Uncertainty at issue in battle over rate bill in MD

Daily Record, The (Baltimore), Jun 14, 2006 by Dori Berman

Constellation Energy Group executives told lawmakers yesterday the rate stabilization legislation they will consider today leaves significant questions unanswered and could damage the company's economic stability.

House and Senate committees yesterday heard testimony on a bill that would limit electricity rate increases for Baltimore Gas and Electric customers this summer to 15 percent and replace members of the Public Service Commission, among other provisions. Both Gov. Robert L. Ehrlich Jr. and legislative leaders called for a special session of the General Assembly to deal with an expected 72 percent rate increase for customers of BGE, the Constellation subsidiary.

Ehrlich, legislative leaders and company officials negotiated a rate relief plan during the regular session that ended in April, but the Senate killed the plan.

Lawmakers now hope to emerge as early as today from the special session with a bill that will avoid the 72 percent increase just months before the election.

Under the new plan, customers would see a 15 percent increase from July 1, 2006 until May 30, 2007. The legislation leaves the next step up to a reconstituted Public Service Commission, but determines market rates must be implemented by June 1, 2008. Customers would pay back the deferred dollars through an average monthly charge of $2.19 over 10 years.

BGE and Constellation officials warned that the uncertainty the bill leaves after the initial 15 percent increase could have negative consequences.

We believe that your intention here is good, but please understand that if BGE is put into a credit crisis it is very, very bad for the customers of BGE, Constellation Senior Vice President of Corporate Affairs Paul J. Allen told lawmakers yesterday.

There's a period of uncertainty that we want resolved. We do not know how the credit rating agencies are going to react, Allen said. BGE's credit rating was already downgraded earlier this year amid concerns over how legislation would impact the company's ability to recover costs.

Though they've had little time to comb through the 59-page bill, Allen said that particular provision stood out as the one that could have hurt the most. Company officials also yesterday asked lawmakers to consider bringing rates to the market level by Jan. 1, 2008, instead of that June.

Rate caps enacted as part of a 1999 measure to deregulate the state's utilities are set to come off at the end of this month. Officials have been scrambling to reach a resolution to the issue since the legislative session failed to produce one.

We think it's a good answer; maybe not the perfect answer, but a good answer, Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George's, said of the bill. We're all being tested. Tomorrow is going to be a very testing time for us. We don't need any finger pointing. What we need is solutions.

A bill to fire the five members of the Public Service Commission passed earlier this year, but was vetoed by Ehrlich. The point has proven controversial, with Democrats accusing the commissioners of shirking their responsibility to consumers by approving the 72 percent increase. Ehrlich, meanwhile, has called the bill strictly political and believes it will have dire consequences. Company officials said it creates uncertainty.

The bill requires the governor to pick five new commissioners from a list of names provided by legislative leaders. The new PSC would be charged with reviewing the proposed merger between Constellation and FPL Group Inc., as well as hashing out the remaining parts of the rate plan.

To demonize the PSC for what occurred seven years ago is pretty transparent, Ehrlich said. They take down the PSC [with the bill], repoliticize it, which sends an incredibly destabilizing message to the market.

Ehrlich said he expects the commission members will challenge the legality of the provision, and said he believes the company could file lawsuits as well.

Miller, however, said he believes the only legal challenge will come from the PSC.

Quite frankly, BGE and Constellation, they're not Republican, they're not Democrat. They're sort of above the fray, in the sense that they're a company trying to do business in the state of Maryland, Miller said.

We've asked them to make a number of financial concessions in this bill to benefit the ratepayers. In the course of our extensive deliberations with them, I think we have a tacit understanding that there's not going to be any lawsuit.