A day after legislative leaders said they were forging ahead with a business-backed bill to deregulate the power industry, Gov. Parris N. Glendening slowed things down, expressing strong reservations about the proposal's impact on consumers, the environment and tax revenue.
After a breakfast meeting with Glendening and top House Democrats, House Speaker Casper R. Taylor Jr. decided yesterday not to introduce the bill. The governor's concerns, though not new, dimmed Taylor's earlier optimism that a deregulation bill could pass this session.
"It is becoming more and more convincing to me that the governor is not at all enthused about any deregulation this year," said Taylor. "He was very emphatic."
Deregulation, which would allow customers to choose where they buy their power, is still on the front burner in the General Assembly. Senate President Thomas V. Mike Miller says he will introduce a version of the industry proposal soon. He, Taylor and businesses argue that if Maryland does not allow electricity competition, employers will move to states where they can shop for lower rates.
The state's leading industry players in the debate, including Baltimore Gas and Electric Co. and major business customers, said this week that they have reached tentative agreement on a deregulation proposal. They are hoping the General Assembly will pass a bill during the 90-day session that ends April 12. Glendening said yesterday that he will work with them.
"I'm going to work with everybody. I want to see this done," Glendening said after the meeting. "But if it's going to happen, and it's going to pass my desk, it's going to happen right -- and right means take care of the individual consumer, protect the environment and make sure we don't raid the money we need for our schools."
The governor said he outlined four major concerns in his breakfast with Taylor that must be addressed before he can support deregulation: He said a three-year freeze on electricity rates, as envisioned by the draft industry bill, is inadequate. Miller plans to offer a four-year freeze. But Glendening is hoping for a different solution, arguing that after a freeze, homeowners could get hit with major rate increases.
"Three years is nothing in the lifetime of a homeowner," Glendening said. "What happens after three years if the rates all of a sudden go up 20, 25 percent?"
Glendening wants environmental protections that are not in the industry proposal. He is intrigued, for instance, by proposals in other states to impose a rate surcharge on sellers of electricity generated by plants that burn cheaper, dirtier fuels.
He is concerned about giving the state's power companies tens of millions of dollars in tax breaks, which would happen under a separate proposal being discussed in the General Assembly. He said that would take away much-needed money from education.
"These companies are doing quite well," Glendening said.
The utilities argue that if they lose their monopoly business, they need tax cuts to compete with power companies in other states.
Glendening is worried that rate payers may be compelled to pay billions of dollars to bail out investments utilities made in power plants under a monopoly system, when they were guaranteed profit and customers.
Recovering these "stranded costs" is one of the most vital issues in deregulation. The governor points out that in other states, power generators have sold well above book value, meaning utilities may not need to recover stranded costs.
One alternative legislative proposal would require that companies auction off their power plants if they want ratepayers to cover stranded costs. The idea is embraced by consumer advocates but is staunchly opposed by the state's utilities.
Pub Date: 2/04/99