ANNAPOLIS- As Baltimore Gas and Electric Co. customers brace for an average rate increase of 72 percent once state-imposed price caps expire in July, competing utilities pronounced themselves ready to jump into Central Maryland’s electricity market and offer consumers a lower price.
At a Tuesday hearing before the Senate Finance Committee, Washington Gas Energy Services President Henry A. Warren Jr. told state legislators that the years of below-market pricing brought on by the caps have hampered the competitive market.
“We haven’t been able to compete with those low-capped rates,” he said in an interview. He urged legislators to reject last minute efforts to extend the price caps and mitigate the impending BGE rate increases.
The committee heard a series of bills intended to regulate prices more strictly than the rate plan proposed by the Maryland Public Service Commission. The commission’s plan limits the increase initially to only 21 percent. One of the Senate bills would limit that increase to 5 percent per year.
Warren urged the committee not to pass any legislation that would hinder other utilities from being able to compete profitably with BGE, which is going to be subject to the Public Service Commission’s plan to phase in the full 72 percent rate increase. The commission’s plan, he said, has provisions to allow for competition.
He said his company has been stockpiling reserves of electricity to sell in the area, and that his company is offering BGE customers up to 10 percent in savings.
Frank Lacey of Direct Energy, a retailer which sells energy to businesses in Maryland, said that the solution to the energy pricing problem is not to put restrictions on prices, but to allow competition to thrive.
“Consumers will end up paying more under these bills,” he said.
Robert L. Gould, the managing director of corporate communications for BGE’s parent company, Constellation Energy, said in an interview that there should be no government interference in the market, including the commission’s plan.
“Our concern with the Public Service Commission’s plan is that it’s bad public policy,” he said. “Any government intervention in the marketplace is bad for the consumer.”
The commission’s plan would have customers pay a 5 percent interest charge in their electricity bills to pay for the rate deferral. According to BGE, the company will not pay off its expenses on the deferral for at least 20 years at the 5 percent rate.
Baltimore Mayor Martin O’Malley told the committee that the 5 percent surcharge should be eliminated entirely and that the commission no longer serves the public. The commission’s chairman, Kenneth D. Schisler, was appointed by Gov. Robert L. Ehrlich Jr., who O’Malley is challenging in this year’s gubernatorial race.
“The regulated are now the regulators,” he said. “Governor Ehrlich fired the watchdogs and put foxes in charge of the henhouse.”
Schisler told reporters in a meeting at the State House Tuesday afternoon that the commission developed its plan objectively.
“There have simply been no mistakes,” he said. “Unfortunately, prices have risen significantly.”
Schisler said that the commission’s contact with BGE and Constellation has been “kept to a minimum,” and that the 5 percent interest rate is the lowest rate the commission could legally give the company so that it could recover its costs. “It wasn’t a matter of giving the utility profit,” he said.