Electroshock therapy

May 25, 2007

If there is a silver lining in the Maryland Public Service Commission's decision to allow Baltimore Gas and Electric Co. to go forward with its planned 50 percent electricity rate increase, it's that PSC Chairman Steven B. Larsen and his fellow commissioners are clearly not satisfied with the status quo. That may not seem like much to BGE's 1.1 million customers who, on average, will see monthly bills of 1,000 kilowatt hours rise from $92 to $139, but it's a respectable start.

There was never a chance the PSC was going to wave a magic wand, undo the past and make higher utility prices vanish. BGE customers find themselves in this predicament not because of this week's 106-page order but because:

The cost of energy has risen steeply and globally in recent years.

The deregulation law passed by the General Assembly in 1999 that capped rates at an artificially low level was fundamentally flawed.

Nobody - not the previous PSCs, neither of the last two governors, nor BGE and its parent, Constellation Energy Group - had adequately planned for the transition to market rates.

Like it or not, BGE customers are not suddenly going to be paying prices that are out of whack with the rest of the Mid-Atlantic region. BGE rates mirror what's already happened to people living in the Pepco and Delmarva Power service areas.

That's not going to make the transition pleasant - even for those who choose to defer much of the increase for the remainder of the year under an interest-free plan BGE must offer customers - but the unhappy news ought to be kept in perspective.

The important question is: What happens next? The point of deregulation was to take advantage of market efficiencies to lower electricity rates. But what has become increasingly obvious is that, for a variety of reasons, that's not happening in Maryland - nor likely to happen anytime soon. The market here is too constrained by limits of infrastructure and other factors.

Essentially, BGE is a distributor whose only obligation is to buy power at a wholesale auction and then pass along the cost to consumers. Constellation, meanwhile, is obligated only to get the best price offered for its product, whether that's from BGE or another utility.

Real reforms are needed - beginning, perhaps, with how BGE buys electricity. But in the long term, what Maryland really needs is a coherent energy strategy to guide policy decisions. High prices are not the only problem on the horizon; the industry's alarming contribution to global warming and the possibility of future power shortages may prove just as challenging.

The PSC's order makes a good case that the current system is not working to the benefit of consumers. Prior commissions didn't necessarily see it that way. The change in attitude is a start, but there has to be more - from conservation measures like smart meters that distinguish between peak and off-peak use, to increased funding for energy assistance programs that aid the poor.

Mr. Larsen's PSC certainly talks the talk. The commission appears to be more independent, more critical, and more consumer-focused than its predecessors. But, at least for the moment, that's produced nothing more than good intentions. Frustrated consumers will expect more.

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