He guarded interests of state's consumers

THE BALTIMORE SUN

It was much easier, Michael J. Travieso believes, for residents to deal with their phone service, and gas and electric, back in the days when the state regulated prices.

"You called up the gas company or the electric company or the phone company, and everything worked the way it was supposed to," said Travieso, a Democratic appointee who represented Maryland consumers for nearly a decade before being ousted by the Ehrlich administration this month.

But that was before deregulation swept the nation in the mid- to late 1990s, a phenomenon he asserts was never designed to save consumers money and believes was doomed to fail from the start.

Travieso, the man who for eight years guarded the interests of Maryland residential consumers as people's counsel, argues that legal changes are needed to protect residents from the deregulated giants selling power and communications services.

In an interview yesterday, he said the state should shift to a system that requires utilities to provide service to any residential customer that wants it for a regulated price, based on the utility's cost of acquiring power on the wholesale market.

"If the law were changed, it would put the utilities back where they were, where they have an obligation to serve consumers," which they do now only through set periods negotiated with the Public Service Commission, but not by law, he said. Travieso was appointed people's counsel by Gov. William Donald Schaefer in 1994, during an era of heavy regulation, when utilities were vertically integrated - producing, marketing and transmitting power in areas in which they had virtual monopolies.

The system worked, he believes.

"The system was grounded on the concept that natural monopolies were the best and most efficient way," with regulators setting rates based on costs and return on investment.

The push to deregulate the electric power industry began in the mid- to late 1990s as large, industrial power customers sought to lower their costs. Under deregulation, the power generated by plants has become a commodity that can be bought and sold across regions, while the transmission systems, owned separately, are still regulated.

The states with the priciest electricity were the first to deregulate; Maryland, which had average rates, became the 23rd and possibly last state to restructure its regulation of electric utilities.

Travieso says utilities bought into deregulation thinking they would be able to boost their return on investment by competing in an open market. But deregulation was also supposed to increase competition enough to drive down prices, especially for consumers, Travieso said.

"It was clear to many advocates and economists that you couldn't have both of these things," he said. "The only way to get there is to be more efficient, so costs will go down."

He believed companies were likely to face increased marketing costs of getting residential customers to switch from a familiar utility.

"Trying to convince someone in a house in Glen Burnie that they should buy electricity from a company they never heard of instead of a company they've been buying from all their life is not easy; you have to offer significant savings," said Travieso. "We doubted that this was going to work for residential customers."

Travieso testified against the plan in 1995 before the Public Service Commission, arguing that "retail competition," or sales directly from competing energy companies to consumers, would not benefit residential consumers.

Maryland's deregulation plan was backed by industrial customers, retail marketers such as Enron Corp. and utilities. They said and continue to argue that there is no doubt that competition can lower prices.

When it became clear that Maryland was headed for deregulation, Travieso's office successfully fought for consumer protections, such as temporary rate limits set by legislators to protect consumers through a transition to deregulation.

Those limits will begin to expire next year - for Pepco's service territories at the end of June, in BGE's service area in 2006 and for Allegheny Power in 2008.

When he left office this month, Travieso was in the middle of negotiating with three utilities serving Maryland - Pepco, BGE and Allegheny - the second stage of an agreement designed to protect residential consumers from price spikes when the temporary rate limits disappear by allowing utilities to ask for bids to purchase power from wholesale marketers.

The first part of that agreement was reached in April.

Even with the settlement, under which local utilities are expected to continue providing electricity at regulated prices to smaller customers, prices could go up because of conditions in the wholesale market, such as the price of natural gas, a fuel used to produce electricity.

While Maryland formally deregulated in 2000, Travieso said, in reality "the market hasn't deregulated. The law says you can pick someone else, but there ain't no one else," he said, noting that most Maryland consumers still don't have a choice of electric power providers.

He believes the deregulation wave may have ended, though debate is continuing over whether the shift has saved consumers money.

"Unless there's a proven benefit in the states that have deregulated, it's unlikely we'll see a lot more of it," he said.

This summer, even as Gov. Robert L. Ehrlich Jr. was replacing Democratic appointees with Republicans, Travieso said he was hoping to keep "one of the best jobs a lawyer can have." He had applied for it when Ehrlich took office but knew he could be replaced.

On Aug. 6, he received a memo asking him to step down that day.

The Ehrlich administration is reportedly interviewing candidates to replace Travieso. Sandra M. Guthorn, the former deputy people's counsel, has been acting people's counsel since mid-August.

Travieso said yesterday that he is hoping to continue working on behalf of consumers in the energy industry.

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