DiPaula pans plans on BGE rate rise

Focus on cutting costs, not on PSC, Ehrlich aide urges

June 09, 2006|By ANDREW A. GREEN | ANDREW A. GREEN,SUN REPORTER

Gov. Robert L. Ehrlich Jr.'s top aide said yesterday that some of the key ideas being considered by legislative leaders for next week's special session are not "real solutions" to the looming electric-rate crisis, but he would not say whether the General Assembly plans would draw a veto.

James C. "Chip" DiPaula Jr., Ehrlich's chief of staff, said in an interview that firing the members of the Public Service Commission, a top priority for many legislators, would be "a distraction" from securing lower rates for BGE customers facing a 72 percent increase on July 1.

And he said that any attempt to require the return of hundreds of millions of dollars paid by utility customers to compensate Baltimore Gas and Electric Co.'s parent company for the anticipated but unrealized decline in value of its power plants, known as "stranded costs," would be indefensible in court.

"The governor needs real solutions," DiPaula said.

Ehrlich, a Republican, announced Monday that he would call a special session of the legislature to deal with the pending increase, but he has not done so. He said he wants the legislature to reconvene and pass a rate-deferral plan that narrowly failed on the last night of this year's General Assembly session, along with cost-saving ideas lawmakers have.

The governor made his announcement hours after Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch, both Democrats, had decided to pursue a special session on their own.

DiPaula said the governor and his staff are meeting with legislative leaders to work out a deal before formally calling the session. The first such meeting, with Busch, took place yesterday.

DiPaula, the administration's point man on the issue, said he has searched for ways to ease the impact of rising rates but has found no better solutions than the plan that failed in the Senate in April.

That plan called for a 15 percent rate increase on July 1, with customers brought up to market rates eventually. Customers would be charged a monthly fee -- about $1.50 -- for 10 years to make up for the deferred payments.

"The governor has always been open to additional good ideas," DiPaula said. "As yet, we haven't heard them. No one has presented them."

Since Monday, Busch and Miller have been collecting legislators' signatures on a petition that would require a special session to begin Wednesday. Key legislators and staffers have been working on a plan that includes the return of stranded costs, the firing of the five PSC members and other measures differing from the proposal Ehrlich favors.

Sen. E.J. Pipkin, an Eastern Shore Republican who was a leader in the negotiations with BGE during the legislative session, said the legal argument against requiring the return of the stranded costs is hollow.

The payments from customers were granted to BGE parent Constellation Energy Group as part of the 1999 electricity deregulation plan, the law that resulted in the soon-to-expire rate caps. That deal was premised on the notion that deregulation would spark competition and benefit consumers, but it did not, Pipkin said.

"The basic tenet of the contract that the state and the utilities entered into has never developed, therefore it's challengeable," Pipkin said. "That often gets lost in the rhetoric around `a deal's a deal, and you can't do this.'"

Miller, Busch and other key lawmakers have said that firing the PSC and replacing it with a new version controlled by appointees of the legislature is crucial to their efforts. Their arguments have been echoed by Baltimore Mayor Martin O'Malley, a Democrat running for governor who sued in Baltimore Circuit Court to force the PSC to reconsider its approval of an Ehrlich-negotiated deferral plan. A judge agreed with the city's arguments, and a new hearing is pending.

Democrats have complained that the PSC is too oriented toward the industry, and they want a new, more consumer-oriented group to decide what BGE rates should be, whether Constellation's proposed merger with a Florida utility should be approved and other matters.

DiPaula said such a move would serve only to deflect blame from legislators for failing to enact reform during the legislative session and for crafting a "flawed" deregulation bill in the first place.

Firing the PSC would hurt consumers because it would make Maryland's regulatory environment unstable, DiPaula said. That would make investors less eager to loan the state's utilities the funds they need to maintain and expand Maryland's energy infrastructure and would ultimately lead to higher bills, he said.

"We know [legislators] are under a lot of pressure, but we need rate relief and not hollow scapegoats," DiPaula said.

Sen. Edward J. Kasemeyer, a Howard County Democrat and a key figure on the rates issue, said the legislature's plan to replace the PSC and delegate decisions about rates and other issues to the new members makes sense.

"It's a rational approach in terms of these issues in that I don't know if we've ever had the expertise to handle them," Kasemeyer said. "You give the matter to people who have expertise."

andy.green@baltsun.com

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