David Nitkin on state politics issues

Electricity ratesDelmas I. Gruver, Sparks: While it would be difficult, but not impossible, why is nobody considering re-regulating the power industry for all of Maryland?

From Nitkin and Sun business columnist Jay Hancock: There is broad recognition that deregulation has not been a success for consumers in any state where controls were lifted on the utility market. The newly reconstituted Public Service Commission will examine how deregulation is working, butthe difficulties you mention are real.

They include the fact that Baltimore Gas and Electric Co. no longer owns power plants; they transferred them to Constellation Energy. They also include the fact thatConstellation shareholders have invested more than $1 billion to upgrade the efficiency of the former BGE plants and will invest more than $1 billion more to install anti-pollution equipment. If these plants were to be re-regulated, BGE ratepayers would have to pay for the upgrades and increase in market value of the plants.

The alternative would be for BGE to build new plants of its own. But in either case, it would probably lead to rates even more expensive than they are now.

Richard Sullivan, Jessup: Why has there been no discussion about BGE's financial condition (since 1999)? Some obvious questions (that should affect the current issues) would include: Have dividends been reduced because of the adverse impact of the PSC price ceilings? Have net/gross margins been drastically reducedbecause of the '99 PSC price ceilings? If BGE's financial condition has remained about the same (or even improved), then this issue about the effects of PSC price ceilings or need to eliminate pricing ceilings seems very misplaced.

From Hancock: You're right -- there has been no deterioration in BGE's financial condition since the rate caps were installed in 2000, even though energy prices to fuel generation plants have soared. But the reason is that BGE of course knew about the rate caps and locked in its wholesale electric supplies for the long term in 2000.

Like the household rate caps, those contracts expired July 1. Now, BGE is buying electricity that is much more expensive, and if the rate caps were still there, its margins wouldn't just be reduced, they would vanish.

Davis Maloy, Columbia: While I appreciate the amount of time The Sun has dedicated to the BGE issue, there are a number of issues related to the new law that have not been touched on, or that I have been unable to locate in the many articles published.

  • What happens if you move out of the BGE area during the 10-year payback? Do you have to pay the 10 years' worth as a lump sum?
  • What happens if you move into the BGE area during the 10-year payback? Do you have to pay the "interest" charge, and what is it based on?
  • What happens if you choose to go with another energy provider?
  • What is the "interest" payment based on? If it is based on usage, how much? How much would it be for someone with a $200, $400 or $600 bill?
  • Will the new PSC have to take into account all the administrative costs associated with BGE having to keep track of all this when determining how much they can charge customers? I am tired of hearing about the bickering and politics associated with this. I want more reporting on the small details of the plan. From Hancock: Mr. Maloy, we have covered most of this stuff on Electric Shock, our all-BGE-all-the-time Web log. To answer your questions:
  • If you move out of the BGE territory, the 10-year payback will continue to be levied on the guy who moves into your house. You won't have to pay a lump sum.
  • See question No. 1. If you move into the BGE territory, you'll be paying the deferral payback -- estimated at $2.19 a month -- for the remainder of the 10 years.
  • All the rate-relief adjustments happen on your BGE distribution bill. They do not affect the electric supply portion of your bill, so if you choose another energy supplier, you still get the rate relief plan, but you can save extra money if the alternative vendor has a better electric supply rate.
  • There is no net interest on the deferral loan. BGE is providing credits to cover the interest. Without the credits, the payback charge would be more like $5 a month.
  • I haven't heard that implementing the rate relief plan will lead to significant administrative costs for BGE, but it's a good question. Elections Victor Arca, Mount Airy: Why is there no uproar in The Sun about the blatant racist comments about Lt. Gov. Michael [S.] Steele? Why no outcry against the Democratic plan that stated that "we have to discredit him early ... take him out ...?" This is outrageous. Nitkin: The comments you refer to were part of a strategy and polling memo prepared by an African-American firm for the Maryland Democratic Party, with assistance from national Democrats, to assess the strength of Steele's candidacy for Senate. As an African-American and a popular leader, Steele is polling highly and faces a challenge for Democrats trying to keep the seat being vacated by Paul [S.] Sarbanes. The poll was conducted by Cornell Belcher, and was entitled "The African-American Voter in Maryland." The poll found that many black voters were receptive to Steele's message of economic empowerment. Many Democrats believe that Steele's conservative views and ties to President Bush make him a less-than-ideal candidate. The pollster wrote: "Democrats can not [sic] afford to wait until after the primary election to knock Steele down. A persuasion campaign should start as soon as possible to discredit Steele as a viable candidate for the community." While some may find this language "outrageous," others would say it reflects the heated battle between Democrats and Republicans for the Senate seat. Sun reporter Jennifer Skalka reported on the poll after receiving it; it is not up to news reporters to generate "uproar." Claudia, Fort Worth, Texas: Although you have a Republican governor and lieutenant governor, your state seems to be generally quite liberal. Do you feel that this is a movement by the people of Maryland toward a more conservative set of legislators, or was the election of a Republican executive branch an anomaly? Nitkin: That's what this election will largely determine. The General Assembly has taken left-leaning stances in the past year or two, such as becoming the first state in the nation to require large employers -- namely just Wal-Mart -- to provide a certain level of employee health insurance. There are some districts where Republicans think they will be very competitive in knocking off Democrats, but Democrats remain confident that they can keep veto-proof majorities in both the House and the Senate. Bryan, Newark, Del.: David, I am sorry to see that Douglas [M.] Duncan bowed out of the [governor's] race. I thought he was a better candidate than [Baltimore Mayor] Martin O'Malley. What did the Democratic party offer Duncan as a payoff for dropping out of the race? Nitkin: Duncan dropped out because of a diagnosis of clinical depression. As far as we know, he was not offered anything. For months, if not years, many top Democrats wanted Duncan to run for another office, such as state comptroller, to avoid a bruising gubernatorial primary. Duncan now will not be on the ballot this year for any office -- strong evidence that there was no behind-the-scenes deal. Gregory Thomas Jr., Baltimore: What would be the significance of an O'Malley governorship in contrast to an Ehrlich governorship? Nitkin: It's difficult to predict, because the shape of a governorship is probably heavily determined by outside events -- such as the overall state economy. But it's safe to say that if O'Malley is elected this year, there will probably be more cooperation between the executive and legislative branches than we now see (although, by definition, there is usually tension between the two). There may also be less feuding between the next mayor of Baltimore and the governor.
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