Governors and power

Our view

April 26, 2010

It may come as a shock to some, but electricity is proving to be one of Martin O'Malley's best allies. As expected, last week's electricity supply auction allowed Baltimore Gas & Electric Co. and other Maryland utilities to lock in favorable rates over the next two years.

That continues a downward trend that started last year. Maryland consumers will see significantly lower commodity prices for electricity as rates roll back to the lowest in four years. The timing couldn't be better for the incumbent governor who made a record increase in electricity rates — and Robert L. Ehrlich Jr.'s failure to do much about it — a core issue of his 2006 campaign.

But easily lost in the political rhetoric is that both events — the surge in prices then and the reduction now — were largely due to factors beyond either man's control. A cap on BGE rates created by a 1999 deregulation law that had kept prices below market levels was expiring when the utility sought the sizeable jump in prices during Mr. Ehrlich's tenure. More recently, a global economic recession that has greatly reduced the demand for power has pushed down energy prices.

While the candidates can spin these facts any way they want, the reality is that Maryland still has not charted a clear course for the state's energy future. That's particularly apparent in the General Assembly where a key Senate committee has expressed interest in re-regulating electricity while their counterparts in the House prefer the state move further toward deregulation.

This much is certain: The Maryland Public Service Commission has become a much more active regulator under Mr. O'Malley, and consumers have benefited both directly (in the form of rebates on their bills) and indirectly (most notably in the $2 billion agreement that spared them the future decommissioning costs of Calvert Cliffs nuclear facilities).

The PSC has proven so aggressive on such issues as Constellation CEO Mayo A. Shattuck's compensation and the sale of half the company's nuclear assets to Electricite de France that some were left to wonder if the attitude of Maryland's governor's was too harsh. Constellation remains the sole Fortune 500 company headquartered in Baltimore.

Yet with rates falling, the appeal of deregulation has only increased. For the first time, residential customers can find better prices by shopping around. But that's a trend that might not last beyond 2012, as the U.S. economy gradually recovers and demand for energy increases.

Will Maryland have enough electricity in the future, and should the PSC order utilities to build power plants if they are deemed necessary, a move that would undoubtedly raise prices now but might protect consumers in the long-term? Will enough money be invested by Constellation and others in renewable forms of power or in conservation? And how might all of this be affected by climate change legislation pending in Congress?

Those are the questions that Maryland's gubernatorial candidates need to answer. The prices consumers pay for electricity today are not guaranteed forever. Instead of rehashing the ups and downs of the past (and perhaps even the present), voters need to hear what plans Mr. O'Malley and Mr. Ehrlich might have for the state's uncertain energy future.

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