BGE offers new plan

THE BALTIMORE SUN

Constellation Energy Group executives presented lawmakers with a new plan yesterday for phasing in the 72 percent electricity rate increase scheduled to hit this summer, but legislative leaders said it still falls short of the protections consumers will need.

The plan, a revision of a proposal Constellation officials made last week, would allow a 15 percent increase in Baltimore Gas and Electric increases July 1, with more hikes phased in over 18 months. Customers would not be charged interest on the deferred payments, but would be assessed an estimated $8.54 fee on their bills every month for eight years to pay the utility back for the forgone revenue.

Constellation CEO Mayo A. Shattuck presented the offer in a morning meeting with Gov. Robert L. Ehrlich Jr., Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch.

It was the first time Annapolis' top three leaders have met to discuss the rate increases, an indication of the seriousness of negotiations expected to dominate the closing days of the General Assembly session.

Ehrlich said he was heartened by the meeting but still thought Constellation needed to do more.

'Major ... progress'

"It's a step in the right direction," Ehrlich said of the company's new plan. "Major league progress from a week ago."

Another meeting is set for tomorrow as lawmakers from both parties try to prevent sticker shock for BGE's 1.2 million customers just months before Election Day.

But Miller and Busch said that the plan was inadequate and that it would not stop them from aggressively pursuing legislation to fire the members of the Public Service Commission and give the legislature veto power over a pending merger between Constellation and FPL Group Inc. of Florida.

Both bills are widely viewed as a slap at Ehrlich, the state's first Republican governor in 36 years, who ran on a platform of reducing Maryland's regulatory burden and enacting more business-friendly policies. The impending rate increase has focused attention on the state Public Service Commission, which critics say has swung on Ehrlich's watch toward utility companies to the detriment of customers.

"A lower rate of increase over a longer period of time, and they might be in the ballpark," Miller said yesterday, referring to the Constellation proposal. "Unless someone comes forward with a better plan than what came forward today, the House bill [to allow a veto of the merger] will be on the floor of the Senate."

A Constellation spokesman said after the meeting that negotiations would continue but that the plan depends on the approval of an $11.4 billion merger between the company and FPL Group.

Phase-in

According to a confidential draft of the proposal, the 72 percent rate increase would be phased in over 18 months, instead of the 15 months utility executives proposed last week.

Under the new proposal, BGE's 1.2 million customers would get hit with a 15 percent increase July 1, a 4.5 percent increase in January 2007 and another 20 percent increase in June 2007. Customers would see market rate prices starting in January 2008. The proposal would defer the first-year increase - estimated at $750 million over eight years - by charging customers $8.54 a month.

To offset that cost, the utility would borrow the money. Instead of passing interest along to customers, as originally proposed last week, the company would absorb the estimated $108 million. According to the company's draft, savings from the proposed merger would result in a benefit to customers of about $346 million.

"This latest proposal speaks to the seriousness of the issue and how serious we deem it to be," said a Constellation spokesman, Robert L. Gould. "We believe we have put together an extremely aggressive and compelling plan that would drastically reduce the rate shock that customers would be seeing in July. And we have been very clear: The merger plays a clear role in all this."

But Busch, the House speaker, said Constellation's new plan to mitigate the shock to consumers "just shuffled some things around" rather than making meaningful concessions.

And after the meeting, Miller, who had previously been cool to the House's merger bill, said he could see the legislature enacting it and the Senate's PSC bill within days.

The Senate gave preliminary approval yesterday to a bill that would remove all five members of the Public Service Commission April 9 and replace them the next day with a board controlled by the legislature. It appears poised for final approval in that chamber as early as today.

The coming rate increase - an average of $743 a year per household - is the result of a deregulation plan and settlement agreement approved by the legislature and other officials in 1999 and 2000. As part of the deal, rate caps have been in place for six years but are now due to expire just as world energy prices have spiked because of Hurricane Katrina and global instability.

In addition to the two bills moving forward in the House and Senate, Busch said he expected the legislature to demand some recouping of $528 million customers paid Constellation over the last several years to compensate the company for an expected decline in the value of its Maryland power plants. Rather than declining, their value has increased significantly in recent years.

"Both houses are talking about solutions to the problem," Busch said. "Up until now, there's been no dialogue about the problem other than a long-term financing plan."

A bill requiring Constellation to return the $528 million is pending in the Senate Finance Committee. Sen. Thomas M. Middleton, a Charles County Democrat and the committee's chairman, said he was waiting for an opinion from the attorney general regarding the bill's constitutionality.

Until yesterday, efforts in the legislature to address the rates and merger had been generally bipartisan. But Republican allies of the governor stood on the floor of the Senate yesterday to object to the PSC reconstitution bill, saying it was nothing but a petty slap at his appointees.

'Mean-spirited'

"This is probably the most mean-spirited bill I've seen since being in the legislature," said Sen. J. Lowell Stoltzfus, the minority leader from the Eastern Shore. "It's opportunistic piling on, blaming the PSC for the electricity rate increase. The real story is, this bill is not really about the rates but it's about criticism toward this administration for replacing PSC members."

The commission - four of whose five members were appointed by Ehrlich - has come under intense fire for not acting aggressively enough to protect the public from the rate increases. Prominent lawmakers have called for commission Chairman Kenneth D. Schisler's resignation, particularly since a series of e-mails were uncovered earlier this month showing what some called a too-cozy relationship between him and industry lobbyists and officials.

Schisler issued a statement yesterday opposing the bill, which would effectively oust him from his $117,000-a-year job.

"This legislation does nothing to address the upcoming looming rate increase facing consumers," Schisler said in the statement.

But Democratic senators said the public doesn't trust the commission.

"It wasn't put in there to be mean-spirited," said Sen. Paula C. Hollinger, the Baltimore County Democrat who sponsored the bill. "It was put in there so the people have confidence in those who are supposed to be out there protecting their interest."

Middleton said one name that has been talked about as a potential new member of the commission is Michael J. Travieso, the longtime People's Counsel who was ousted by Ehrlich shortly after the governor took office in 2003.

The Senate's preliminary vote on the bill and on several amendments offered by Republicans fell largely on party lines, with Sen. E.J. Pipkin, an Eastern Shore Republican, the only member of his party to side with the Democrats. He said the current commissioners have only espoused deregulation and market competition, which haven't worked in Maryland.

"We want people in the room we're comfortable with who will be aggressive on behalf of the consumers," Pipkin said. "This vote is not about politics, in my opinion. This is policy over politics."

andy.green@baltsun.com

kelly.brewington@baltsun.com

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