Larsen made progress, but more work remains

June 11, 2008|By JAY HANCOCK

In what proved to be his grand finale as Public Service Commission chairman, Steven B. Larsen filed a 212-page salvo last week petitioning federal regulators to cut wholesale electricity prices in in Maryland and a dozen other states.

"The No. 1 priority of the Maryland Public Service Commission since being reconstituted in 2007 by Gov. O'Malley has been to fight on behalf of Maryland ratepayers to make sure rates are fair and reasonable," he said. Rates from now until 2011, he said, "are unjust and unreasonable and must be adjusted."

My work here, he might have added, is done.

Except it's not.

BGE electric bills are still about 80 percent higher than they were two years ago. Maryland faces power shortages within years, but no major generation plants are being built. Electricity prices are hostage to a flawed and dubious interstate wholesale market.

Larsen made unprecedented efforts to address all three problems, and he leaves the Public Service Commission in far better shape than when he arrived.

But he shocked consumer advocates and megawatt mongers alike by announcing his resignation after only a year on the job.

He's telling people he wants to return to business to take a good job and make more money. Of course, he would - eventually. But why now, with so much work still to be done? He knew what the PSC position paid - $187,000. Gov. O'Malley even gave him a $60,000 raise.

I think he came to realize his orders from O'Malley - cut electricity prices, reduce pollution AND ensure future power supplies - were impossible to fulfill. Especially running a commission that, thanks to deregulation, has lost much of its power to the federal government anyway.

Larsen objects to this characterization. O'Malley "understands the issues" involved, he said. "He understands that this commission has been working really hard and pushing the envelopes that we can, legally." As for his commission, he said, "we did a lot of the things we said we were going to do, although not all of them are complete. I acknowledge that."

Larsen held the power of a minor potentate when he was Maryland's insurance commissioner under Gov. Parris N. Glendening.

He single-handedly blocked CareFirst BlueCross BlueShield's attempt to sell itself to WellPoint Health Networks for $1.4 billion. Broad subpoena power let him ferret out the juiciest details of a plan by CareFirst executives to pocket scores of millions in bonuses in connection with the merger. He kept CareFirst a nonprofit and saved it as Maryland's health insurer of last resort.

By contrast, his best-known accomplishment as PSC chairman is the $170 rebate that Constellation agreed to give each BGE household.

Many companies selling electricity to Marylanders are out of state and out of the PSC's reach. PJM Interconnection, which manages the Mid-Atlantic wholesale megawatt market, is in Pennsylvania and answers - to the extent that it answers to anybody - to the Federal Energy Regulatory Commission.

Maryland badly needs new interstate transmission lines. But those are completely out of the PSC's control, too.

True, the $170 rebates add up to $187 million. O'Malley and Larsen got Constellation to give up $2 billion in potential future charges. They persuaded federal regulators to cap prices on certain generators that had reaped monopoly profits at times of peak demand.

In last week's petition, they're asking Washington to block another $2 billion in charges Maryland customers must pay to generators for guaranteeing power to the grid.

But most of this money wouldn't have been billed for years or decades, which makes it irrelevant to families worried about $300 electric bills now. Larsen wasn't able to block BGE's initial, 70 percent price increase for households. It's obvious O'Malley wanted to do a lot more, a lot more quickly, and that constituents expected him to.

Soaring energy costs, just as much as legal obstacles, have wrecked chances to lower electricity prices.

Even with complete re-regulation, costs for coal and other fuels would make prices much higher than they were a few years ago. And complete re-regulation - price controls on all Maryland generators once owned by utilities - isn't going to happen. These days electricity's market price is largely driven by increasingly expensive natural gas.

The state must also build generators and cut carbon emissions, which will drive up costs even more. Steering the PSC in such an environment will be unglamorous, grueling and frustrating.

Last week's self-congratulatory moment included a news release from the Maryland Democratic Party with heroic quotes from O'Malley and Larsen. A separate, PSC media statement signaled the impending transition by giving a cameo role to PSC General Counsel Douglas Nazarian, whom O'Malley has appointed as Larsen's successor.

Presumably Nazarian will last longer as chairman than Larsen did. Certainly, he knows it will be difficult. Larsen's early departure demonstrates that to everybody else, too.

Mission not yet accomplished.

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