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O'Malley to offer energy package

The Baltimore Sun

Gov. Martin O'Malley's energy administration will release sweeping legislative and policy recommendations today that include new power-conservation laws, an estimated $100 million fund for environment-friendly initiatives and an emphasis on consumer responsibility for electricity consumption.

O'Malley, a Democrat who campaigned on the unfulfilled promise of undoing a 72 percent electricity rate increase for 1.2 million Baltimore Gas & Electric customers, appears likely to pursue an agenda in Annapolis that could further increase consumer costs in the short term. But administration officials say the proposals are needed to ensure long-term sustainability of Maryland's faltering power network and forestall the threat of blackouts as early as 2011.

"It's very likely that a number of the proposals in the energy plan will be included in the governor's package" to the legislature this session, said O'Malley spokesman Rick Abbruzzese. He said the governor's energy bills will be introduced this week or next week.

The plan is likely to cheer environmental groups, many of whom felt shunned during the administration of Republican Gov. Robert L. Ehrlich Jr. Among the key elements:

Creating a "strategic energy investment fund" paid for by electricity companies that would invest in energy-efficient technologies and promote nonpolluting power alternatives.

Asking lawmakers to pass a bill codifying Maryland's goal of reducing overall electricity consumption by 15 percent by 2015, based on 2007 usage.

Requiring the state's utility companies to buy 20 percent of their power from wind, solar or other renewable sources by 2022 - and doubling the penalties for companies that do not.

In addition to legislation, the O'Malley administration is endorsing the strategy adopted last month by the Public Service Commission, which regulates the power industry, of stronger state intervention in how utilities purchase power.

A recent PSC report said Maryland residents face the prospect of rolling blackouts within three years if nothing is done to address an energy shortage in the state. Maryland now imports about 30 percent of its electricity, endangering the reliability of an aging transmission system.

PSC Chairman Steven B. Larsen said the administration's plans are a "recognition that the state is finally generating action around a serious problem," but he cautioned that Marylanders must moderate their energy consumption if the state is to keep its lights on without damaging the environment.

"There's no question we're going to have to get customers used to the idea that they're going to have to also take steps to help address the issue," Larsen said. "If they're looking to go back to the days of cheap, plentiful, endless supplies of electricity with no impact on the environment, I do think those days are over."

To reward consumers for reducing their electricity use and investing in energy-efficient technologies, administration officials are proposing an array of incentives and subsidies paid by the energy fund, such as issuing rebates to customers who purchase more efficient appliances.

The fund will not rely on tax revenue. Instead, the governor is banking on proceeds from the auction of so-called pollution credits under an initiative of 10 states to voluntarily reduce carbon dioxide emissions.

Under the Regional Greenhouse Gas Initiative, power plants must keep emissions below a downward-sliding limit, or buy credits from cleaner power plants.

Brandon Farris, policy director of the Maryland Energy Administration, said Maryland expects to receive about $100 million a year from the sale of its pollution credits, though the yield won't be known until the first auction this summer. Larsen said the amount could be twice as high.

But Del. Warren E. Miller, a Howard County Republican on the House Economic Matters Committee, said he doubted that the "cap and trade" system would create even a $100 million windfall, and that added costs borne by power plants would probably show up on consumers' electrical bills.

"I have a fear that's going to be passed on to Maryland electrical consumers," Miller said. "The cost to our consumers should trump everything else."

A spokesman for Constellation Energy Group, the corporate parent of BGE, said the utility would maintain a "thoughtful and constructive dialogue" with the legislature and the O'Malley administration, but declined to answer specific questions about the electricity plan.

O'Malley officials acknowledge that power companies probably would pass on to consumers the costs of buying pollution credits, which would in turn drive up electricity bills unless the added costs are offset by reduced usage.

That's why the governor wants to use the fund to make it easier for consumers to lower energy consumption, Abbruzzese said.

But recent tax increases and economic uncertainty might spur a fight in the legislature this session if lawmakers prefer to give all or some of the $100 million back to consumers.

"I'm sure that point of view will be represented in Annapolis," Abbruzzese said. "This will be debated."

Sen. Thomas M. Middleton, a Southern Maryland Democrat who chairs a committee that handles utility issues, said protecting fixed-income and poor residents would be a high priority. "If we've got $100 million, we've got to take care of those folks," he said.

Johanna Neumann, policy advocate for the Maryland Public Interest Research Group, said she hopes the legislature will resist the temptation to directly refund the sale of pollution credits to consumers.

"I could see the political advantage of rebating the money," she said, "but by actually investing ... in energy efficiencies, consumers will see greater benefits and greater savings, because we will able to avoid blackouts, future rate shocks and avoid costly new transmission lines."

In anticipation of the extensive rate increases in 2007, some environmental and consumer groups have called for the state to buy or build its own power plants, arguing that the landmark deregulation of the industry in 1999 had clearly failed.

The plan released today calls on the PSC to continue studying the creation of a Maryland Power Authority, but recommends no immediate action. Consultants hired by the commission have said it would cost $18 billion to $24 billion for Maryland utilities to buy back power plants they relinquished during deregulation.

Sean Dobson, the executive director of left-leaning Progressive Maryland, said lawmakers should give O'Malley's plan a chance to work.

"But if it turns out to be insufficient," he said, "the state should construct, own and operate its own ultra-efficient, clean-energy power plants and force utilities to pass along this electricity to consumers at a regulated, affordable rate."

gadi.dechter@baltsun.com

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