Baltimore Gas and Electric customers took on nearly $1.5 billion in costs in exchange for rate cuts worth barely one-fifth of that amount in the 1999 settlement that moved the state toward deregulation, according to a report released yesterday by regulators.
It marked the second day in a row that the Maryland Public Service Commission said consumers have been hurt by state and federal decisions governing power markets.
In yesterday's report, consultants hired by the PSC say that the 1999 settlement was lopsided in favor of BGE's corporate parent, Constellation Energy Group. A key part of that settlement with regulators laid out terms by which BGE would transfer ownership of its power plants to Constellation.
The deal established the so-called "stranded costs" that consumers would pay to compensate Constellation for taking on the plants in a deregulated environment. When regulated, plant owners are allowed a specific rate of return. But deregulated owners enjoy no guarantee of profits or customers and bear greater financial risks.
The report by Kaye Scholer LLP says regulators did not sufficiently examine the liabilities that the deal placed on ratepayers. Had the full extent of the costs and benefits been weighed at the time, the deal would not have been found to be in the "public interest," the report says.
Regulators also allege that BGE might have violated some of the deal's terms, and said they will consider whether some of the money that consumers paid can be recovered through rebates or credits on their bills.
Constellation sharply criticized the report, saying it relies on faulty analysis and is an attempt to rewrite history. Maryland courts have twice upheld the deal's terms in past disputes.
"While Constellation will continue to be a willing participant in any productive dialogue, we will unequivocally reject any mischaracterization of our actions," said Mayo A. Shattuck, Constellation's chief executive.
The report is the second in a series of studies ordered by lawmakers last year to examine the fairness of the state's power market in the wake of a more than 70 percent increase for BGE customers during the past two years. BGE is Maryland's largest utility with 1.1 million customers.
"Ultimately, the General Assembly will take up the larger issue as to whether any of the terms and conditions of the transfer can be changed after the fact," said Steven B. Larsen, PSC chairman.
