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Cities make power pacts; Smaller towns aim for cheaper electricity under deregulation

THE BALTIMORE SUN

Whether it's Hampstead in Carroll County, which spends $80,000 a year on electricity, or the city and schools of Baltimore, which spend $45 million a year, Maryland cities and towns are hoping to reduce their electricity costs when a state deregulation law takes effect July 1.

To maximize their savings, these government purchasers plan to pool their buying power for the electricity that lights streets and office buildings and powers water treatment plants. But cities will need help sorting through the choices among electricity companies, said Jack A. Gullo Jr., mayor of New Windsor and president of the Maryland Municipal League.

"The negative part is that, to get to the point where you can make a decision, the town has to do a lot of work," Gullo said.

John R. Miller, purchasing agent for Baltimore, said the city has joined other members of the Baltimore Metropolitan Council to ask for bids in July. The council includes governments, schools and community colleges in Harford, Baltimore and Anne Arundel counties, as well as the University of Baltimore and the University of Maryland, Baltimore.

"We think we're going to be a very attractive customer," Miller said. Based on the experiences of cities in other states that have ended regulation of electricity, he said, "we think we can save between 4 [percent] and 8 percent."

Starting July 1, electricity customers will be able to purchase power from any company or broker willing to provide it, ending the legal monopoly of major utilities and the government-regulated prices they charge.

The rates for a streetlight have been set by the Maryland Public Service Commission. Depending on the wattage and other factors, it costs a city or town between $5 and $11 a month to power a streetlight, according to Rose Kendig, a spokeswoman for Baltimore Gas and Electric Co. It doesn't matter how big the town is or how many streetlights it has.

BGE does not provide one bill for the whole city. Each site -- treatment plant, office building, or row of streetlights -- is billed separately at rates set by the PSC, said Sheldon Switzer, director of pricing and tariffs for BGE.

BGE will continue to provide power to users who don't choose another provider. But with the competitive pricing that starts July 1, the rate for streetlights and everything else could change according to what a buyer can negotiate.

Switzer said cities and towns might be in a good position to benefit from deregulation because streetlights -- the biggest electrical drain in most towns -- are used in off-peak evening hours.

But government customers -- including municipal, state and federal governments -- account for only .009 percent of BGE's business, Kendig said.

Small towns, if working individually, would have little influence. But communities such as New Windsor, population 1,300, and Taneytown, 5,000, are banding together to attract lower bids from power companies that are about to enter the market in Maryland.

On the PSC Web site, buyers can check the list of 17 companies seeking licenses to sell electricity in Maryland. Permits have been granted to Statoil Energy Services Inc. of Alexandria, Va.; Pepco Services Inc. of Washington; FirstEnergy Services Corp. of Akron, Ohio; Washington Gas Energy Services Inc. of Herndon, Va.; and UGI Energy Services Inc. of Wyomissing, Pa.

BGE and other utilities that own the transmission lines would continue to operate and maintain them, but any licensed provider would be able to transmit power on those lines, for a fee paid to owners.

Determining 'load profile'

To help its members make informed choices, Maryland Municipal League is seeking a state grant to hire a consultant to work with cities and towns to figure out their "load profile" -- how much energy they use at various times of day, said Jim Peck, director of research. He said cities, towns and counties might join the state's effort to negotiate a single contract for all electricity needs.

Gullo and Taneytown Mayor Henry C. Heine hope to hire a consultant on their own, and persuade neighboring towns in Carroll County to join them.

"It would be a savings to the city, and a savings to the taxpayer," said Heine.

He and Gullo have invited energy consultant Christopher Cook, whom they know from when he was assistant director of the Maryland Energy Administration, to talk with other elected and appointed officials from Carroll County towns. Cook will speak at a meeting April 27 of the Carroll chapter of the Maryland Municipal League, in Union Bridge.

Some towns have ordinances requiring them to solicit bids for purchases over a certain amount. That could apply to electric power purchases as it does for capital building projects, Cook said.

Taneytown will spend about $147,000 on electricity in the 12 months ending June 30, with streetlights as the largest use, said Linda Hess, clerk-treasurer. Taneytown has one source from which to buy power: Allegheny Power. Most other cities and towns in Carroll are served by BGE.

'A better price'

"If you're a larger purchaser, you'll get a better price," Cook said.

He hopes to find ways for each town to cut its energy bills by 10 percent to 20 percent.

Hampstead officials would be interested in saving money through electricity deregulation, but will probably opt to go along with Carroll County government for pooling efforts because the county would be the largest government purchaser in Carroll, said Kenneth Decker, Hampstead town manager.

Hampstead spends about $50,000 a year for illuminating streetlights, Decker said, and up to $30,000 a year on the electricity needed to pump water from wells, into the pump house to be treated, up to the water tower for storage and then into homes and businesses.

Heine hopes the restructuring act will pave the way for another change. He wants to see Maryland cities and towns gain the right to purchase power for their residents, and sell it to them, the way they provide water and sewer service.

He believes the city could help its residents save on their electricity bills. With no natural gas service in Taneytown, Heine guessed the majority of 5,000 residents have electric heat -- one of the most expensive ways to heat a home.

A handful of Maryland municipalities -- including Hagerstown and Thurmont -- have marketed power for decades, but state law prevents additional communities from doing so, Cook said.

A bill to allow cities and towns to be "aggregate" buyers of electricity failed during this legislative session, as it did last year.

Gullo said that once deregulation takes effect, and officials across the state are comfortable with it, he hopes the next step will be allowing municipalities to become aggregate buyers for their residents.

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