PSC delays rate-fix advice

Report to Assembly lacks panel's views

January 03, 2007|By Paul Adams | Paul Adams,Sun reporter

The state Public Service Commission yesterday put off recommendations for how to prevent future electricity rate shocks, submitting a report to the General Assembly that summarized testimony on electricity deregulation without offering the solutions some consumer advocates and lawmakers were seeking.

Lawmakers last year ordered the PSC to open a sweeping probe of the industry to reconsider many aspects of deregulation, which critics blame for creating the conditions that led to a 72 percent rate increase for Baltimore Gas and Electric customers. Any changes could affect utility bills for years to come.

Options under study range from allowing utilities to again own regulated power plants to reforming the process by which utilities buy power in the competitive wholesale market. Many critics say flaws in the power procurement process were the primary cause of last year's rate increase.

The report, which was due by Saturday, disappointed some lawmakers and consumer advocates, who were hoping it would lead to more substantial progress in efforts to improve electric regulations.

But it was unclear yesterday whether House and Senate leaders were expecting the current PSC to provide a roadmap to fixing what many consider to be a broken scheme. House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller were unavailable for comment yesterday.

The same legislation calling for the study sought to fire the current commissioners over their handling of the rate increase.

The state's highest court overturned the firings, but Gov.-elect Martin O'Malley and legislative leaders have pledged to oust the commission this year in a way that will survive legal scrutiny.

Given the likelihood that industry reforms may be decided by a different commission, some lawmakers say the General Assembly may give little weight to the report.

"The first thing you have to look at is whether there is public and legislative confidence in this PSC to look at whether we should go back to a regulated environment," said Sen. Thomas M. Middleton, a Charles County Democrat and chairman of the Finance Committee.

"There isn't a whole lot of confidence there, and given that, I'm just as satisfied they didn't make recommendations."

The commission report summarized weeks of testimony submitted by consumer advocates and industry officials.

In a separate report released yesterday, the commission analyzed state energy assistance programs for the poor, concluding that lawmakers may want to look at current financing levels given rising fuel costs. The report was called for by the same legislation asking the PSC to reconsider the industry's structure.

Many consumer advocates blame 1999 legislation deregulating the industry for exacerbating the BGE rate increase. As part of the transition, utilities either sold or transferred ownership of their power plants, making them subject to the sometimes volatile wholesale market.

BGE last year was required under PSC rules to seek bids for its entire power supply in the midst of a wholesale energy price spike caused when hurricanes Katrina and Rita hit the Gulf Coast.

The Office of the People's Counsel, which advocates for utility customers, said it wants the PSC to study whether it would be economical for utilities to replace the current system with a 10- to 15-year power procurement plan that could allow utilities to own power plants again.

Such a plan would take years to implement, which is why proponents were hoping the commission's report to lawmakers would go further.

"We were hopeful that the commission would take this opportunity to start moving down this path, because the sooner you get started, the sooner things can happen," said William Fields, senior assistant people's counsel.

Johanna Neumann, a policy advocate for the Maryland Public Interest Research Group, said the commission report falls short by not making recommendations concerning the role of energy conservation programs and other initiatives that could benefit consumers.

"This document really puts the burden on the legislature to come up with solutions," she said.

BGE officials said they were still reviewing the report and had no comment.

In PSC testimony, the state's largest utility agreed that the current power procurement process should be changed, but it favors less sweeping reforms.

BGE calls for utilities to buy electricity in rolling three-year contracts, with no more than one-third of a utility's power being purchased in any given year. Advocates say that approach would spread power purchases and protect consumers from temporary price spikes.

But some suppliers, who seek to snatch BGE customers by offering lower prices, want utilities to buy power through monthly contracts so that customers pay true market rates. Critics say it would scare away wholesale bidders and subject consumers to frequent price changes.

PSC staff has called for revolving one-year contracts that would be purchased quarterly.

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