PSC energy report sparks debate

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(Arianne Starnes/Examiner)
'The company is lying and taking advantage of citizens,' says Denise Lowery, 56, of Baltimore, of the BGE company as she listens Saturday during a meeting of the Maryland Coalition to Stop the BGE Rate Hike in Baltimore.

Activist groups, energy industry leaders and state agencies weighed in on the Public Service Commission’s interim report presented late last week, with some calling into question its analyses and others agreeing with its recommendations to solve the state's looming energy shortfall.

The PSC on Thursday presented a report to a House of Delegates committee, outlining options for a re-regulation of Maryland’s electric industry, including long-term contracts with suppliers, and an analysis of “stranded costs,” funds paid to Constellation by BGE customers during deregulation which the PSC has sought to reclaim.

The Maryland Energy Administration released its own Strategic Electricity Plan a week ago, centered on an increase in renewable energy sources and turning the Governor’s initiative to reduce energy consumption 15 percent by 2015 into state statute.

Administration Director Malcolm D. Woolf agreed with the PSC’s advocacy of long-term contracts with energy providers to lock-in electric rates for several years in exchange for the construction of new power sources

“We need to do everything we can to get every extra kilowatt on the grid,” Woolf said. “The reality is that deregulation has failed to generate enough supply in Maryland and certainly failed to generate residential supply for Maryland.”

Constellation Energy blasted the PSC report in a statement released last week, claiming, “it is immediately apparent that the report is based upon flawed analyses.”

“It would appear … that this PSC report, which was prepared without public comment or review, misstates and omits numerous facts and is based on false assumptions,” Mayo Shattuck, chairman and CEO of Constellation said in a statement. “Overall we’re concerned that this report will have a detrimental effect on Maryland, especially at a time when energy-related investments are so essential for this state.”

Constellation claims the report wrongly assumes that stakeholders involved in the 1999 deregulation settlement did not know what they were doing and “cherry-picks” parts of that settlement. Also, the company said the report does not mention that the settlement relieved taxpayers of costs to maintain and upgrade the plants. Constellation said it will have invested $2.7 billion in the plants between 2000 and 2010.

After enduring a 70 percent rate increase over the past two years, Maryland residents are desperate for relief.

“It’s not doable for working-class people, poor people or senior citizens, especially in light of the present economy,” said Leo Burroughs Jr., chair of the Maryland Coalition to Stop the BGE Rate Hike. “There needs to be an established ceiling beyond which service rates cannot exceed.”

Burroughs and the group against rate increases plan to file a complaint with the Federal Energy Regulatory Commission.

Five things you need to know about Maryland’s energy situation

With the intention of driving down prices by fostering competition, the state General Assembly in 1999 passed a bill deregulating Maryland’s electric industry. Customers would stay on regulated rates for a number of years until each company, one by one, moved into the wholesale market.

2. Customers paid Constellation Energy $528 million at the time of deregulation to take over BGE’s generation plants.

The payment, so-called “stranded costs,” was made to compensate the new owners for transition costs from a regulated to a deregulated. However, those plants increased in value, and the state’s Public Service Commission now seeks to reclaim those stranded costs for ratepayers.

3. BGE customers have seen a 70 percent rate hike in two years.

By the time BGE customers, the last group paying regulated rates, entered the wholesale market, energy costs including natural gas, heating oil, and regular gas had skyrocketed. State authorities managed to stop a massive rate increase in 2006, but were unable to block a 50 percent rate increase which took effect on June 1.

4. A major energy shortfall, with the possibility of rolling black-outs, could occur by 2011 or 2012.

Public Service Commission Chairman Steven Larsen said last week that if new sources of electricity are not created, the state will face a shortfall of 1500 megawatts, equivalent to the output of more than two medium-sized power plants, by 2011 or 2012. That shortfall could lead to rolling black-outs or brownouts.

5. The Public Service Commission favors long-term contracts with energy providers to create new electricity generation.

The PSC believes contracts of several years or more with energy generators would lock in rates for customers, in exchange for a guaranteed supply, and capacity from the generators. — Aaron Cahall

acahall@baltimoreexaminer.com

acannarsa@baltimoreexaminer.com

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