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All eyes on Ehrlich to settle rate mess

Friday, April 14, 2006

ANNAPOLIS — Lawmakers and BGE ratepayers are playing a waiting game wondering if Gov. Robert L. Ehrlich Jr. will call a special session for legislators to approve a plan to mitigate a 72 percent increase in electricity bills.

‘‘That’s probably the million-dollar question,” said Del. James E. Malone Jr. (D-Dist. 12A) of Arbutus, whose district faces the huge rate increase July 1 when state-imposed rate caps expire.

If he can ease the rate increases on his own, Ehrlich (R) is sure to win political points using the legislature’s failure in his re-election campaign.

But Ehrlich and BGE parent Constellation Energy Group might need the legislature to pass a securitization plan that will allow Constellation to issue bonds to offset the rate increases.

Any rate mitigation plan will be difficult, Ehrlich told WAMU radio on Thursday.

It is unclear if the governor can provide the motivation for the utility to lower the rates. On WAMU, House Majority Leader Kumar P. Barve (D-Dist. 17) of Gaithersburg said Ehrlich will not be able to get as good of a deal unless the legislature goes into special session.

Ehrlich does not necessarily have to call the special session. The General Assembly could call itself back by gathering signatures from a majority of its members and presenting them to the governor.

The potential of a special session will keep Constellation at the table because the company fears that the legislature could pass re-regulation or price caps that might hurt the company’s bottom line, Ehrlich advisers have said.

Sen. Thomas McLain Middleton, the Finance Committee chairman, said he doubted the governor would want a special session.

‘‘If the governor can put a majority of the stuff we had in the bill without the legislature, he is certainly going to do it,” he said.

But Constellation will negotiate regardless.

‘‘We’re at the table. There’s no issue with needing leverage. We’re committed now as we were before at finding a solution to the rate cap issue,” said Robert L. Gould, managing director for corporate communications.

Leverage, however, was what legislators sought with a package of bills, including one that could sink the proposed $11.4 billion merger between Constellation and Florida Power and Light.

Lawmakers raced the bills through both houses so they would have plenty of time to override Ehrlich’s certain vetoes. The vetoes came down as promised, but the chambers watched the session’s clock run out without trying to overturn them, frittering away the leverage they thought they needed.

And as the clock ran out, it also ran out on their deal — swapping a 72 percent hike with a 15 percent increase one year and a 20 percent to 30 percent increase the next.

Middleton (D-Dist. 28) of Waldorf said that plan was the best bet politically, but too many senators questioned the long term effects.

Del. Peter V.R. Franchot, a candidate for comptroller, said Democratic leaders need to get their acts together to find a resolution to what he called ‘‘a major train wreck.”

‘‘While everyone is upset, we have to get back into session and finish the job,” said Franchot (D-Dist. 20) of Takoma Park.

Franchot believes one nuance is lost on much of the public: The rate plan passed the House but failed in the Senate.

‘‘The public does not differentiate between the House and Senate, they are simply going to say that the General Assembly did not complete its work,” he said.

Del. Steven J. DeBoy Sr. agreed, adding that the public cares little about cameral differences or even party differences.

‘‘There’s bipartisan anger out there,” said DeBoy D-Dist. 12A) of Arbutus.

DeBoy described being pummeled with questions from a couple of constituents at a Baltimore County Democratic Club meeting on Wednesday night and then later by the ladies auxiliary of a fire department.

‘‘People can take their anger out at the polls. ... They’re mad at the legislature because they didn’t get this done,” DeBoy said.

‘‘Not everyone understands what’s going on. They just see it’s going to hit them in the pocketbook,” said Malone, who attended the same Democratic club meeting.

The rate increases follow the expiration of price caps that were established when the General Assembly deregulated electricity in 1999.

BGE’s caps come off July 1. Pepco’s came off last year, and its customers are scheduled to see a 29 percent increase this summer. Allegany Energy customers will see its caps come off next year.

Moments before the 2006 session ended, Ehrlich promised to call lawmakers back to Annapolis until the rate debate was resolved.

The next morning, however, Ehrlich and his aides were discussing ‘‘nonlegislative” options. The Public Service Commission still must approve the Constellation-FPL merger.

Ehrlich, in the WAMU interview, reiterated his support for the deal. Constellation offered the savings from the ‘‘synergies” of the new company as part of its rate mitigation plan.

‘‘Clearly, the merger is good for the state,” Ehrlich said.

Democratic gubernatorial candidate Douglas M. Duncan has already tried to use the electricity issue to score campaign points.

‘‘Until Bob Ehrlich starts talking about re-regulation, he’s not solving the problem. He’s passing the buck,” Duncan said.

Duncan, the Montgomery County executive, supports allowing local governments to buy electricity for residents through aggregation. Montgomery County has purchased three years of electricity for 18 local government agencies at a cost of $125 million, saving $25 million.

On Thursday, he wrote Ehrlich, House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller Jr. calling for a special legislative session. He said re-regulation should be part of the mix.

‘‘I recognize that rolling back or modifying deregulation would be an extraordinary step, but we are witnessing an extraordinary gouging of ratepayers by the utility industry and it calls for a dramatic response,” Duncan wrote.