling."

Constellation spokesman Robert L. Gould declined to say yesterday what legal options the company might pursue if the legislature tries to recoup stranded costs or extend rate caps. But legal experts in the utility industry say a suit under such conditions would be a near certainty.

In meetings at the end of the General Assembly session in April, participants said, Constellation CEO Mayo A. Shattuck III warned the legislature away from some of the more aggressive moves it was considering, such as going after the stranded costs, by saying the company would sue and would win.

Another of the Assembly's bills - one that would have fired the members of the Public Service Commission - drew a lawsuit before the legislature could even decide whether to override the governor's veto.

Public Service Commission Chairman Kenneth D. Schisler filed suit in his home jurisdiction of Talbot County in April, using agency money to hire a lawyer in the firm that once employed Schisler. A Talbot judge granted the PSC an injunction, and the Court of Special Appeals refused to dismiss the case on the grounds that the legislature might resurrect it in a special session.

Legislators now say that doing just that is their priority.

Robert A. Zarnoch, the assistant attorney general who serves as the legislature's general counsel, said his office weighed in during the regular legislative session on the legality of most of the measures now under consideration.

In the past few days, it has been giving advice again, and he said some of the proposals from the spring are being tweaked to put them on more solid legal ground.

"We've been thinking about these kinds of issues, and there will be ... differences to some bills designed to take care of any legal objections," Zarnoch said. "It doesn't mean there won't be a lawsuit anyway."

One of the central legal issues involved is the takings clause of the U.S. Constitution, which says that the government may not take private property without due compensation.

In March, Sen. Thomas M. Middleton, a Charles County Democrat and chairman of the Finance Committee, asked Zarnoch's advice on whether a bill requiring the return of stranded costs would violate that principle.

Zarnoch concluded that it wouldn't. He wrote in an advice letter that the basic premise of the law that granted them the $528 million - that deregulation would spark competition and benefit consumers - proved unfounded, thus making Constellation the beneficiary of "an unintended windfall."

Gould said the idea of the state recovering stranded costs is "a nonstarter."

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