Saturday, Aug. 16, 2008

Energy gets top billing at O'Malley's MACo speech

Governor promotes new generation, renewables

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OCEAN CITY – Maryland must embrace new generation opportunities, expanded use of renewable energy, promote the use of "smart meters” that reduce consumption and partner with the federal government to avert looming electricity blackouts as early as 2011, Gov. Martin O'Malley told several hundred county officials on Saturday.

"We can not stand idly by and wait for market forces or the electricity good fairy to come in and solve this problem for us,” O'Malley (D) said during a 28-minute address at the annual Maryland Association of Counties summer conference. "All of the experts are telling us that demand is outpacing supply and we know that there's no new generation coming online. We have to do something about this now or the rolling brownouts and blackouts will happen.”

O'Malley's six-point plan to combat the energy shortfall acknowledges that wholesale re-regulation will be a tough sell in the legislature because of the high up-front cost to purchase power plants from the utility companies.

The governor's proposals, however, will also likely result in even higher electricity bills at a time when ratepayers have recently been hit by post-deregulation price spikes as artificial rate caps expired. That, or the blackouts that are predicted if nothing is done, could be political liabilities for O'Malley as he faces re-election in 2010.

"I know how much all of us wish that there were simple cost-free solutions to this complex problem, but our shared reality is not simple and it is not cost-free,” O'Malley said.

Energy policy has been a common theme during the first 18 months of the O'Malley administration, from appointing four new Public Service Commission members to launching an ambitious effort to reduce consumption 15 percent by 2015. The state has also waged war with Constellation Energy Group, the parent company of Baltimore Gas & Electric, over the return of energy credits and ratepayer reimbursements that stemmed from deregulation

But the demand shortage has proven to be complicated. The state is supporting Constellation's efforts to build a third reactor at Calvert Cliffs Nuclear Power Plant in Lusby, but it's not projected to be ready until at least 2015. Prospects for extending transmission lines that would supply electricity from outside the Mid-Atlantic grid are slow-moving and the push for more renewable energy usage requires significant up-front capital investment

And O'Malley said it was important that government play some role, rather than wait for market forces to restore the supply-and-demand imbalance.

"Free markets alone will not secure that future,” he said. "If we want a more secure, more renewable and more affordable energy future, then there are things that we must do together to bring about that stronger future that we prefer.”

Newly appointed Public Service Commission Chairman Douglas R.M. Nazarian said his agency will strive to put the governor's ideas into practice. "We are going to take control of our own destiny, our own future and … we are not going to sit back and let the markets solve the problems that we identify.”

However, Sen. E. J. Pipkin, a leading voice on utility issues in the General Assembly, said government's role should be restricted. He opposed O'Malley's plan for local governments to use the bonding authority of Maryland Environmental Services to build "peaking plants,” or locally-controlled generation facilities that can produce electricity for a small community. One such project is under consideration in Thurmont.

"I see no role for a government agency that continues to struggle to meet its core competency of running water and sewer plants in MD being used for energy usage,” said Pipkin (R-Dist. 36) of Elkton. "This expansion of creating czars in the government, which is what we've seen over the last two years, is not something that's good. Creating a new agency involvement in direct building of power plants is not something that I think is constructive. I think the private market does have a place in the system and I think that's one proposal that I had some problems with.”

Still, Howard County Executive Kenneth S. Ulman said there's a consensus across party lines to tackle the looming energy squeeze.

"No matter what your political ideology is, I'm finding people across the spectrum are very focused at this moment either for global warming issues or for foreign oil issues or for homeland security issues that we've got to be generating local power,” he said.

The emphasis on long-term contracts for renewable power drew applause from the crowd, particularly Jim Lanard, head of strategic planning and communications for Bluewater Wind, an offshore wind farm developer in the Northeast.

"The only way in Maryland that renewable power gets built is offshore wind,” he said. "There's just not enough land mass to build land-based wind power. Solar works on a house-by-house basis unless you build solar farms in the west, so what we're looking at is wind, and Maryland, like Delaware, is really the Saudi Arabia of wind power.”

O'Malley also wants to accelerate the deployment of smart meters and smart pricing that would reduce consumption and save consumers money by using electricity during non-peak times. He also pledged to provide more financial assistance for low-income families and promote energy-efficient appliances.

The governor's speech was largely on target, said Robert L. Gould, a Constellation spokesman.

"The governor clearly appreciates the fact that there are no easy solutions and that we must look at many alternatives to meet our future energy needs,” he said in a statement. "… Key to any solution set must be the ability to balance affordability, reliability and sustainability – all of which are critical to making Maryland an attractive place for future energy investment.”