State to probe subsidy BG&E; paid its retail stores Audit said outlets received $555,000


The state Public Service Commission plans to investigate whether Baltimore Gas and Electric Co. is subsidizing its nonregulated businesses by providing services paid for by the ratepayer-supported utility.

The PSC decision came after a study by the national accounting firm Ernst & Young found that BG&E;'s retail stores received $555,000 worth of direct and indirect services from the regulated utility business last year. The PSC said it would hold public hearings on the matter, though no dates have been set.

The PSC's investigation stems from complaints filed by the Maryland Alliance for Fair Competition, a group of heating and air conditioner contractors and appliance dealers, and the Small Business Coalition for Fair Utility Practices, which is primarily made up of kitchen remodelers and floor-covering businesses.

"This is the first time the commission has instigated its own investigation of the non-utility operation of a utility," said Gary R. Alexander, an attorney representing both groups. BG&E; spokesman Arthur Slusark said yesterday that the company would "cooperate fully" with the PSC. The company has said that despite the subsidy found in the audit, paid for by BG&E;, the study showed a net benefit to customers when the subsidy was balanced against the profit earned by the regulated appliance service business.

The company owns 11 stores that carry products ranging from washing machines to video games.

Ernst & Young concluded in its report that the utility was not charging the merchandise division for various direct and indirect costs. This support amounted to a $555,000 net subsidy from the parent utility in 1992.

If the subsidy were returned to BG&E;'s customers, it would amount to 2 cents a month for the typical BG&E; customer using 600 kilowatt hours each month, BG&E; said.

The study also found that BG&E;'s appliance servicing business -- included in the utility's regulated business for rate-making purposes -- contributed $8.2 million in profits to the company, equal to 44 cents a month to the typical ratepayer. Mr. Slusark said that profit more than offsets the $555,000 subsidy.

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