Urging tighter grip on energy

O'Malley wants PSC to order that new power supply prices be regulated to reduce rates

December 19, 2009|By Laura Smitherman | laura.smitherman@baltsun.com

Gov. Martin O'Malley has asked the state's top energy regulators to order that new power be supplied in Maryland at cost-controlled prices in an attempt to bring down electricity rates.

While urging the Public Service Commission to take that step, O'Malley also indicated he might abandon his effort to impose broader re-regulation of the energy industry through legislation. That proposal failed in the last General Assembly session, and the governor vowed to bring the bill back, but he doesn't appear to have the necessary support.

O'Malley is pushing for more regulatory control over the energy market as he heads into an election year. The last time he faced voters, he made fighting utilities and lowering electricity bills a central theme of his campaign. And he has often said that a deregulation policy implemented in 1999 failed to produce cheaper rates and a reliable energy supply.

"Maryland cannot be held hostage to the failure of deregulation and broken energy markets," O'Malley said in a letter Friday to the PSC. "We can no longer afford to passively wait for competitive energy prices."

It's unclear whether state regulators would heed O'Malley's suggestion. PSC officials declined to comment because the matter is part of a case pending before the commission.

But opponents to the governor's plan quickly emerged. Jay Kooper, president of the Retail Energy Supply Association, said that if regulators order utilities to build new plants, ratepayers would be burdened with the cost. Also, he said, any new electricity brought online wouldn't necessarily be used in Maryland because the state is part of a larger regional market.

"What the governor is proposing is the wrong direction for Maryland," Kooper said. "The PSC is going to have to ask itself if this is the right way to go for ratepayers, especially in these economic times."

Maryland policymakers have been struggling to set the right level of regulatory control over the industry, vacillating from a hands-off approach that fosters competition to more government intervention. The PSC was given statutory authority to order new generation three years ago. O'Malley's bill would have taken that a step further and given regulators more authority over all future power generation.

O'Malley's re-regulation effort passed the Senate earlier this year but was rebuffed in the House of Delegates. Speaking at the Baltimore Sun editorial board on Friday, the governor said his administration hasn't decided whether to reintroduce the bill but pointed out that delegates have already signaled they won't approve it.

"A lot of legislators feel so regretful over their deregulation vote - those that were there at the time and cast that vote - that they are hyper-cautious about casting any vote unless they can clearly look down the road and see what the future holds," O'Malley said.

Del. Dereck E. Davis, chairman of the Economic Matters Committee where O'Malley's bill died, said he wants to continue under the current regulatory regime while working to improve competitive markets. He also noted a projected decline in global energy prices, and the fact that several retail suppliers are offering lower rates than utilities.

"If we focused our efforts on making the public aware that there are reliable alternatives to incumbent utilities and encouraging them to switch, you would see immediate savings," said Davis, a Prince George's County Democrat.

O'Malley cited the fact that fewer than 5 percent of Maryland's 2.1 million residential customers have chosen to sign up with a retail electricity supplier as proof that deregulation has failed.

He also pointed out that that no new large-scale electric generation has been built in the state since 2003, and that the state now imports nearly 30 percent of its energy from nearby states.

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