ANNAPOLIS – Frustrated by a surge in electricity rates that a deregulation law was expected to prevent, a Maryland lawmaker is proposing a bill that would allow counties to purchase electricity wholesale and resell it to their residents at rates lower than the local utility charges.
The sponsor of the legislation, Delegate David D. Rudolph, D-Cecil, said that residents could save as much as 10 percent on their electricity bills if counties are allowed to negotiate the purchase of electricity at competitive rates. He said that the existing utilities, which many believe have a monopoly over the markets, don’t have the incentive to secure lower prices.
He said these local governments would be able to secure cheaper electric rates by pooling together customers for better buying power and because the groups would lack the profit margin that utilities factor into rates.
Rudolph said that this would come as a welcome relief to many Marylanders who face or are expected to face electricity rate increases between 50 percent and 70 percent.
The bill is being opposed by both Baltimore Gas and Electric, the state’s largest utility, and by the People’s Counsel to the Public Service Commission, who represents consumers before the state utility regulation panel.
In a statement to the House Economic Matters Committee, BGE official Ruth Kiselewich said that the program would hurt low-income consumers and confuse ratepayers.
“Customers may not understand who their electricity supplier actually is,” the BGE statement said. “The local government? The electricity supplier who bids that year?”
Proponents of the bill include Jim Peck, director of research at the Maryland Municipal League, who said that despite the deregulation of the electric utility market in 1999, electric rates continue to rise.
“Everyone has said all along deregulation was done to foment competition. And clearly there hasn’t been any. We’d like to provide an alternative,” Peck said.
Rudolph’s bill would allow counties to take matters into their own hands by repealing a current law that restricts the purchase of electricity by local governments only to those markets lacking sufficient competition.
Rudolph said the rules set by the PSC are burdensome since they require an opt-in program in which the local government must engage in a costly marketing scheme to lure in participants. These marketing programs have been shown to be largely ineffective, Rudolph said.
Rudolph’s bill would work on an opt-out basis in which residents would be required to notify the county or municipality operating the program if they wished to remain with their original electric utility company. Howard County is currently the only local government that the PSC has allowed to form an electric cooperative.
Deregulation was expected to put downward pressure on costs and provide residents with more choice, but costs have risen dramatically and only about 1 percent of residents buy from utilities that compete with the dominant supplier, according to a June 2006 Public Service Commission report.
However, some officials expect this to change as rate caps, which have allowed the existing utility companies to sell below market price, expire and allow outside utility companies to compete on a level playing field.
According to Theresa V. Czarski, spokeswoman for the Maryland People’s Counsel, the future for competition among electric utilities in Maryland is not looking bright.
“People have actually come back to standard offer service [the non-competitive service]. There is less competition now than there was in 2004,” she said.
Despite high electricity rates and a lack of competition, Czarski was reluctant to endorse the bill. She said that she wanted the PSC, with its new pro-consumer Chairman Steven B. Larsen, to maintain its focus on improving procurement for everyone in the state and come up with a better model.
Czarski was also concerned that the energy-buying local governments that would be possible under the bill could drive prices higher for customers of the non-competitive utility company. She said the non-competitive companies would have to build in higher prices in order to contend with the possibility that customers in their area could switch to the competing service.
Another concern, Czarski said, is that the local governments would “cherry pick” the best customers, which could result in lower-income customers, who are not in the local government’s program, paying higher energy rates.
But proponents of the bill, like Peck, said that local governments should be able to seek better electricity rates than currently offered in the existing market. “We provide water, sewer and other municipal services without a profit motive. We’d like to have the opportunity to similarly provide electricity service at the lowest cost possible to save our people money,” said Peck.