The Senate Finance Committee voted last night to require at least a 3 percent residential rate cut as part of legislation that would give Marylanders a choice of electricity suppliers.
The vote is the first official response by lawmakers to Gov. Parris N. Glendening's proposal Monday to guarantee homeowners and renters a 7.5 percent rate reduction if the state-regulated electric power industry is opened to competition.
Sen. Thomas L. Bromwell, the committee's chairman, proposed a 3 percent rate reduction as his panel reviews legislation establishing the framework for electricity deregulation.
Bromwell offered the five-year rate reduction as a compromise between utilities and industry, which wanted no guaranteed rate break for homeowners, and Glendening's proposed 7.5 percent cut.
The Public Service Commission, which is negotiating deregulation with utilities, would be authorized to require an even bigger residential reduction if warranted. But Potomac Electric Power Co., which recently got a $19 million rate increase in return for selling its power plants, would be exempted from the legislation.
House members are reviewing the same issues. Speaker Casper R. Taylor Jr. has proposed a cut of 2 percent to 7 percent.
Mike Morrill, the governor's director of communications, said Glendening would be "pleased they moved to protect consumers" from the vagaries of unregulated rates. But he said the governor still believed that the utilities could afford to reduce rates by the full 7.5 percent.
A consultant hired by the state had concluded earlier that Baltimore Gas and Electric Co. is awash in excess earnings and could easily afford the 7.5 percent residential electricity rate reduction Glendening proposed.
"One way or another, BGE's regulated rates right now are simply too high," said Matthew I. Kahal, a consultant to the Maryland Energy Administration.
Kahal, of Exeter Associates in Silver Spring, helped draft the residential rate cut proposal that the governor presented to the General Assembly on Monday. Lawmakers in Annapolis are debating legislation that would give Marylanders a choice of electricity suppliers, starting in 2000.
BGE challenged the governor's proposed rate cut as illegal and possibly unconstitutional. And Robert Fleishman, the utility's vice president for corporate affairs and general counsel, warned of layoffs if the company is forced to lower rates that much.
But Kahal pointed out yesterday that the Maryland Public Service Commission staff has found that BGE is earning $131 million a year more than it is entitled to. In testimony filed with the commission last month, the PSC staff recommended a 6 percent rate reduction for all BGE customers, including commercial and industrial users.
The PSC is reviewing BGE's rates as part of its own plan for introducing competition to the state's electricity market. The commission plans to hold hearings next month on BGE's rates and deregulation proposal, with a decision expected by October.
BGE has proposed freezing its rates for the next three years, until all Marylanders have a choice of electricity providers under the timetable proposed by the PSC for phasing in deregulation.
Gregory Carmean, the PSC's executive director, said his staff will likely reduce its recommendation next week, but said the amount has not been determined. Carmean said the staff still believes the utility's customers should pay less for electricity, because BGE's costs have declined in recent years.
The Office of the People's Counsel, the state's consumer advocate, also has urged the PSC to require a 5 percent across-the-board rate cut, worth about $110 million a year.
Glendening administration officials cited those BGE recommendations in arguing for the General Assembly to require a 7.5 percent residential rate reduction for all four utilities operating in Maryland. The governor's proposal -- which would not affect business or commercial users -- would cost BGE about $75 million a year.
Pub Date: 3/17/99