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Re-regulation surfaces again in legislature

As they did last year, two state senators have filed a bill to re-regulate Maryland’s electricity market, which has been deregulated for more than a decade.
A similar bill did not get out of committee last year.
Sen. James C. Rosapepe (D-Dist. 21) of College Park, who filed the bill with Sen. E.J. Pipkin (R-Dist. 36) of Elkton, said it’s an issue worth their effort.
“We will keep fighting for this bill,” Rosapepe said.
A hearing is scheduled in the Senate Finance Committee at 1 p.m. on March 6.
Deregulation hasn’t lowered electricity prices or encouraged construction of major new power generation in the state, as proponents had expected, Rosapepe said.
The average electric rate per kilowatt hour in Maryland declined by 3 percent in 2010 from the previous year to 12.68 cents, according to federal figures. But it increased each year before that since 2004, when rate caps started to expire.
The Maryland average in 2010 was 28 percent higher than the national average of 9.9 cents per kilowatt hour. However, most rates have come down in the state even more since then. Pepco’s standard electric rate in Maryland is 8.6 cents, while Baltimore Gas & Electric’s is 9.1 cents, according to the Maryland Office of People’s Counsel.
Deregulation has resulted in lower rates as most suppliers now offer rates to Maryland consumers that are lower than those charged by the utilities, said Robert Barkanic, state chairman for Maryland, Delaware and Washington, D.C., of the Retail Energy Supply Association. In response to the new reregulation bill, his association will work to “educate legislators” this session on how deregulation has worked, he said.
Barkanic praised the consumer choice education bill that came out of the legislature last year. That called for the state to, among other things, provide information online about competitive suppliers, including the latest rates.
Maryland ranked fifth among 18 jurisdictions that have deregulated markets in a recent study measuring progress in implementing electric choice among businesses by Washington, D.C., energy consulting firm DEFG. The state was sixth in progress among residents. Texas was first in both areas.
Constellation Energy of Baltimore works in both the regulated utility and competitive retail areas. That helps the company meet the needs of as many potential customers as possible, said Maureen Brown, a Constellation spokeswoman.
Some states, including Florida and Arizona, are showing renewed interest in deregulation, the DEFG study says. Virginia is among those that at least partly suspended deregulation efforts in recent years.
But Virginia’s law in 2007 still allows electric customers with annual demands greater than five megawatts to have the option to shop around. In addition, customers can purchase electricity supply from competitive renewable sources if their utilities do not include renewable energy as a generation source, and natural gas customers can look for competitors.
As far as new generation, Gov. Martin O’Malley (D) has encouraged new plants to be built in Maryland, Rosapepe noted. But more should be done, he said.
“We need a longterm strategy,” Rosapepe said.
Maryland does import some of its electricity, but has sizeable reserve margins in place, Barkanic said. The state relies heavily on coal and nuclear power generation.
“Nothing is getting built now because there is no real need for it,” Barkanic said.
kshay@gazette.net

More Maryland businesses continue to switch to competitive electrical suppliers, even as most continue to stick with the state’s major utilities.

The number of companies that changed over increased by 13 percent last year from 2010, according to Maryland Public Service Commission figures.

As of December, some 93,000 businesses were served by alternate suppliers such as Clean Currents of Rockville, but that is only 39 percent of commercial customers in the state. Although residences are switching faster than businesses in recent years as people seek lower rates, the nearly 400,000 residential customers using competitive suppliers account for only 20 percent of the state’s total.

It’s taken time and an education process, especially among residents, to see a substantial increase in customers, said Robert Barkanic, state chairman for Maryland, Delaware and Washington, D.C., of the Retail Energy Supply Association. That group represents competitive electric and natural gas suppliers such as Constellation NewEnergy, a wholly owned subsidiary of Baltimore energy giant Constellation Energy that sells in multiple states.

“Deregulation is working in Maryland,” said Barkanic, also senior director of energy policy for PPL EnergyPlus, an Allentown, Pa., wholesale and retail supplier of electricity and natural gas, and a subsidiary of PPL Corp. “Merchants have more of an incentive to come up with innovations that fit individual customers’ needs.”

Constellation, which owns a regulated utility, Baltimore Gas & Electric, as well as subsidiaries that sell in the competitive market, now has about 100,000 customers in Maryland that switched from a utility to its own suppliers, said Maureen Brown, a company spokeswoman. About 80,000 have been signed up in the past two years, as the company started marketing in the state under the Constellation Electric brand, she said.

The other 20,000 customers in Maryland were transferred when Constellation purchased Connecticut natural gas and electric supplier MXenergy last year. Constellation now has retail operations in 46 states with more than 1 million customers.

The acceleration of customers switching to competitive suppliers in recent years is a further sign that deregulation is working, Brown said.

“The market has matured in Maryland,” she said. “More customers are taking advantage of lower prices offered by retail suppliers.”

