Democrats calling for rate action

THE BALTIMORE SUN

Democratic legislators - joined by some Republicans - denounced yesterday an electricity rates deal struck by Gov. Robert L. Ehrlich Jr. with BGE and said they want a special session to either soften the shock of a 72 percent price increase facing consumers or take more drastic action.

"I'm getting calls from my constituents telling me that's a bad deal," said Del. Patrick L. McDonough, a Baltimore County Republican, one of a cross-section of legislators interviewed yesterday. "The deal we put together in the waning moments of the General Assembly was a bad deal to start with. This is worse. ... We need to have a special session."

The deal Ehrlich unveiled Thursday, which he called the best possible relief for ratepayers while keeping BGE solvent, would spread the rate increase over 18 months but not significantly reduce the cost to consumers. Critics want changes such as rate caps or the re-regulation of the power industry, which would be overseen by a reconstituted Public Service Commission.

Del. Curt Anderson, a Baltimore Democrat, said a group of about 20 delegates had started talking about petitioning for a special session before Ehrlich's plan came out. Anderson and Del. Ann Marie Doory, another Baltimore Democrat who was considering the petition, said the governor's plan is too complicated for typical ratepayers, especially the elderly, to figure out what to do.

Democrats hold a 33-14 advantage in the Senate and a 98-43 edge in the House. A simple majority in each house is sufficient to call a special session.

"I just think we need to do that," Doory said of a petition for a session. "I was very disappointed with the outcome."

The Republican governor could also call a session but said he saw no need after concluding his talks with BGE.

Ehrlich's greatest ally in keeping intact the plan he negotiated with the utility might be the disunity among legislators about how best to proceed. What could make consensus more difficult is the divide between House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller.

Busch said that he would be willing to go into a special session but only to deal with immediate rate issues and only if an ironclad deal were in place beforehand.

"Our goal should be, how do you create the best benefit to the ratepayer?" Busch said. "For us to come into a special session, I would think there would have to be an agreement that would be more beneficial to the ratepayers than what has already been put on the table."

But Miller said he wants to see the legislature force change at the PSC, which has been criticized as too industry-friendly. Ehrlich appointed four of the five commissioners, and the fifth is a former BGE executive.

Miller said Busch might be too closely aligned with Ehrlich, who vetoed measures to stall the merger, fire the PSC and recover $528 million in "stranded costs" - money that customers paid to BGE's parent company, Constellation Energy, to compensate it for the anticipated loss in value to its power plants when deregulation was approved in 1999. The plants appreciated in value instead.

"How far can he pull away from his position with the governor?" Miller said of Busch. "I just want him to be able to say there's a better alternative for the ratepayers of the state. If we can come up with that, then I certainly want a special session."

When he announced a deal Thursday, Ehrlich pointedly thanked Busch but did not mention Miller.

The governor said yesterday that the disagreement between the two chambers was a major factor in his decision to pursue a rate relief plan without calling a special session. He said he was working well with Busch behind the scenes and felt he could craft a workable compromise without legislation.

"Given what failed on sine die, it was the best we could do," Ehrlich said, referring to the last day of the session.

The deal Ehrlich negotiated with BGE lacks several provisions that legislators considered essential during the recently concluded General Assembly session.

Customers would have to opt into the plan, current PSC members would stay and BGE would contribute no cash to the deal unless the merger between Constellation and FPL Group Inc. of Florida goes through. Delegates and senators of both parties said in the legislative session that those provisions would be deal-breakers.

"I think it's awful, and I'm really, really disappointed," said Sen. James Brochin, a Towson Democrat. "You can take the side of the utility or you can take the side of the ratepayers, and the governor is taking the side of the utilities. We need to go back into a special session."

He opposed the deal that failed in the Senate as the regular session expired at midnight April 10.

Sen. E.J. Pipkin, an Eastern Shore Republican who also voted against the deal, complained that BGE had not been forced to return the stranded costs.

"You had $500 million in stranded costs on the table. That's where you would have gotten real rate relief," he said. "That part has disappeared, and that's disappointing."

The new plan would allow a 19 percent rate increase July 1, with another 25 percent the following June. Customers would be brought up to market rates in January 2008. They would pay a $15-a-month fee for two years, starting in June 2007. If the merger didn't go through, the monthly fee would be $19.

The governor has described the plan as a $1.2 billion commitment by the utility, but Constellation officials calculate its value differently.

The utility has committed to providing $600 million over 10 years for rate relief, provided the merger goes through. To cover the deferred payments, the utility would borrow money, which customers would repay - plus interest - through their monthly fees. If all customers took advantage of the plan, BGE would have to borrow $588 million, a figure that company officials said would be financially crippling.

But BGE estimates that only about half of customers will choose the plan, meaning the amount the utility needs to borrow would be $294 million.

Both of the Democrats running for governor continued their opposition to the plan yesterday. Mayor Martin O'Malley filed a protest of Ehrlich's plan with the PSC, saying it should not be approved until regulators thoroughly review the Constellation-FPL merger.

"What's really troubling about all this ... you know we've had bills in the legislature that if the legislature passed, it would have allowed us, the consumers, and the working people to use the merger to leverage a better rate deal," O'Malley said. "Instead, what the governor and BGE are doing is using this 72 percent rate jolt to leverage their merger."

Montgomery County Executive Douglas M. Duncan sent an e-mail to supporters yesterday urging them to contact state leaders and demand a special session.

"Democrats in the Maryland General Assembly can put a halt to this price gouging in a special session of the Maryland General Assembly," Duncan said in the e-mail. "Contact Governor Ehrlich, Senate President Mike Miller, and Speaker of the House Mike Busch and join me in urging them to bring lawmakers back to Annapolis to take action now, stop the Ehrlich rate plan."

Sen. Thomas M. "Mac" Middleton, who as chairman of the Finance Committee played a key role in the negotiations during the session, said one thing could change the dynamics and bring about a quick consensus: more complete disclosure by Constellation executives of how much they stand to gain from the merger.

Calculations based on documents filed by the utility with the U.S. Securities and Exchange Commission indicate that Constellation Chief Executive Officer Mayo Shattuck could reap $40 million in merger-related pay and perhaps much more. The figure includes long-term stock options converted to cash and accelerated vesting of his pension.

Legislators expect that more precise figures will be revealed as part of the merger approval, and they expect that news of tens of millions in bonuses for executives will motivate lawmakers to move fast. "That's when the public dissatisfaction with this whole thing is really going to be seen," Middleton said.

andy.green@baltsun.com

Sun reporter Gus Sentementes contributed to this article.

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