Slump can be used to brighten Md.'s future

December 13, 2008|By JAY HANCOCK

Add Maryland's energy future to Wall Street, the federal deficit, Washington politics, Detroit carmakers and everything else turned topsy-turvy by the financial crisis.

Six months ago, we worried about even higher electricity prices and blackouts or brownouts as early as 2011. But the recession granted a reprieve.

Not an especially welcome one, for sure. But the economic slowdown and crash in energy prices have delayed the future and offered policymakers time.

The Public Service Commission just grabbed it. In a long-awaited report delivered Thursday, the agency focused on conservation as the main way to ensure that electricity resources meet electricity needs in the next few years.

The panel rejected the politically explosive option of seizing generation plants once owned by Baltimore Gas and Electric and Potomac Electric Power Co.

And it delayed whether to order BGE or Pepco to build their own generators at the expense of ratepayers.

"No bureaucrat will ever make a decision until he has to," an old Washington hand once told me.

But in this case, procrastination makes sense. Now that doomsday is delayed by an expected dip in the growth of electricity use, Maryland can concentrate on cutting demand instead of taking risky steps to buy or build generators. We'll avoid huge bills for at least a while. Maybe longer. And we'll reduce pollution while we're at it.

The commission was never, ever going to recommend forcing unregulated power companies to sell back generation plants once owned by Pepco and BGE. Mirant owns some of the plants. BGE parent Constellation Energy owns others, including the Calvert Cliffs nuclear units.

Deregulating the plants was a terrible mistake. Banning Pepco and BGE from making their own megawatts and forcing them to shop on the open grid helped drive up prices.

But trying to re-regulate generators through state seizure would be an even bigger disaster.

Leave aside the troubling breach of property rights that comes with any involuntary government takeover. Never mind the billions in costs that would accrue to taxpayers or ratepayers. (Even if you grab the plants, you have to pay for them.)

Assume for argument's sake it's a great idea to buy aging, dirty, coal-fired generators that will be obsolete in a low-carbon economy.

Let's also assume the expertise to run these facilities would be magically transferred from Mirant and Constellation to whomever ends up in charge.

The litigation alone would burn resources for years and distract from planning for the future. Constellation and Mirant would certainly fight seizure unless they got an exorbitant price.

Anyway, Maryland's settlement with Constellation this year prohibits it from revisiting deregulation.

That's not to say there might not be chances to re-regulate plants on the cheap, with cooperation of owners.

Falling energy prices might eventually hurt their profits enough to make re-regulation (and a guaranteed rate of return) look good. Buyouts such as Warren Buffett's pending bid for Constellation give the opportunity to get concessions in exchange for regulators approving the deal.

But the main job for Maryland now is to cut electricity use.

Unfortunately, the economy is helping.

Normally, the state increases kilowatt consumption at 1.5 percent or 2 percent a year, a rate that put it in peril of temporarily running out of juice on some boiling summer day in 2011 or 2012. Next year, however, energy pros won't be surprised if use decreases for the first time in many years.

Factories are running on half-speed. Unleased offices sit vacant and dark. New-home growth has plummeted.

All this pushes back the deadline, giving regulators room to plan generation that is long-term and green instead of quick and dirty.

Faster-than-expected development of a transmission line from Pennsylvania to Northern Virginia should also reduce pressure on the grid and the need for new Maryland plants, PSC officials say.

Meanwhile, we can build on impressive conservation gains. BGE's Peak Rewards program, which pays household customers for letting the utility turn off their air conditioning for a while on really hot days, will eliminate the need to build an entire generation plant.

My family and I are participants. It was painless. We never noticed the AC going off.

Gov. Martin O'Malley's EmPower Maryland program is cutting electricity use by state agencies. The PSC has asked utilities to come up with new ways to get households to cut back.

And the huge federal stimulus promised for next year should provide rich opportunities to invest in conservation and green energy. Malcolm Woolf, director of the Maryland Energy Administration, wants the rescue to include $10 billion to help pay for insulation, tight windows, efficient appliances and so forth.

By cutting climate-changing pollution, lowering chances of brownouts and avoiding construction of expensive generators, electricity conservation can put Maryland in great shape when the economy thrives again.

As the engineers like to say, the cheapest kilowatt is the one you never have to use.

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