Steady course for PSC

New PSC chief plans to stay the course

June 11, 2008|By Paul Adams and Laura Smitherman | Paul Adams and Laura Smitherman,Sun reporters

Maryland's newly named utility watchdog said yesterday that he will work to change regulations that drive electricity bills higher, continuing the strategy set by his predecessor during the past 15 months.

But Douglas Nazarian, who will replace Steven B. Larsen as chairman of the Public Service Commission in August, acknowledged the complexity of the problems he faces as he goes to work for consumers.

He inherits a commission still grappling with how to restructure the power industry to achieve Gov. Martin O'Malley's campaign pledge to lower electricity rates, while balancing the concerns of energy companies who supply the state's power.

"There are some things we cannot waive a magic wand and change," he said, referring to the rising cost of energy. "What the commission can do is identify ways in which the wholesale [electricity] markets are not functioning fairly, and we can address that."

O'Malley announced Larsen's departure and the appointment of Nazarian yesterday at an Annapolis news conference. Nazarian joined the commission as general counsel a year ago and was one of the architects of the regulatory reform strategy initiated by Larsen. His appointment is viewed by many as an endorsement by O'Malley of the direction that the commission has taken in recent months.

Indeed, O'Malley praised Larsen, whom he credited with turning around a "demoralized" and "pro-energy industry" agency, and said that Nazarian would continue the "aggressive watchdog style of regulation" on behalf of consumers.

Electricity rates continue to soar in the wake of the transition to a deregulated power market. Democrat O'Malley ran for governor in 2006 pledging to lower power costs and has faced criticism from those who say he failed to deliver on those promises.

Nazarian frequently appeared at General Assembly hearings and worked closely with Larsen in negotiating a $2 billion settlement with Constellation Energy Group that provides rate relief to customers of its subsidiary, Baltimore Gas and Electric Co. He also helped draft a series of complaints against the federal commission that regulates wholesale energy markets, arguing that certain rules enrich power companies at the expense of consumers. One such complaint seeks up to $2 billion in rate relief for Maryland consumers.

Nazarian also brings experience with the telecommunications industry, an area that had been a "weakness" for the commission in terms of expertise, O'Malley said. "He's not new to this fight," the governor said. "He was there in the thick of every single battle we've fought."

However, Republican leaders see consumers getting little benefit if the PSC continues as it has under Larsen.

Maryland Republican Party Chairman Jim Pelura lambasted Larsen's tenure yesterday as a failure with regards to rolling back BGE rate increases.

And Del. Warren E. Miller, a Howard County Republican on the Economic Matters Committee, said the O'Malley administration has employed "saber-rattling" and "veiled threats" against the industry, but has done little to bring more energy generation or transmission capabilities to help supply the region's power grid.

"I just think there was a lot more rhetoric than there was action," Miller said.

But Democrats praised O'Malley's pick, saying the commission is on the right track.

Nazarian "knows how the PSC is run; it's in good hands," said Sen. Thomas "Mac" Middleton, chairman of the Finance Committee.

Colleagues describe Nazarian, 41, as a good-humored litigator whose penchant for handling complex legal cases makes him a good fit for his new job. He has a reputation as a consensus builder and someone who never lost his temper or let his ego get in the way in 10 years as a litigator at the Baltimore law firm of Hogan & Hartson. Former co-workers also noted his love for the Orioles and his collecting of Pez candy dispensers.

"The more complicated the issues, I'd say, the better he is going to be able to bring to bear a pretty considerable amount of brain power," said Stephen J. Immelt, managing partner at Hogan & Hartson's Baltimore office.

Constellation Energy Group, the state's largest power producer, called on Nazarian to focus on Maryland's energy future.

"It is our view higher energy costs are a long-term reality driven by global supply and demand," said Rob Gould, a Constellation spokesman. "We're eager to work jointly with the PSC and all stakeholders on solutions that balance the price of energy with our state's environmental priorities."

Praise and advice for the incoming chairman was tempered by surprise at Larsen's departure, which comes in the middle of the commission's campaign to challenge regulations governing the competitive energy market.

O'Malley said that although Larsen was confirmed for a full term by the Senate this year, he never intended to stay that long as chairman. Larsen had worked in previous Democratic administrations and left a lucrative career at Virginia-based health insurer Amerigroup Corp. at the behest of the governor.

And the administration put Larsen in a new pay grade earning nearly $190,000 a year. O'Malley said yesterday that the salary adjustment was "worth every penny." Administration officials said Nazarian's salary is still being negotiated.

While Larsen doesn't plan to leave until August, he informed the administration after the General Assembly session ended in April that he planned to step down, and he spoke with legislative leaders Monday to tell them of his decision. He said yesterday that "it's just the right time for me and my family" to return to the private sector, and noted that he will soon have to begin paying college tuition.

"I wouldn't leave, I will tell you, if I didn't feel in my heart that the work at the commission will go on," said Larsen, who will return to Amerigroup's Maryland division as senior vice president of government affairs. "We will not miss a beat."

paul.adams@baltsun.com

laura.smitherman@baltsun.com

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