Regulated power not so cheap

Out There

April 07, 2009|By Glen Thomas

By now it's considered conventional wisdom that deregulation is to blame for rising electricity prices in Maryland, while states with regulated energy markets are immune from such unpleasantness.

Tell that to consumers in regulated West Virginia, where two utilities recently asked the state Public Service Commission for a 43 percent rate increase. The request by Appalachian Power and Wheeling Power came after the PSC granted an 11 percent rate increase last summer. Keep in mind West Virginia has abundant coal reserves and, for now, some of the cheapest electricity in the nation.

West Virginia isn't alone. Across the South and Eastern Seaboard, at least nine regulated utilities have posted rate increases in the past year ranging from 13 percent to 25 percent.

Contrast that with the double-digit percentage decreases in rates that many deregulated markets are experiencing this year. Falling commodities prices have allowed utilities in those states to buy electricity at lower prices, passing the benefits on to consumers.

The operator of New York's power grid reported in December that wholesale prices in the state had dropped 54 percent since June 2008 as a result of falling natural gas prices. That decline should eventually show up in utility rates. In Pennsylvania, the Public Utility Commission said rates will decrease nearly 11 percent starting in June for residential customers of Pennsylvania Power Co.

That should give pause to Maryland policymakers as they contemplate re-regulation legislation. Who knows, maybe it's time for a little "unconventional" wisdom to find its way into this debate.

Glen Thomas, the president of GT Power Group, is former chairman of the Pennsylvania Utility Commission.

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