Power structure

The Baltimore Sun

Gov. Martin O'Malley's call for public hearings to explore the relationship between Constellation Energy Group and its subsidiary, Baltimore Gas and Electric, may strike some as a purely political exercise. After all, it's not as if the genie of deregulation is headed back into the bottle. It's doubtful any new information can be gleaned that will result in the company's breakup or rebates for customers.

But BGE's sticker-shocked 1.1 million customers deserve to know more about the utility's relationship with its parent and whether there are steps the Maryland Public Service Commission or General Assembly could take, if not to bring down electricity rates, at least to lessen future rate increases. Even Constellation officials say they welcome a fact-finding effort.

Make no mistake - BGE customers are paying more chiefly because the cost of energy has risen worldwide. The question is, are there other factors aggravating the situation?

As the PSC noted in May, Constellation and BGE would seem to be in conflict. BGE may want to secure the lowest rate possible for its customers, but Constellation's goal is to sell power at the highest rate of return for its shareholders.

BGE makes money delivering power, not generating it, so what difference does a high wholesale price make (aside from stirring up a political furor, of course)? Whatever the price, it's simply passed along.

On the other hand, forcing BGE's sale might make matters worse. At minimum, BGE benefits from Constellation's expertise and its financial largess. An independent BGE, or one owned by a neighboring utility, could still be stuck purchasing electricity at the same high market prices.

Chairman Steven B. Larsen and his fellow PSC members need to look beyond mere ownership to scrutinize the procurement process. Will BGE ever have an adequate financial incentive to seek the lowest possible wholesale price for its customers? And can buying the power at auction ever supply it?

For instance, might ratepayers be better served if the utility - or perhaps even the state - had the flexibility to react to market conditions? That would mean signing long-term contracts when rates are down, buying less when rates are high. In theory, that would spare BGE customers the kinds of price spikes caused by hurricanes and other short-term problems.

The relationship between BGE and Constellation is just one issue among many. Maryland faces potential power shortages by 2012 if new sources of electricity (and high-voltage power lines) aren't developed soon. The state needs to devise an energy strategy for the future - but first, Marylanders need to better understand the ins and outs of a complex power structure.

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