Commentary - Righting energy deregulation’s wrongs

As the incoming chairman of the Public Service Commission, I could not let Lawrence J. Hogan’s July 13 column, “Electricity rates and broken promises,” pass without a response. Rather than rehashing the tired political battles of 2006, let me offer some candid observations about the present and future of electricity in Maryland.

In my view, we are where we are today largely because of the impossible or broken promises of deregulation, passed in Maryland in 1999. Proponents of deregulation — primarily companies that own and operate power plants and energy traders such as Enron — promised deregulated markets would breed competition, provide incentives for new power plants and cause prices to fall.

These benefits never materialized. In the time since restructuring, almost no new power plants have been built, reactivated or upgraded in Maryland. And Maryland continues to import approximately 30 percent of the electricity it needs. It gets worse: Maryland faces the real possibility of brownouts or blackouts on hot summer days in 2011 or 2012 unless additional electricity becomes available through new power plants or new transmission lines, or unless Maryland consumers significantly reduce the amount of electricity they use.

In the meantime, as wholesale electricity prices have risen, the companies that own and operate power plants in Maryland reap the profits. Existing generators have little incentive to build new plants, which would increase the supply of electricity and likely reduce wholesale prices. And the deregulated markets offer no relief — if anything, prospective generators argue that they cannot justify building until prices rise still higher.

I have an altogether different vision. First, we must put the past behind us and focus on the future. At the General Assembly’s direction, the PSC prepared and issued lengthy reports analyzing the impacts of deregulation on ratepayers and options for reregulating. As a result of these reports, which are available on the PSC’s Web site (psc.state.md.us), Gov. Martin O’Malley, the General Assembly, the PSC and Constellation Energy were able to settle the disputes of the past and, through new legislation, provide approximately $2 billion in benefits to Baltimore Gas and Electric Co.’s ratepayers.

Second, we can and must take control of our own destiny. For our part, the PSC cannot and will not wait passively for the markets to provide reliable electric service at reasonable rates. The PSC has the authority under existing law to direct Maryland’s utilities to build new power plants or enter into contracts to secure new generation here. We would not do so lightly, but the PSC will protect consumers from interruptions in service if the markets fail to build the power plants or transmission lines we need to keep the lights on. And we will serve as a zealous advocate for Maryland consumers with the grid operator and before the Federal Energy Regulatory Commission to ensure that the wholesale electricity markets function properly and fairly.

While the PSC focuses on the broader markets, all Marylanders can and must conserve electricity. Gov. O’Malley’s EmPower Maryland initiative, passed by the General Assembly, directs us to reduce our consumption of electricity by 15 percent by the year 2015. The utilities already have proposed, and the PSC already has approved, programs that represent a start toward achieving this ambitious goal. In the coming months, the PSC will consider and approve additional cost-effective utility-run energy efficiency programs. But consumers need not wait for utility-run programs — each of us can turn down the air conditioner, increase the energy efficiency of our homes, use compact fluorescent lightbulbs and replace inefficient appliances with new, efficient ones. The sooner we act, the more we save — on our bills and as a state.

Finally, although the governor, the General Assembly and the PSC face critically important policy decisions about our energy future, I don’t view these decisions as political ones. Everyone agrees, and Maryland law provides, that Maryland consumers are entitled to safe and reliable electric service at just and reasonable rates that afford our utilities a reasonable rate of return. I and the PSC will study these issues carefully and implement the best possible solutions for our state, rather than wasting time debating the politics of the past.