Ehrlich deal holds BGE rate hike to 19%

Announcement caps a week of politically charged solutions to state’s energy crisis from all three gubernatorial candidates

Friday, April 21, 2006

ANNAPOLIS — BGE customers this summer will see their average monthly electricity bills increase 19 percent instead of the 72 percent hike under a deal negotiated by Gov. Robert L. Ehrlich Jr.

Ehrlich administration officials continued negotiations with BGE parent Constellation Energy Group after a legislative proposal died with the conclusion of the 2006 General Assembly session 10 days ago.

‘‘It is in everybody’s best interest to mitigate rate shock,” Ehrlich (R) said Thursday afternoon. ‘‘It is in everybody’s best interest that the people least able to afford it get the relief they deserve.”

The legislative deal had slightly smaller increases. The House of Delegates overwhelmingly passed the plan, but the Senate killed the proposal when a procedural vote failed to pass by a single vote.

Like the deal announced Thursday, the legislative plan had Constellation offering $60 million a year for 10 years to offset rates. The company also will borrow $588 million to pay for a deferral of rates.

The legislative plan would have allowed the company to secure its debt, borrowing more than $700 million, which would have reduced the rate increases more.

‘‘I think the plan we had on the table on Sine Die was the best plan,” House Speaker Michael E. Busch said. ‘‘Right now, the governor is trying to put the best possible alternative forward.”

Since the end of the legislative session last week, Annapolis observers have contemplated whether the governor would call — or want to call — lawmakers back for a special session to take up rate relief.

Busch (D-Dist. 30) of Annapolis brushed aside the question for the moment.

‘‘Without other information, I don’t know there’s a whole lot else that can take place,” Busch said Thursday.

One of Ehrlich’s rivals, Montgomery County Executive Douglas M. Duncan, blasted Ehrlich as well as Baltimore Mayor Martin O’Malley. Duncan and O’Malley are both seeking the Democratic gubernatorial nomination to take on Ehrlich in November.

‘‘They are both way too close to the energy companies and their executives to fight for the hard working men and women in Maryland,” Duncan said Thursday in a statement.

Ehrlich, in his shirt sleeves on the lawn of the governor’s residence on State Circle, said the state and nonprofit agencies will launch a public education campaign to tell BGE’s 1 million ratepayers about the deal.

The 19 percent increase would kick in July 1. On June 1, 2007, rates would increase 25 percent. Customers also will pay $15 a month over the next 24 months. In January 2008, rates would transition to market levels.

Customers will have to sign up for the rate deferral, otherwise they will have to pay the full cost of the increase.

The $15 charge is a deferral from the 72 percent increase. The legislative plan charged instead $1.50 a month for 10 years. The difference is the ‘‘Ehrlich energy tax,” said Hari Sevugan, a spokesman for the O’Malley campaign.

Ehrlich also announced an 85 percent increase in state and federal assistance for low-income families.

The actions follow the expiration of price caps put in place in 1999 to end the state’s regulation of the energy markets.

Back then, proponents believed deregulation would spark competition that would drive rates lower. The caps prevented other electricity companies from competing for Maryland customers.

‘‘It did not work. The grand experiment failed,” Ehrlich said Thursday.

The governor’s announcement capped a week showing how electrical rates will ignite gubernatorial politics. Duncan and O’Malley also unveiled proposals for state energy policies.

Duncan’s plan, released at a news conference Monday in front of Constellation’s Baltimore offices, called for re-regulating power companies, price caps and aggregation (where counties and municipalities buy electricity in bulk for residents).

‘‘We have to do what is right by the people of Maryland — and I don’t believe that it is right to sit idly by while big corporations take us to the cleaners,” Duncan said Monday.

O’Malley’s plan, released Thursday, takes special aim at Ehrlich’s appointees to the Public Service Commission.

‘‘I blame the PSC because they should have seen this iceberg coming up on our bow a couple of years ago,” O’Malley said.

In a Dundalk neighborhood of 1950s row homes on Thursday, O’Malley promised to replace the PSC commissioners with advocates for consumers. He also called for a ‘‘shock absorber” to keep energy bills affordable.

O’Malley did not call for re-regulating markets immediately.

‘‘If we had a Public Service Commission, we’d have professionals that could tell us what’s reasonable,” he said.

On Thursday, Duncan was in Baltimore arguing that Pepco customers were not getting a good enough deal for its rate increase. He filed a motion to have Montgomery County’s Office of Consumer Protection advocate for county residents in the rate increases.

In a deal between PSC staff and Pepco, residents would see rates increase 15 percent beginning June 1. On March 1, 2007, rates would increase 15.7 percent more. On June 1, 2007, customers would be charged full market rates. Customers also would be charged for the amount deferred for no longer than the next 18 months.

The PSC ruled the county could take part, but Pepco has asked for a ruling by today, said Christine Nizer, PSC spokeswoman. Until the PSC rules, Montgomery County can present a filing to the commission, she said.

The electricity issue comes tailor-made for political challengers to carry through a summer of campaigning into the September and November elections.

‘‘It’s probably going to be the overriding issue. A lot of people are going to cast their votes on this issue. It’s an enormous increase,” said Matthew Crenson, a Johns Hopkins University political science professor.

By taking over the issue, Ehrlich is playing a high-risk strategy: The governor could be blamed for not coming up with a better deal and the company has a vested interest in seeing him re-elected, Crenson said.

If Ehrlich is not re-elected, Constellation will be dealing with someone who is a good deal more hostile, Crenson said.

Chris Cavey, chairman of the Baltimore County Republican Central Committee, is a self-described DATE — Defender of All Things Ehrlich. He is unabashedly sanguine over how the electricity issue can play into Ehrlich’s campaign.

‘‘In my opinion, the governor will be completely unbeatable if he comes up with a complete solution the everyday man can understand,” Cavey said.

People are frustrated, confused, even clueless over the rate debate, he said.

‘‘They know they’re getting a rate increase, but they don’t know how big. They know the governor’s trying to do something, but they’re not sure what. They know the legislature didn’t fix the problem, but they’re not sure why,” Cavey said. ‘‘They’re looking for a hero.”

Lawmakers, however, are facing some voter scrutiny over the deal they let slip through their fingers.

Del. Herbert H. McMillan (R-Dist. 30) of Annapolis said he has had as many constituents question why the General Assembly did not institute re-regulation of energy markets.

McMillan was one of nine delegates to reject the legislative rate relief plan, in part because it softens the blow of higher rates before the November election and then constituents get ‘‘hammered” after the election, he said.

‘‘This is the big issue for people, but I think you have to do better than come up with a little deal to get you past the election. People aren’t stupid,” McMillan said.

Another opponent to the plan was Del. John R. Leopold (R-Dist. 31) of Pasadena. Leopold’s district and McMillan’s are served by BGE.

‘‘While it was tempting to support the bill that we had on our plates on the last night, I had 36 pages of legislation to digest in 10 or 15 minutes. I didn’t think that was responsible legislating,” Leopold said.

A new poll showed 75 percent of Maryland voters ‘‘very concerned” about utility rate increases.

In the poll, by Gonzales Research and Marketing Strategies, 40 percent of respondents held Constellation most responsible for the rate hikes; 34 percent blamed the General Assembly; and 12 percent held Ehrlich most responsible.

Meanwhile, Duncan announced he has returned $3,205 in campaign contributions from Constellation and its top executives.

O’Malley said Thursday he would not return his contributions.