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Ehrlich signals veto of BGE bill


Gov. Robert L. Ehrlich Jr.'s decision on whether to veto the General Assembly's BGE rate-deferral plan isn't due until midnight tonight, but he has given strong signals that he will reject the legislation and attempt to push a bill of his own.

The Democrats who run the legislature tried during last week's special session to bring an end to the issue that has dominated Maryland's political scene for months. But the governor indicated yesterday that he would like to keep the debate alive, and he said consumers are on his side.

In comments since an unusual six-hour public hearing on the bill Tuesday, the governor has focused on two elements of the legislature's plan that he says are unacceptable to consumers: that they have no choice of whether to participate in the legislature's plan and that BGE would be allowed to recoup interest expenses on the deferred payments.

Ehrlich said at yesterday's Board of Public Works meeting that even those who attended Tuesday's hearing to ask him to sign the bill had reservations about it and wished the legislature could return to revisit the issue.

"Clearly, the majority of folks are opposed to the bill for two reasons: no consumer choice and charging interest," Ehrlich said. "With those who wanted me to sign [the bill], it was a 'yes, but,' which I found interesting."

Top lawmakers said they are poised to return tomorrow to override any veto. They said that allowing people to opt out of the program would have meant less rate relief for everyone and that customers will effectively not pay interest under their plan.

"The governor is not a details person, which is why he obviously doesn't understand the details of the bill," said Senate President Thomas V. Mike Miller. "He wants to have his cake and eat it too. He wants to give customers choice, but that doesn't bring the rate down."

Baltimore Gas and Electric Co.'s rates are set to rise 72 percent on July 1 with the expiration of rate caps instituted as part of Maryland's 1999 deregulation of the electric industry.

During last week's special session, lawmakers passed a plan that would limit the rate increase to 15 percent for the next 11 months. Customers would be assessed a monthly fee - estimated to average $2.19 after give-backs by the company - for 10 years to make up the difference.

After the 11 months, customers could choose to begin paying market rates for electricity or to participate in another deferral plan, which would probably add to the monthly fee.

The plan passed both chambers with a veto-proof majority, and many of Ehrlich's fellow Republicans voted for it.

After playing little public role in the special session last week, Ehrlich has spent the past few days reclaiming the spotlight on what has become a central issue in the governor's race.

Yesterday, he began airing the first television ad of his re-election campaign, which says, "When faced with a crisis on electricity rates, Ehrlich could have blamed others. Instead, he led."

Neither Ehrlich nor any members of his administration testified at the hearing the legislature held before passing the BGE legislation last week, and he didn't introduce a rates bill of his own during the special session. He did, however, ask the legislature to take up at the end of the regular legislative session a bill that contained both provisions that he now objects to. The bill failed.

Every proposed rate-relief plan would require BGE to borrow money to cover customers' deferred payments, and all would allow the company to recover the interest costs it would have to pay as a result.

When Ehrlich announced a plan that he negotiated with Constellation Energy Group, BGE's parent company, after the regular legislative session, he said it contained no provision for interest charges. When Democrats unveiled the plan they passed last week, they said it, too, included no interest charges.

Both claims fudged the truth: Both plans allow BGE to recoup its interest costs, but in each case the company agreed to concessions that would more than offset those charges.

In Ehrlich's plan, the concessions were contingent on the success of Constellation's proposed merger with FPL Group Inc. of Florida. In the legislature's plan, they are not.

When the Public Service Commission considered Ehrlich's plan, it agreed to a request by People's Counsel Patricia A. Smith that customers not be forced to pay interest.

But the four members who wrote the opinion in support of the governor's plan - all of them Ehrlich appointees - said that denying BGE the ability to recover interest costs outright would be "of doubtful legality." Instead, they said, BGE could recover the costs later.

Ehrlich Chief of Staff James C. "Chip" DiPaula Jr. said yesterday that the administration agrees it can't force the company to give up interest charges. He said such a provision would have to be negotiated with the company.

Constellation spokesman Robert L. Gould declined to comment on whether the company would be willing to negotiate on the interest charges.

Ehrlich's second major objection, the lack of consumer choice in the legislature's plan, has been echoed on talk radio shows and was repeated again and again by witnesses at the veto hearing.

"Hooking up people to a credit card for 10 years with a really unknown interest rate and no consumer choice, that's probably the No. 1 observation-slash-criticism," Ehrlich said on WBAL radio yesterday. "I have no choice, no consumer choice here."

Miller said the legislature would "absolutely" have preferred to craft a plan in which people could choose whether to participate. But he said it was impossible to do that and also enact a mechanism called "securitization," which helps guarantee BGE's debt, lowers borrowing costs and lowers monthly bills.

The failed plan that Ehrlich and legislators agreed to at the end of the regular session also relied on that technique of guaranteeing revenue through fees on bills. Utility industry experts say such a mechanism would help protect BGE's credit rating while providing a better benefit to consumers.

DiPaula said the administration agrees that structuring the deal that way is better for BGE and its customers. But he said he sees no reason that it is incompatible with consumer choice.

"I can't conceive of any reason why you couldn't do it," DiPaula said.

William A. Mogel, a utilities lawyer with the Saul Ewing firm in Washington, said he has many reservations about the General Assembly's bill but that on the question of securitization, the legislators are right.

Investors who would buy bonds BGE would issue to finance the deferral plan would want to make sure there was sufficient cash flow to cover the debt, Mogel said. If customers could opt out, the cash flow would be reduced, investors would be less comfortable, and BGE would be considered a greater credit risk, he said.

"It just really undercuts the whole securitization concept," Mogel said.

Miller said Ehrlich's continued efforts to keep the BGE issue alive do nothing but create dangerous uncertainty for the company and frustration for consumers.

"People want a solution," Miller said. "They want this to be behind us."

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