Assembly fallout

THE BALTIMORE SUN

Maryland's manufacturers aren't huge BGE fans -- a group of them is fighting the utility in court over natural gas rates -- but don't hold your breath waiting for them to cheer on legislators trying to rein in electricity increases.

"They're very concerned when any government begins to treat any business in a way that just doesn't look fair, because they're worried they could be the next," said Michael Powell, an attorney representing the Maryland Industrial Group, a key supporter of energy deregulation in 1999. "This does look extremely unfriendly from a business perspective."

That's the hue and cry from a variety of corners in the business community, a voice that has been largely lost in the brouhaha that has erupted over the 72 percent increase slated to hit residents July 1. Corporate leaders say legislators' handling of the situation is one more blow to Maryland's business-climate image in a year that kicked off with the General Assembly overturning vetoes of a minimum-wage increase and the so-called Wal-Mart health benefits bill.

"One's an accident, two's a trend, three's a problem," said William Burns, a spokesman for the Maryland Chamber of Commerce, which testified yesterday against the proposed emergency legislation. "The General Assembly continues to pass initiatives that shine a negative light on the state, and such actions make the job of economic development harder than it should be."

Business-climate image is a perennial issue for Maryland, which struggles with the perception -- though not necessarily the reality -- that it is an anti-business state. The Wal-Mart bill, which set minimums for health care spending that effectively applied only to the retailing giant, attracted attention nationwide. The electricity rate wrangling has brought censure from The Wall Street Journal, which wrote in an editorial in April that the "message being sent to job creators is clear: Lights out."

Local business leaders are raising the specter of credit-card giant MBNA Corp., which was once a subsidiary of a Baltimore-based bank. It left for Delaware in 1982 after the General Assembly refused to lift caps on the interest rates lenders could charge -- comparatively low at a time of raging inflation.

"Sometimes when decisions are made by a legislature, ... it can have unintended consequences," said Donald C. Fry, president of the Greater Baltimore Committee, a business and civic leadership group.

If state leaders aren't careful, BGE parent Constellation Energy Group might go the same route, said Robert O.C. "Rocky" Worcester, president of the Maryland Business for Responsive Government. He blames the legislature for setting up a system in 1999 that called for deregulation -- but required years of capped prices for residential customers at rates that were 6.5 percent less than in 1993.

"It wasn't deregulation," he said. "It was the highest form of regulation -- it was price setting."

The timing is an "odd perfect storm," said David Mahler, manager of responsible care for Sasol North America Inc., which makes detergent chemicals at its Baltimore facility. The rate cap is lifting in an election year, which means election-year maneuvering between the Democratic-led legislature and the Republican governor. And to top it off, Constellation Energy is attempting to merge with FPL Group Inc. of Florida, which some legislators have seen as ideal leverage for the rate issue.

"All these things seemed to happen at once and created all this opportunity for mischief," Mahler said.

Tom Hucker, who is on leave as executive director of the liberal advocacy group Progressive Maryland while he runs for the state House of Delegates, thinks much needs to be done. Fire the Public Service Commission members, he said. Get back the multimillions in "stranded costs" paid to Constellation for the loss in value of its power plants that was expected but never materialized, he said. And stop the merger, too, he said.

'Right thing to do'

"BGE's been enormously profitable for years," said Hucker, who said he continually hears concerns about the rate increase from residents. "It's the right thing to do for the legislature to step in and protect consumers."

Maryland, which has a low unemployment rate and emerged unscathed from the 2001 national recession, isn't "a business hell" and never was, said Richard P. Clinch, director of economic research for the University of Baltimore's Jacob France Institute.

In fact, his institute's regular surveys show that businesses are increasingly rosy about their prospects and the overall climate. Nearly 70 percent rated the state "pro-business" or "business friendly" in a survey released in January.

On the other hand, the state has a less than sterling reputation nationally, and additional negative publicity doesn't help, he said.

Impact of politicking

But Anirban Basu, a Baltimore economist who sits on the executive committee of the Maryland Business Council, isn't convinced that the electricity-bill politicking hurts Maryland in the way that the Wal-Mart bill did.

The Wal-Mart bill was the first of its kind nationally. With energy costs rising everywhere, and politicians elsewhere demanding concessions from oil companies, "Maryland does not particularly stand out," he said.

"I think the BGE impact is far less," Basu added.

Aris Melissaratos, the state secretary of business and economic development, disagrees: He thinks it's much worse.

"It's a more blatant attempt to interfere with the normal business process," he said. "We lost MBNA forever. We may be replaying the same process."

Francis X. Kelly, a Democratic state senator from 1979 to 1990, remembers clearly when MBNA left. He was one of the few who voted for lifting the interest-rate caps then. A utility is traditionally more regulated, he pointed out, but he sees some similarities with the BGE situation now.

"There's nothing that any legislative body can do to control prices," said Kelly, who is founder, chairman and chief executive of the 300-employee Kelly & Associates Insurance Group in Hunt Valley. "I'll be honest with you: As a businessman in Maryland, I'm concerned about the atmosphere that's being created every time the legislature steps in and tries to take control."

jamie.smith.hopkins@baltsun.com

Sun researcher Paul McCardell contributed to this article.

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