David Nitkin on state politics issues

Editor answers questions about energy rates, Assembly, governor's race

May 9, 2006

Energy rates

Diane, Arnold: How long before the [Baltimore Gas and Electric Co.] rate hike and the surging gas prices take a serious toll on the [Maryland] economy as reflected in cost of living indicators? All of us know that money will be tighter for discretionary spending, but what real effect will it have on the economy, [specifically] a drift toward a recession?

Nitkin: Most economic analysts predict a strong future for Maryland's economy because of a continued infusion of federal jobs as part of the base-realignment process. Maryland is a wealthy state, and while the cost of living will rise, unemployment is low and economic indicators look healthy. However, a confluence of factors -- including fuel prices, and the revision of adjustable rate mortgages -- does have the potential to have a negative impact.

Joanne Rusk, Annapolis: I currently am on the BGE "budget plan." My rate went up 26 percent in March. If the plan moves forward as the governor plans and BGE customers are to pay 19 percent as of [July 1], am I to assume that the 19 percent will be over and above the 26 percent? If so, that's outrageous!

Nitkin: The Sun had a story today describing how some budget-billing customers have already seen increases of 70 percent, although the increases have varied.

I forwarded your question to Rob Gould, head of corporate communications for BGE parent Constellation Energy Group, and here is his response:

"The budget bill amount will not change on July 1 as some increase has already been factored in. The next change will be at the start of the new budget billing year, or September.

"Essentially, the transition plan is independent of the budget bill calculation.

"If a customer is on budget billing -- the amount of the budget bill is determined independently of whether or not the customer chooses to opt in to the transition plan. Thus, the budget bill amounts will be calculated as they always have been and will reflect the full increase from current frozen rates to market rates for electricity supply.

"If the budget-billing customer does opt in to the transition plan, they will receive the same schedule of transition credits and deferral repayments as any other customer.

"By choosing to opt in to the transition plan, the effect will be a credit beginning on July 1 to offset the increase in either standard rates or budget billing charges."

Dave, Bel Air: Please explain to me how Mayor Martin O'Malley can blame [Gov. Robert L.] Ehrlich [Jr.] for the rising cost of gas, and especially the 72 percent rate increase for BGE electricity? Seems like O'Malley has forgotten that the governor doesn't have control over the cost of gasoline, and that the former governor and Democratic legislature enacted the price regulation of 1999. [Don't] O'Malley's comments seem like "throw it against the wall, and see what sticks" politics?

Nitkin: The deregulation law was passed in 1999, when Ehrlich was in Congress, and the six-year rate caps were approved by a Public Service Commission appointed by Democratic Gov. Parris N. Glendening. Ehrlich can justifiably say he had no part of the Maryland plan, although he did vote for a federal deregulation law while in Congress (and every Republican in the General Assembly voted for the 1999 bill).

O'Malley says that the current Public Service Commission could have done more to protect consumers from the rate increase that is occurring with the lifting of the caps. Ehrlich has acknowledged that he appointed PSC commissioners and wanted PSC staff who were business friendly, and e-mail exchanges show a close relationship between PSC Chairman Kenneth D. Schisler, an Ehrlich appointee, and utility company lobbyists, notably one who was also a lawyer for BGE until recently.

Mary Lewis, Baltimore: Why is it that The Sun always has to point out that the PSC was appointed by Ehrlich? There is enough blame for everybody -- the mayor, governor, legislature, everyone involved. To imply to readers that this was all Ehrlich's fault is not fair.

Nitkin: To be fair, I don't see any blame for O'Malley regarding rates. But there is certainly blame for Senate President Thomas V. Mike Miller and legislative Democrats and Republicans who voted for the law; and for Glendening, who signed it. To point out that Ehrlich appointed four of the five current members of the PSC, who must now deal with the issue, is in no way implying that the current rate situation is Ehrlich's fault.

Cate, Towson: Why doesn't anyone mention the basic flaws with BGE and the business model? I see that BGE fails as a business in [two] ways. First, after the Enron and California debacle[s] and the war in Iraq, why didn't BGE purchase contracts when prices were lower in anticipation of a higher market? The trends have been obvious for years. Second, there is no incentive for BGE to keep prices lower. The reality is the consumer market will not be competitive for a very long time, if ever, so their profits are built in. The only solution I can see is to nationalize utility companies. Any comments?

Nitkin: My only comment is that I am not an economist, a business major or an industry analyst, so am ill-equipped to offer an opinion on the BGE business model in a deregulated environment. I can say that many states are looking for ways to fix or alter their deregulation laws, and that the Enron-era laws passed don't seem to be providing the consumer benefits as hoped.

General Assembly

Benjamin Brown, Glen Burnie: There was legislation before the Assembly this year about reporting hospital infections. I know it died last year but I didn't hear anything about this year.