Gov. Martin O'Malley said yesterday that eliminating the link between power companies' profits and the amount of energy they distribute - a plan recently approved for Pepco, the Washington-area utility - could be one of the most effective strategies for reducing electricity bills across Maryland.
Officials with that company say they could begin incentive programs to help consumers conserve energy as early as this fall, and the idea of "decoupling" is likely to be a major issue at the energy summit O'Malley will hold in Annapolis today.
"In the past, the energy companies had a profit motive in promoting consumption," O'Malley said. "If we can decouple that, I think it's a step in the right direction."
Besides conservation, the governor's energy summit will focus on strategies to ensure that adequate supplies can either be generated in Maryland or imported from other states. It will be followed by two days of hearings by the Public Service Commission (PSC), when experts will help the state forecast its power needs for the next five to 10 years and to develop the most efficient ways to provide that energy.
O'Malley, who campaigned last fall on stopping steep Baltimore Gas and Electric Co. rate increases, has focused on energy policy as much as any other issue in the last few months. The governor was forced to concede after PSC hearings this spring that the state had no authority to roll back the BGE rate increases, but he has concentrated on conservation initiatives and changes to the state's electric market.
"We are all getting socked by high energy bills," O'Malley said. "Deregulation has failed to bring about the promised benefits to consumers. ... The area that each of us can control in an environment where we feel like the deck is stacked against us is our own consumption."
With 1.1 million customers, BGE is the largest utility in Maryland. Pepco and Delmarva Power customers have also seen large price increases in recent years.
Pepco proposed its decoupling plan, and the PSC agreed last week to let it go into effect. O'Malley said he was heartened to see the PSC's decision and would like to see the concept spread throughout the state.
Under deregulation, companies such as Pepco and BGE make money from distributing electricity, not producing it. Distribution charges are generally a much smaller part of customers' bills than the cost of the electricity itself.
Bill Torgerson, vice chairman and general counsel of Pepco Holdings Inc., said that under the old system, the company made more money if its customers used more electricity, so the utility had no reason to encourage conservation.
But now, the company's revenue will be based on the number of customers it serves, not the number of kilowatt-hours they use. As a result, Torgerson said, Pepco is planning a program that could take effect this fall to provide $1.50 discounts on energy-efficient, compact fluorescent light bulbs. The utility is considering establishing a rebate program next spring to help customers buy energy-efficient appliances.
"We think it's quite reasonable to expect that the governor's goal of 15 percent energy use reduction by 2015 is achievable," Torgerson said.
Although Pepco's overall profits will be based on the number of customers it serves, a household's charges will still vary based on how much electricity it uses. A single person with a studio apartment will still pay less in distribution charges than a family in a large house, company officials said.
Maryland Energy Administration Director Malcolm D. Woolf said today's meeting will also address other conservation strategies, such as the implementation of "smart meters," which help consumers manage their energy use based on the price of electricity at different times of day. That would encourage people to put off tasks like running the dishwasher at times when the electrical grid is at its peak load.
Tim Brennan, a professor of public policy and economics at the University of Maryland, Baltimore County who will be participating in the summit, said smart meters could play a major role.
"The most important thing that has to happen is to allow consumers to see electricity rates that reflect what electricity really costs, including the overall environmental costs and cost spikes during peak demand times," such as hot summer afternoons, Brennan said in a statement.
Woolf said the meeting will also focus on ensuring Maryland has an adequate and reliable energy supply. The state currently imports a quarter of its electricity, and the transmission lines into the state are operating near their capacity.
Other topics include whether the state should allow utilities such as BGE and Pepco to build their own power plants again, whether new transmission lines should be built and whether Maryland should do more to encourage energy production from renewable sources, such as wind and solar power.
A Silver Spring-based company, Competitive Power Ventures Inc., announced yesterday that it plans to build a new 600- megawatt gas-fired power plant in Charles County.
Company officials say the plant could be working within four years. It would be the state's first new large-scale addition to the state's power supply in more than a decade.
PSC Chairman Steven B. Larsen said that without new supplies, Maryland could start experiencing rolling blackouts within the next decade. He said the PSC's hearings will focus on more technical details than the governor's meeting.
"We need to get a clear picture on what we think the forecast is," Larsen said. "And then the question really is: What is the most cost-effective combination of solutions, meaning generation, whether it's solar, wind, or gas-fired plants, and conservation and transmission capacity, that keeps our service reliable in the future?"
Today's meeting, which will take place in the Senate office building in Annapolis, will be open to the media but not the general public.
Officials from utilities such as Pepco and BGE will be joined by representatives of generating companies, such as Constellation Energy Group, consumer and environmental advocacy organizations such as the Maryland Public Interest Research Group and Environment Maryland. Academics, policy experts, legislators and others have also been invited, he said.
The energy administration will prepare a report with recommendations in time for the next General Assembly session in January, Woolf said.
Brad Heavner, the executive director of Environment Maryland, said the state summit is overdue. He said he'll be advocating for more renewable energy instead of more transmission lines to bring power from coal-fired plants in West Virginia.
"The fact that Maryland has not had a statewide energy plan is a huge void," Heavner said. "All our decisions should be guided by an overall strategy."
andy.green@baltsun.com
Sun reporter Paul Adams contributed to this article.
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