Wholesale natural gas prices have dropped, and retail competitors can pass savings on more quickly, Brown said.

Customer growth was slow in the early years of deregulation, which started in Maryland with the passage of a 1999 law. The movement took several years to get fully implemented, as rate caps were imposed to protect against price spikes during a transition period. Those caps expired beginning in 2004, and commercial customers, especially larger ones, were quicker to find competition.

Since late 2008, the growth rate among residences switching to competitive suppliers in Maryland has gone up more than six-fold, while rising 63 percent among businesses, according to figures from the state commission.

The competitive market nationally is expected to see further growth, as the value of electricity purchases from alternate suppliers should reach $56 billion by 2020, up from $29.4 billion in 2009, according to a recent report from Pike Research of Boulder, Colo.

Price still an issue

Price, which was a big concern several years ago as rates spiked throughout Maryland, is still an issue.

The average rate per kilowatt hour in Maryland about doubled from 2003 to 2009, from 6.45 cents to 13.08 cents, according to federal figures cited in a study by the American Public Power Association. The Washington, D.C., organization represents more than 2,000 community-owned electric utilities.

That was a higher jump than the average increase nationwide, from 7.4 cents in 2003 to 9.8 cents in 2009. The average electric rate in Maryland actually declined in 2010 to 12.68 cents, while the national rate remained roughly the same. Rates have come down even more in Maryland, according to latest figures from the Maryland Office of People’s Counsel.

When factors such as using lower-cost hydroelectricity, weather and traffic congestion are taken out, prices in deregulated states now are actually lower than in regulated ones, Barkanic said.

“You see retail suppliers tightening their belts to beat the standard service price offered by utilities,” Barkanic said.

But such studies give ammunition to opponents of deregulation.

“Deregulation has been a disaster for consumers and a disaster for the Maryland economy,” said state Sen. James C. Rosapepe (D-Dist. 21) of College Park, co-author of a bill to reregulate electricity. “The only ones that have benefited are the big utilities.”

Fewer switching to natural gas suppliers

Fewer Maryland customers have switched to competitive natural gas suppliers, with some 25,000 businesses — 32 percent of the total — using competitors in December, according to PSC figures.

Almost 180,000 residences — 17 percent of the total — were using competitive natural gas suppliers in December.

Switching over to a competitive supplier affects only the supply portion of the customer’s bill. Utility companies continue to deliver electricity and natural gas to businesses and homes, handle power outages and bill customers. When their initial signup period with a competitive supplier ends, customers may be locked into rates higher those charged by the utility.

Although many businesses are switching to reduce costs, some are making the change for environmental reasons. That was the case with Hudson Trail Outfitters, a Gaithersburg outdoor clothing and gear retailer that is powering its stores in Rockville, Annapolis and Washington, D.C., through wind power with Clean Currents.

“We believe that making the switch to wind power through Clean Currents supports the core initiatives of the company,” which include environmental and community preservation, Sandy Cohan, general manager of HTO Ltd., said in a statement.

The rates offered by Clean Currents, which brokers renewable energy, for 100 percent wind power are a little higher than Pepco’s standard service offer of 8.6 cents per kilowatt hour. But the 50 percent wind power rate is about the same as Pepco’s.

Clean Currents has grown tremendously in the past few years. Last year, the company made Inc. magazine’s list of the 500 fastest-growing private businesses in the country with revenues in 2010 of $2.4 million, up more than 1,500 percent from 2007.

More joining co-ops

Numerous chambers of commerce and other organizations have cooperatives or groups that band together to purchase electricity or natural gas at lower rates for members. Businesses involved in the Rockville Chamber of Commerce’s buying group, which is brokered by Clean Currents, include Rockville development firms Foulger-Pratt and the Tower Cos.

David Borchardt, chief sustainability officer for Tower, said the program is a good one that helps companies and organizations do more for the environment and even save some money.

“We still buy a good part of our power from Constellation Energy,” Borchardt said. “That doesn’t mean we wouldn’t do more in the future” as far as switching to competitive suppliers.

kshay@gazette.net

More Maryland businesses switching to competitive electrical suppliers

Number using competitive suppliers, December 2011: 92,636.

Number using competitive suppliers, December 2010: 82,071.

Number using competitive suppliers, December 2003: 12,309.

Percentage of businesses using competitive suppliers, December 2011: 38.8 percent.

Percentage of businesses using competitive suppliers, December 2010: 34.1 percent.

Percentage of businesses using competitive suppliers, December 2003: 5.7 percent.

Source: Maryland Public Service Commission

ResourcesInformation about rates of competitive suppliers, Maryland Office of People’s Counsel: opc.state.md.us/ConsumerCorner/RetailSuppliers.aspx.

Maryland Public Service Commission: psc.state.md.us.

Retail Energy Supply Association: resausa.org.

American Public Power Association: publicpower.org.