Economic Matters chairman says no to re-regulation
Davis points to past mistakes, urges conservation measures
House Economic Matters Chairman Dereck E. Davis will vote against proposals to re-regulate Maryland's electricity industry and vowed to prevent the issue from consuming his panel's work in the 2010 General Assembly.
His comments, made Wednesday during a legislative breakfast at the College of Southern Maryland more than two months before the 90-day session, could set the tone for a debate that went unresolved last session and still promises to be highly charged when lawmakers return in January to Annapolis.
But Davis' opposition, which he said he arrived at after hearing a raft of testimony and months of analysis on the issue, deals a blow to re-regulation supporters who hoped its passage would boost electricity supply and drive down energy rates.
The state legislature should not be in such a rush to return to a regulated environment, especially given the failures of deregulation that many lawmakers now acknowledge was a mistake, said Davis (D-Dist. 25) of Upper Marlboro.
"It's really become pretty clear to me that, as my 11-year-old would say, maybe we ought to just chill out," he said.
Residential energy prices are starting to decrease; new plants that will increase in-state generation capacity are being planned; and outside suppliers are now directly soliciting Maryland customers, said Davis, pointing to a flier he received recently in the mail from Dominion Power advertising affordable rates.
He is also not convinced that re-regulation will guarantee price reductions that would bring them anywhere near where they stood before artificial rate caps imposed under deregulation expired in recent years. Baltimore Gas and Electric customers saw a 72 percent rate increase in July 2006, when the caps were removed.
"To me, that's a pretty big gamble to take," Davis said. "Right now, I think we just need to settle down and stay the course."
In the meantime, he is hopeful that the use of smart energy meters and other conservation initiatives will help reduce ratepayers' bills.
But legislators leading the charge to go back to a regulated market said that is wishful thinking.
"We've waited plenty; we've studied it to death," said Sen. E.J. Pipkin (R-Dist. 36) of Elkton. "The [Public Service Commission] in their statements last year made it clear that deregulation has failed. Now let's move toward re-regulating and taking back our energy future."
Although Davis said he would not put re-regulation bills in the drawer, he pledged to not let the issue drag out over the course of the session and prevent his committee from tackling other important legislation.
Earlier in the breakfast program, Senate Finance Chairman Thomas McLain Middleton (D-Dist. 28) of Waldorf said the ball was in Davis' court to move a re-regulation bill through the House first next session. The Senate passed a re-regulation bill this year, only to see it fizzle in Davis' committee in the waning days of the legislative session.
"It doesn't make any sense to go through that battle again and then have it go nowhere in the House," Middleton said.
The bill passed by the Senate this year would not have provided rate relief in the short term and hinged on ratepayers subsidizing the construction of power plants when so ordered by the PSC, "on the hopes that once a new power plant is built we'd save money for ratepayers," said Sen. Robert J. Garagiola (D-Dist. 15) of Germantown, a re-regulation opponent.
During its review of the proposed joint venture between Constellation Energy Group and Electricite de France, the PSC asserted its authority to build or purchase new generating capacity. The board approved the deal last week.
While it may be prudent to tinker with the market structure, "we don't need real wholesale changes," Garagiola said.
"If we do not see rates stabilize nor new generation built, then maybe it's time to make changes," he said.
Even without Davis' support, Sen. James C. Rosapepe believes re-regulation will get a huge boost if Gov. Martin O'Malley makes it one of his legislative priorities.
"In my experience in the legislature, very few important things get done in one year," said Rosapepe (D-Dist. 21) of College Park, who has 14 legislative sessions under his belt as a delegate and senator.
O'Malley (D) said Monday after attending the Women's Suburban Democratic Club dinner in Potomac that he has not yet finalized his legislative package for the 2010 session, but conceded that any step toward re-regulation faces hurdles in the General Assembly.
"Most everyone so regrets their votes on deregulation that they don't want to make a second mistake that compounds a very complex problem," he said.
The governor expressed his preference for a hybrid regulatory environment used in several other states in which the residential market is regulated, but not the commercial sector. Coupled with an expansion of the state's renewable energy portfolio, O'Malley believes that scheme would result in more predictable electricity pricing.