Power Failure

Our View : By Rejecting Gov. Martin O'malley's Re-regulation Proposal, Maryland Lawmakers Have Left The State's Energy Policies In A Muddle

April 19, 2009

The General Assembly's failure to move forward with the re-regulation of the electric industry this year is surely not the final word on the subject. It certainly doesn't indicate any sudden embrace of deregulation, the dubious enterprise that proved to be. More likely it reflects the challenge of getting lawmakers to seriously address a topic that is both substantively complex and fraught with high-voltage politics.

Gov. Martin O'Malley didn't help matters much by submitting the legislation so late in the session. But considering many of these same legislators embraced far more sweeping energy policy reforms in 2006 under worse time constraints - and even boldly overrode a veto from then-Gov. Robert L. Ehrlich Jr. to do so - such criticism sounds a bit like "the dog ate my homework."

All the O'Malley bill sought to do was put Maryland more clearly on the path of re-regulation and the option of ordering utilities such as Baltimore Gas and Electric to build power plants if that serves the interests of ratepayers. As Public Service Commission Chairman Douglas Nazarian testified in Annapolis, the PSC needs lawmakers to choose a direction for his agency.

What doomed the governor's bill (beyond the House's apparent annoyance with timing) was opposition from commercial and industrial customers that have negotiated more favorable utility rates for themselves. Such a benefit could go away if market rules changed (although a compromise on this issue was developed in the Senate, it went nowhere in the House of Delegates).

Just as troubling, however, is how anger over this winter's high heating bills - likely a product of cool weather, longer billing cycles and higher rates - appeared to overwhelm any reasonable conversation about how electricity should be regulated in the future. Constellation Energy's credit meltdown and its failed energy trading business haven't helped matters either.

What happens now? Amazingly, the short-term outlook is fairly positive. Electricity rates may soon go down, at least slightly, as the recession has reduced demand and fuel prices (assuming continuing credit problems don't eat up those savings). And Chairman Nazarian has pledged to move forward with the agency's investigation into how Maryland will meet power needs despite the re-regulation bill's failure.

This much is also apparent: The price of electricity isn't ever going back to pre-2006 levels. But there are still serious concerns over how to ensure Maryland has an adequate power supply in the years to come and how much that electricity will cost residents.

Under Mr. O'Malley, a more activist PSC has been gradually moving in the right direction, but bolder action may yet be necessary. However, that will require legislators who were so quick to lambaste the last administration for not addressing the failures of deregulation to actually do something about it and back the agency's re-regulatory efforts.

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