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PSC reverts to March plan

THE BALTIMORE SUN

State utility regulators said yesterday that a judge's order striking down a plan to defer part of a 72 percent rate increase for residential electricity customers has forced them to at least temporarily revive an earlier plan that includes a smaller rate cut and interest charges.

The decision will mean less savings for Baltimore Gas and Electric Co. customers come July than they would have received under a deferral plan hashed out between Gov. Robert L. Ehrlich Jr. and the utility after lawmakers failed to pass legislation dealing with the issue. Consumers will be automatically enrolled in the plan unless they call BGE and opt out.

The order by the state Public Service Commission is the latest turn in a debate over electric rates and deregulation that has angered and confused consumers. BGE customers are still waiting to know exactly how much they will be paying for electricity when rate caps that have been in place for six years expire at the end of this month. The issue has sparked lawsuits and countersuits and become the focus of a political tug of war between the governor and his opponents in the coming election season.

Baltimore officials successfully sued last month to stop the governor's plan in hopes of getting a better deal. A Baltimore City Circuit Court judge sided with the city on May 30 and ordered the PSC, which regulates utilities, to hold new hearings to investigate more deeply into whether the rate increase is justified.

But while that process plays out in coming weeks, the PSC, in a 4-1 vote, said it would be unconstitutional for regulators to deny BGE the ability to recover its cost to provide electricity.

The commission said the court's decision left it little choice but to revert back to a rate plan it had approved March 6.

That order - which phased the higher rates in over two years and charged 5 percent interest - was widely criticized by lawmakers and consumer advocates at that time as being too harsh, leading to months of rancorous debate during the recently concluded legislative session.

Yesterday's PSC announcement was immediately criticized by city officials, lawmakers and consumer groups, who say the commission did not consider alternatives that would be more favorable to consumers.

Critics also said the commission based its analysis on a flawed interpretation of the law - a contention that was bolstered by the state attorney general's office yesterday.

"The Public Service Commission has taken the most anti-consumer position it could find and the most punitive to consumers," said Baltimore City Solicitor Ralph S. Tyler, whose lawsuit against the commission prompted the judge's order. "You can't read this order as anything other than their whining about being reversed."

Ehrlich blamed Mayor Martin O'Malley's administration yesterday for saddling BGE customers with bigger electric bills as a result of its lawsuit.

Ehrlich appointed four of the five members on the PSC, which O'Malley and others have criticized as being too close with the power industry it regulates.

"Today's developments demonstrate why naive, politically tinged lawsuits should never come before the interests of working families," Ehrlich said in a statement. "Regrettably, the city's lawsuit has put working families in a far worse position."

Compliance vowed

Rob Gould, a spokesman for BGE parent Constellation Energy Group, said the company would comply with the PSC's order.

Harold Williams, a former BGE executive and the lone Democratic appointee on the PSC, dissented from the board's decision and said the commission has "failed consumers."

"They had an opportunity to freeze the rates for a period of time until they had a hearing that possibly could have brought out more information that could have made it possible for them to make decisions that would have been positive for the people of Maryland, and they didn't take advantage of that," he said.

Assuming that the PSC's decision stands, customers will see an average 21 percent increase in their electric bills beginning July 1 and will be charged 5 percent interest on the difference between that amount and the 72 percent increase.

That compares with a roughly 19 percent increase in the governor's plan, which did not charge interest and required Constellation to pass on to customers some of the savings it expects to gain from its proposed merger with a Florida utility owner. In that plan, customers had to opt in, or notify the utility if they wanted to participate.

Implementing the PSC's March 6 order was one of two options that city Circuit Judge Albert J. Matricciani Jr. gave the PSC in a decision this week that was seen as a stinging rebuke of the commission's actions on electric rates to date.

The second option

The other option the judge outlined was to temporarily extend the rate caps that have been in place for six years as part of the state's move to deregulation. In theory, the caps would be lifted after the PSC held new hearings on BGE's rates and came up with a suitable rate plan at the end of that process.

But the commission rejected that option yesterday and said PSC rules and the deregulation legislation passed in 1999 did not give it the legal authority to extend the caps.

It also said that forcing BGE to charge customers less than its cost of doing business would violate the "takings" clause in the Fifth Amendment to the Constitution. BGE would almost certainly sue the commission in such an event, potentially delaying or even eliminating any chance that customers could get rate relief by July 1, the commission reasoned.

To support its claims, the commission cited a Dec. 16 letter from the state attorney general's office to lawmakers, who were exploring ways to limit the rate increase. In that letter, the commission said, the attorney general supported the notion that BGE must be allowed to recover its cost to purchase electricity and that the rate caps could not be legally extended.

The attorney general's office disputed the PSC's claim yesterday, however, and said the commission was quoting selectively from its letter to lawmakers in December. In fact, the letter says the state could temporarily cap increases in rates - essentially the same option offered in the court order, the attorney general's office said.

The Maryland Office of the People's Counsel, a utility watchdog agency, also questioned whether the PSC had the authority to extend the rate caps.

In a motion filed with the Circuit Court, the People's Counsel said it could find no legal basis for the PSC to maintain the caps and asked the judge to clarify his order.

The consumer advocacy group also filed a motion with the PSC, asking it to amend its March 6 order to deny BGE interest payments on the deferred bills and allow customers to opt in to the plan, rather than be automatically enrolled.

Tyler, the city solicitor, attacked the commission's claim that extending the rate caps would put BGE in the position of losing money. The central point of the city's lawsuit was that the PSC never forced the utility and its corporate parent, Constellation, to open their books to regulatory review and prove that the higher rates are justified.

"That goes to the crux of this entire problem, which is that there's never been a proceeding in which that point has been proven," Tyler said.

paul.adams@baltsun.com

The two plans

Opt in

Negotiated between Gov. Robert L. Ehrlich Jr. and Constellation Energy Group and approved by the state Public Service Commission in April.

July increase capped at 19.4 percent

Customers phased in to market rates over 18 months

$19 monthly fee for two years starting July 2007

No interest charges

Opt out

Revived by the PSC, which originally ordered it in March.

Initial increases capped at 21 percent

The rest deferred from July 2006 to February 2007

Payments for deferred costs begin March 2007

5 percent interest on deferred costs

[Source: Sun research]

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