Work in progress, O'Malley energy policy yields results

December 19, 2011|Jay Hancock

As a connoisseur of the wide open spaces between what politicians say and what politicians do, I saw promise in Gov. Martin O'Malley years ago.

"Taking on BGE to stop the rate hikes" was his main 2006 campaign message, an assignment that was doomed from the first, stirring television ad. The Baltimore Gas and Electric price increase of that year was cemented in law and history, a fait accompli engineered in no small degree by O'Malley's Democratic party.

But since then, the governor's energy accomplishments have added up to something quite substantial, marked most recently by last week's settlement with Exelon Corp. in its application to buy BGE parent Constellation Energy. O'Malley didn't roll back the BGE rate increase. But he won three cash rebates for BGE customers, obtained more than $2 billion in concessions from Constellation and launched Maryland into a lower-carbon future at a reasonable cost.

The peevish columnist flinches to say it, but there are few if any governors with a similarly impressive record of repeatedly agitating for energy consumers while simultaneously recognizing and doing something about the warming planet.

Bill rebates are the O'Malley accomplishment that consumers notice. The Exelon settlement includes a $100 credit on your BGE invoice to be paid within three months of the deal's closing. It's possible that the Public Service Commission, which has final say over the merger, will increase the amount slightly.

All BGE residential customers get the credit — even if they buy electricity from Washington Gas Energy Services, Viridian Energy or some other third party. That's because BGE remains your utility, for better or worse, even if you shop around for the kilowatts it delivers.

To say that this is the third BGE rebate of the O'Malley administration doesn't give the governor enough due. He personally pushed for all of them aggressively. In 2007 he appointed Steven B. Larsen to the Public Service Commission to revisit the flawed 1999 deal that deregulated Maryland electricity. That led to a $170 rate credit.

Two years ago, O'Malley's PSC asserted jurisdiction on flimsy legal grounds over EDF Group's rescue of Constellation after the 2008 financial crisis. That led to a $100 BGE credit. Counting the Exelon payment, O'Malley will have gotten more than $400 million for BGE customers in bill credits alone.

He also reversed one of the most obnoxious features of deregulation. Somehow, the politicians of 1999 managed to give BGE's valuable Calvert Cliffs nuclear plant and all its future profits to Constellation while making BGE customers pay for the expensive and dirty task of decommissioning it decades later. Larsen, O'Malley's PSC chairman, got Constellation to give up $1.5 billion in consumer decommissioning payments over a couple of decades.

The shields O'Malley installed to protect BGE from its soon-to-be absentee landlord will be a nationwide model, as other utilities are bought by out-of-state holding companies. When I started writing five years ago about "ring-fencing" utilities against predatory or incompetent owners, the firewall between BGE and its unregulated owner was like tissue paper.

Now there are required capital ratios, restrictions on BGE cash transfers to a corporate parent, a provision for blocking a BGE bankruptcy and, thanks to the Exelon settlement, even power for Maryland regulators to order a BGE sale in the event of owner catastrophe.

The latest deal commits Exelon to spending $1 billion on renewable energy, charity, energy efficiency and assistance for low-income folks as well as the rate credits, although much of the money won't be spent for years.

The Exelon settlement would double Maryland's solar- and wind-driven generation, complementing O'Malley's support for sharply cutting greenhouse-gas emissions by 2020. And it would do so at far less cost per megawatt than O'Malley's questionable project to build an Atlantic Ocean wind farm.

O'Malley the environmentalist has been greatly helped by lax environmental standards in other states. Wholesale electricity prices have plunged, thanks to abundant supplies of natural gas extracted in Pennsylvania, Texas and elsewhere with pressurized water and dubious chemicals. That makes people forget the price spikes of 2006 and gives a governor room to add more-expensive green energy to Maryland's portfolio.

O'Malley failed at making Constellation CEO Mayo Shattuck cut his multimillion-dollar pay by much. Maryland's attempt at investigating overpriced wholesale electricity markets banged into the intransigence of federal regulators, who hold jurisdiction. And the governor failed at keeping the campaign promise of 2006.

Then again, energy policy under O'Malley is not what it would have been under his opponent, then-Gov. Robert L. Ehrlich Jr., whose utility commission, when BGE announced the price increases, stood up and saluted.

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