Utilities to praise lifting of controls

Ad drive to counter moves to re-regulate

October 20, 2007|By Paul Adams | Paul Adams,Sun reporter

Constellation Energy Group Inc. and a coalition of large energy suppliers and buyers are preparing advertisements to counter a growing movement to re-regulate electric markets in Maryland and other states where competition is allowed.

Newspaper advertisements touting the benefits of competitive electric markets will begin Monday with the aim of dissuading key lawmakers and regulators from moving back toward traditional regulation of electric utilities. The ads will initially run in the Washington market.

The ads are the product of the Compete Coalition, which includes energy companies such as Constellation and Exelon Corp., as well as major energy buyers such as Wal-Mart Stores Inc., Cargill Inc. and Costco. Baltimore's Constellation is the nation's biggest competitive supplier of wholesale energy to large customers.

The ad campaign comes just as Maryland is considering whether some form of re-regulation could benefit consumers, who have seen rates climb by more than 70 percent since the move to a competitive energy market.

Re-regulation has been debated in numerous states that deregulated in the late 1990s, including Montana, Illinois, California, Pennsylvania and Ohio. In Virginia, lawmakers voted in February to scrap plans to move to a deregulated market.

The political and consumer movement to re-regulate threatens one of the pillars of Constellation's business model, which is to produce and sell wholesale energy in competitive markets. Maryland voted to deregulate in 1999.

The Compete Coalition says the benefits that have come from deregulation have been lost amid consumer frustration over rising electric rates.

Free-market proponents note that power generation plants are producing more power with fewer people and inputs as a result of cost-cutting that came after deregulation took effect.

They also argue that rising fuel costs are behind the big rate increases, which came after rates in many deregulated states had been frozen at artificially low levels for several years.

"We simply believe there is a good story to tell about markets," said William Massey, a Compete spokesman and former commissioner with the Federal Energy Regulatory Commission.

Lawrence McDonnell, a Constellation spokesman, said Compete's campaign is significant because it is backed by large energy buyers, who have seen the benefits of competitive markets.

Deregulation critics counter that wholesale power markets are not truly competitive, resulting in large suppliers having too much control over prices.

Many also complain that the retail market for residential customers has failed to develop, leaving most homeowners captive to traditional utilities for their power supply.

One premise behind deregulation was that consumers would be able to choose among suppliers, who would drive prices down as they competed against each other.

"What this [ad campaign] says to me is that they are nervous," said Paula Carmody, Maryland People's Counsel, referring to the Compete Coalition. The People's Counsel, which advocates on behalf of utility customers, has argued in favor of re-regulating Maryland's energy market.

"They know that deregulation has not produced results for consumers," she said. "What we've seen is higher rates, volatile rates and no apparent benefits."

The Maryland Public Service Commission has hired industry consultants to conduct a review of the state's deregulation laws.

paul.adams@baltsun.com

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