WASHINGTON – A federal judge has ruled that the agency regulating public utilities in the Maryland has no jurisdiction over Fort Meade, clearing the way for the Army’s congressionally mandated privatization of electric power to proceed.
U.S. District Judge Andre M. Davis ruled that the Maryland Public Service Commission has no jurisdictional authority over the “federal enclave” of Fort Meade, and thus cannot license or regulate any private utility that the Army selects as electricity distributor to the base.
Baltimore Gas and Electric Co., which joined with the commission in the suit against the Army and a rival company called Enron Federal Solutions Inc., said it was merely trying to clear up the jurisdictional issues.
“Our intent wasn’t to block privatization,” said BGE attorney Dick Ransom. “We wanted a clear determination of what the laws were so that privatization could go forward on what we think is a fair basis.”
Enron Federal Solutions, a subsidiary of Houston-based Enron Corp., hailed the decision.
“We firmly believe this is a victory for competition,” said spokeswoman Peggy Mahoney.
Officials with the PSC could not be reached for comment.
The suit alleged that because the Army’s proposal did not give the PSC explicit authority over any private utility on base, it violated a 1988 federal law requiring the military to comply with state utility regulations, including a range of health, safety and environmental laws.
For its part, the Army argued that not only does a 1997 law governing the procedures by which electricity privatization occurs require that the military comply with such regulations, but that it alone has the authority to enforce those state standards on base.
The 1997 law resulted in the Pentagon issuing a series of Defense Reform Initiative Directives. Two of them — one in December 1997 and another a year later — deal specifically with privatizing utility systems on military bases.
While acknowledging that “genuine ambiguity exists” between the 1988 and 1997 laws, Davis sided firmly with the Army in his 44-page ruling on Monday.
“I am persuaded the Army acted reasonably in reconciling the manifest conflicts inherent in the statutory and regulatory regime underlying the privatization initiative mandated by Congress,” Davis wrote.
“Put simply, the federal government has absorbed state law, including utilities law, to supply the regulatory standards necessary and appropriate for the operation and maintenance of the electricity and natural gas systems at Fort Meade,” his ruling said.
Ransom said BGE believes that the PSC, created in 1910 by the General Assembly, is best suited to implementing such standards.
“We have a concern that state agencies that have implemented regulations for decades won’t be doing so,” he said. “The agencies that adopted environmental, health, and safety laws are the agencies best suited to enforce them.”
Ransom said that BGE intends to bid for the Fort Meade contract. Should it win, he said, that could end up causing unintended problems.
“PSC requires we serve (customers) according to our tariff or via a special contract,” Ransom said. “If we win the award, we will need PSC approval of our contract with the Army, but we don’t know if the Army will allow PSC to approve the contract.”
When Maryland deregulated its electricity market last year, BGE gave up ownership of all of its power generating plants to its parent holding company Constellation Energy Group. BGE is now involved only with distribution and transmission.
In the world of utility deregulation, companies such as BGE and Enron Federal Solutions do not generate their own power but instead act as distributors or even just retail providers.
In the case of BGE, its electricity for the next three years comes from Constellation Power Source, another subsidiary in the parent Constellation Energy Group that actually operates the power generating plants.
“It is our supplier of last resort,” Ransom said.
Mahoney said Enron Federal is an energy management company. Together with other Enron Corp. subsidiaries, it can either act as a distributor — overseeing maintenance of the actual electrical wires or gas pipelines — or as a retailer, buying electricity on the commodities market from other wholesalers, who in turn buy electricity from power plants elsewhere in America.
Mahoney said this system benefits institutions like the Army by freeing them from worries about supply and infrastructure.
“Taxpayers don’t want the Army to manage their energy. So why not enable the Army to outsource their energy management in order to upgrade their systems in a cost-efficient way?” she asked.
For his part, Ransom said BGE wants privatization to proceed “in a manner which best protects our electricity and gas customers.”
He said “the irony is that even if Enron wins” the Fort Meade contract, “the Army can still purchase the electric power commodity from Constellation.”
“We are indifferent as to where Fort Meade buys its electricity and gas. This is the concept of deregulation and we fully endorse it,” he said.