Everyone smiled and posed together for snapshots in Annapolis on Thursday as Gov. Parris N. Glendening signed into law legislation enabling Marylanders to shop for cheaper electricity, starting next year.
But the camaraderie will be short-lived. The armies of lawyers and lobbyists who clashed before the General Assembly over restructuring the electric power industry plan to carry their fight to the Public Service Commission in Baltimore. The decisions of that body of regulators will determine whether the new law is seen as a success or failure.
Though urged by Glendening and consumer advocates to prescribe deep rate cuts for all residential customers, the legislature left that issue and most others up to the PSC to work out. With millions -- if not billions -- of dollars at stake, the sparring among electric utilities and their business and residential customers is likely to be fierce.
"We're looking at a scaled-back version of World War III at the commission," predicted Gary Alexander, lobbyist for ACCESS, a coalition of business ratepayers and energy suppliers hoping to compete with Maryland's existing utilities.
"I'm sure there's going to be plenty of wrangling before the commission," agreed William T. Torgerson, general counsel for Potomac Electric Power Co.
While business and industry lobbyists teamed up with utility lawyers to oppose consumer and environmental advo- cates before the Assembly, it's likely to be more of a free-for-all when the PSC sits down to work out the details of who pays how much.
The five-member commission, which oversees telephone, natural gas and electric service in Maryland, has been working on introducing competition to the state's power industry for nearly two years. It already had decided to begin letting customers choose power companies July 1, 2000, and it has sponsored "round-table" negotiations among contending parties over how to effect the myriad changes that will come with deregulation.
But the General Assembly tinkered with the commission's timetable, issued guidelines on how the PSC should decide crucial issues and gave it extra work to do before electricity competition can become a reality. The law requires, for instance, that the PSC issue orders or regulations protecting consumers from marketing abuses. It also calls for studies of how deregulation affects air quality and whether to require at least some renewable energy be offered by each electricity marketer in the state.
"We've got a heavy workload, and it'll be a real challenge for us, but I think we can get it done," said PSC Chairman Glenn F. Ivey. He said he has not requested any increases in the commission's 134-member staff.
Not everyone is so confident. Michael J. Travieso, Maryland People's Counsel, the state-appointed consumer advocate before the commission, says the panel is going to have to "reinvent" itself.
New philosophy needed
"They're going to have to change their philosophy," Trav-ieso said, "from trying to make sure everyone's interests are protected to being an agency that's supposed to ensure there be competition and ensure that consumers don't get defrauded."
Travieso said he fears that the PSC may dilute and maybe even eliminate the residential rate reduction required under the law. Legislators called for cuts ranging from 3 percent to 7.5 percent for homeowners and renters who elect to stay with their existing utilities rather than shop around.
But while the law requires that residential rates be reduced, it also allows utilities to raise them back -- but no higher than the current rate -- to recover various expenses.
"There shouldn't have been all this wiggle room in here," Travieso said. He and other consumer advocates fear that there will be little competition to supply homeowners and renters, and they will not be able to find lower rates even if they shop around. A mandated rate reduction would be the only way to ensure that small consumers enjoy some benefits of deregulation, he argued.
Commercial and industrial customers hope to reduce their power bills 8 percent to 10 percent by shopping around. Under the law, they will have to wait until Jan. 1, 2001 -- six months after the first residential customers get to choose. But businesses will all get to enter the market at once, while residential choice is to be phased in over three years.
Fund for poor people
The law sets up a $34 million universal service fund to help poor people pay their power bills. Business and industrial customers, who use 60 percent of the electricity sold in the state, must pay for 72 percent of the fund. That could translate into annual payments of $2,000 to $10,000 for some of the largest business users of power, and lawyers are jockeying over how to allocate the fees each class of customers must pay into the fund.
The biggest issue by far to be decided by the PSC, though, is whether electric utilities are entitled to continue collecting from all customers the money that the companies invested in building power plants in Maryland.
Utilities contend that they should be allowed to recover what they spent on the power plants, since they were built to ensure that the companies could generate enough electricity in the state to meet all customers' needs. With deregulation, customers are free to shop for cheaper power generated out of state, they note.
The utilities last year filed claims with the PSC seeking to recover a combined $2 billion in "stranded costs" associated with their power plants. But consumer advocates and business and industry have joined in opposing those claims, contending that the power plants are worth much more than the utilities say.
"There's no assurance that the recovery of stranded costs won't offset whatever savings there might be," said Sander Wise, a lawyer for the Maryland Industrial Group, which has 24 of Baltimore Gas and Electric Co.'s largest business customers. BGE has asked the PSC to let it collect $1 billion, mainly for the Calvert Cliffs nuclear power plant.
Should the PSC allow utilities to recover stranded costs, those fees would be tacked onto whatever price customers could get from competing energy suppliers. They could undercut the ability of new companies to compete for business with the utilities.
"We intend to hold their feet to the fire," Alexander, the ACCESS lawyer, said of the utilities.
Formal proceedings
The PSC has formal rate-setting proceedings under way looking at what, if any, stranded costs exist with each of Maryland's four investor-owned utilities. One utility, Pepco, which supplies electricity in the Washington suburbs, has proposed a settlement under which it would sell all its power plants, and the company pledges to share any profits from the sale with its customers.
For BGE and other utilities, there is relief that Maryland will join neighboring states in opening the industry to competition.
"We didn't get everything we wanted in this bill," said Robert S. Fleishman, BGE's vice president of corporate affairs and general counsel. "We are not at all pleased with the fact there's a rate decrease in this bill."
The utility is discussing a possible settlement with the PSC staff, Fleishman said. BGE's lawyer said the utility must look out for its employees and shareholders as well as the ratepayers.
"It's like a giant jigsaw puzzle," Fleishman said of the state's move toward electricity competition. "We've got the corners in place, and some of the major pieces are still face down.
"Now we have to put it all together," he added. "It can be done. It has to be done."