Ehrlich vetoes rate relief bill; lawmakers head back for override

Friday, June 23, 2006

by Douglas Tallman

Staff Writer

ANNAPOLIS — Gov. Robert L. Ehrlich Jr. vetoed the legislature’s effort to ease the burden of increasing electricity bills on Thursday, serving as the penultimate chapter in the ongoing saga of Baltimore Gas and Electric rates.

House Speaker Michael E. Busch said the Democrat-controlled General Assembly would continue its special session today, overriding the veto and adding another policy victory over the Republican governor.

House Minority Whip Anthony J. O’Donnell said Republicans would try to get colleagues to consider an alternative plan submitted during last week’s special session that satisfies Ehrlich’s objections.

‘‘We’ll have an hour of debate. They’ll override and that will be it,” said O’Donnell (R-Dist. 29C) of Lusby.

Busch gave little stock to the alternative plan, touting the version that passed the House and Senate last week with majorities that could override the veto.

‘‘We spent a lot of time in crafting this legislation. It’s not like we sat down around a kitchen table for two hours before we went in,” said Busch (D-Dist. 30) of Annapolis.

Electricity rates, particularly for 1.1 million Baltimore Gas and Electric customers, have been an all-consuming issue around the state capitol since March, when the Public Service Commission approved a 72 percent rate hike for BGE beginning July 1.

July 1 was a date established in 1999 under a plan that deregulated the state’s electricity market. Then, rate caps were to expire and utilities would charge customers the market rate for power.

But because of Hurricane Katrina and turmoil in the Middle East, energy prices soared when BGE took its power needs to the market earlier this year.

For more
Read the veto message at www.governor.maryland.gov⁄ billvetoes⁄2006⁄SB1.veto.pdf.

Lawmakers tried to soften the blow of the 72 percent hike by limiting a rate increase to 15 percent for 11 months. The deferred increase would be covered through a $2.19-a-month charge that would be levied on customers for 10 years.

The bill also fired the five-member PSC and anticipates the new PSC would develop a plan to get customers at market rates by Jan. 1, 2008.

Ehrlich’s veto letter said he objected to the ‘‘all-in” conditions of the rate mitigation: Customers would not have the option to swallow the full increase if they wanted and avoid the deferral charge.

He also objected to the deferral charge, agreeing with critics who call the charge interest. Supporters say the charge actually pays down the principal on the deferment.

Ehrlich’s letter said he also wanted more concessions from BGE and its parent, Constellation Energy Group, and he objected to a replacement of the People’s Counsel, which represents consumers before the PSC.

Ehrlich notes that the legislature’s plan provides $386 million in rate relief. A plan negotiated in April — which was subsequently dissolved by a lawsuit brought by Baltimore Mayor Martin O’Malley (D) — had provided $600 million.

That money, however, was contingent on Constellation merging with Florida Power and Light. Democrats say the General Assembly’s plan does not depend on the merger. If it goes through, ratepayers could see more savings.

Ehrlich’s letter also says he would contemplate changes in the PSC, but would not accept ‘‘wholesale elimination.”

Some parts of the bill earned Ehrlich’s blessing. He supports the parts that encourage energy efficiency, provide flexibility in power auctions and increase assistance to low-income residents.

The veto follows a hearing Tuesday in which Ehrlich accepted testimony for six hours from residents.

Forty who testified asked the governor to veto the plan, and 14 urged he sign it, according to a tally kept by a gubernatorial aide.

Several witness comments mirrored the talking points from the political parties. Those who supported the veto blasted the lack of choice and a charge that will be part of their bills for 10 years.

Those who wanted Ehrlich to sign the measure endorsed the firing of the Public Service Commission for failing to protect them from the 72 percent increase.

Some witnesses agreed with Ehrlich that PSC members should keep their jobs.

‘‘Firing the Public Service Commission was a regulatory coup d’etat,” said Norris McDonald, founder and president of the African American Environmentalists Association.

And yet Howard Gerber, who called himself an Ehrlich supporter, had his doubts about the PSC.

‘‘People feel they’re more concerned about the good of the utility than the public,” said Gerber, who said he owns a tavern in Baltimore.

At the hearing, PSC Chairman Kenneth D. Schisler stood to defend his commission. PSC faultfinders say the commission could have anticipated energy prices would fall and delayed last winter’s auctions that led to the 72 percent rate hike.

‘‘If we moved the procurement, it would have had the devastating effect of scaring away bidders away from our process,” Schisler said.