Rate phase-in draws fire

THE BALTIMORE SUN

A confidential draft plan from Baltimore Gas and Electric Co. that would spread a huge utility rate increase over eight years fails to protect customers in the long run, lawmakers said yesterday as they resumed threats to delay a proposed power company merger to negotiate a better deal for ratepayers.

But legislators said that the concept is just a start and that they hope to see a firm proposal by the end of this week.

"The next 48 hours, there will be an intense set of meetings to iron out a plan," said Sen. E.J. Pipkin, a Republican from the Eastern Shore who has taken part in negotiations. "There is an undercurrent of movement to outline something by the end of the week."

The draft, which was circulated yesterday, outlined an offer from executives of BGE and parent company Constellation Energy Corp. to phase in an estimated 72 percent rate increase and provide about $150 million to aid customers, particularly poor Marylanders.

Electric bills are scheduled to rise in July, when six-year caps on electric rates are lifted. The limits were imposed as part of a transition to a deregulated energy market, and lawmakers are scrambling to blunt the impact of consumer costs that could soar just months before an election.

The BGE proposal would defer half the first year's estimated $750 million increase over eight years. The company would borrow money to pay the difference, passing on to customers the projected $4.40-a-month interest cost.

Ratepayers would be hit with a 13 percent increase in July and a 15 percent increase in January. In June of 2007, rates would increase an additional 15 percent, with another increase to follow.

Lawmakers working on a relief plan for consumers hope to use a proposed $11.4 billion merger between FPL Group of Florida and Constellation as a bargaining chip to drive rates down.

Pipkin wants to recover an estimated $528 million that BGE customers have paid the utility to compensate for an anticipated loss in the value of its power plants - a loss that never occurred because energy prices soared.

Yesterday, Pipkin called the discussions with energy officials "a good first step," but he also filed a bill that would halt the merger unless Constellation returns the so-called stranded costs of the anticipated loss in plant value to be used to lower rates.

"The stranded costs was a bad deal," he said. "It's like buying a used car and on the way home, the engine falls out and you take it to the dealer, but he says, 'A deal's a deal.' That's not right."

"Constellation shareholders are set to profit from the upside of this merger," Pipkin said. "The consumer stands to lose. And we shouldn't go into another deal without fixing the problem we currently have."

Senate President Thomas V. Mike Miller, who held a meeting this week with energy executives, said the BGE eight-year proposal would not sit well with customers.

"There's still going to be initial sticker shock," he said. "The average homeowner cannot afford a year's worth of cost increases."

Miller said he wanted to see the company lower or eliminate the interest rate charge on consumers, but he said it was impossible for customers to avoid paying higher rates at some point.

"Somebody is going to have to pay something back," Miller said. "There's no free lunch."

Miller also jabbed the governor for not doing enough to negotiate a lower increase. "We need someone on the second floor [of the State House] working on this issue every day, 24 hours a day," he said.

Ehrlich, who has made "72 percent will not stand" his refrain in the past week, has also met with utility officials, while his staff sat down yesterday with House Speaker Michael E. Busch.

Constellation spokesman Robert L. Gould said the company would not comment on this week's negotiations other than to say any plan would require balance between consumers' and BGE's finances.

"The key to us is to address the customer concerns while at the same time making certain BGE remains financially strong," he said. "That is a very real concern for us."

The company's plan is one of many legislative leaders and industry executives have been considering since the state utility commission announced the planned increase this month.

With a solution elusive, lawmakers are growing irate.

Sen. George W. Della Jr., a Baltimore Democrat, erupted on the Senate floor last night, saying that lawyers hired by utility companies were crowding out consumer interests.

"There are more lobbyists on this issue than senators in the Senate," Della said, eliciting rousing applause from lawmakers.

"I would hate like the devil to walk out of this chamber having done nothing but pass resolutions ... and have the residents of Maryland see the CEO of Constellation walking away with a $20 million golden parachute," he said, referring to the end next month of the Assembly session. "If I sound like I'm frustrated, I am."

Della told lawmakers that they should demand a better plan from the utility company

"We shouldn't be in the back room with lobbyists," he added, prompting a terse exchange with Miller.

"Who's been in the back room with lobbyists?" Miller asked.

"Mr. President, they're all over the place," Della said.

"Just say 'no.' That's all you have to do," Miller said.

Della responded, "Saying no isn't going to do it. We've got to bring them to their knees."

"Thanks for the advice," Miller said.

The longtime senator wasn't the only lawmaker to let off steam yesterday.

During a Senate Finance Committee briefing on the proposed merger yesterday, Sen. Delores G. Kelley, a Baltimore County Democrat, tore into BGE chief executive officer Kenneth W. DeFontes Jr., saying he was acting like a victim while his parent company has scored giant profits.

Whether the Assembly can harness anger into action in less than three weeks remains uncertain. An attorney from the Federal Energy Regulatory Commission, which reviews utility mergers, told the finance committee that she had never seen a legislature thwart a merger.

Cynthia Marlette, principal deputy general counsel for FERC, said that while she couldn't comment on Constellation's proposed merger, any documents to intervene must be filed by April 10, which is also the last day of the legislative session.

Marlette said the commission would act on Constellation's merger by July, within 180 days from Feb. 19, when the merger application was filed. The process can be extended six months for further inquiry, she said.

Gould, the Constellation spokesman, said that efforts to hold up the merger overlook the "great opportunity" it brings.

"That's extremely unfortunate that the significant benefits to Baltimore and Maryland of the merger are being lost in the political debate regarding rate caps," he said.

kelly.brewington@baltsun.com

Sun reporters Jill Rosen and David Nitkin contributed to this article.

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