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Rate Bill Passes: Veto-Proof Votes in House, Senate Enact Limit on BGE Increases

Posted on: Thursday, 15 June 2006, 06:01 CDT

By Andrew A. Green and Jennifer Skalka, The Baltimore Sun

Jun. 15--A plan to hold this summer's BGE electricity rate increase to 15 percent and fire the Public Service Commission passed the General Assembly early this morning with veto-proof majorities in both chambers, a major turn in a saga that has dominated Maryland politics for months and brought anxiety and confusion to BGE's 1.2 million residential customers.

"It's the best proposal that's been on the table thus far," said Senate President Thomas V. Mike Miller. "It's taken a lot of hard work. It's like the Age of Aquarius. On this day everything came together."

Gov. Robert L. Ehrlich Jr. got none of the amendments he said he would need to persuade him to sign the bill. But the legislation passed the House and Senate with more than enough votes to override a potential gubernatorial veto, and legislative leaders said they will reconvene to override if necessary.

The Senate vote came at about 9 p.m. on the first and only day of a special session called to address the electricity crisis; the House vote came after 12:30 a.m. today.

The news in March that BGE electric bills would go up 72 percent with the July 1 expiration of six-year rate caps led to an outcry from consumers and frantic efforts by lawmakers to avert a potential election-year anti-incumbent movement.

Rates are rising as part of an energy deregulation plan passed by the General Assembly in 1999, now being fully implemented at a time of rising energy costs and worldwide market instability.

Robert L. Gould, a spokesman for BGE parent company Constellation Energy Group, said the utility doesn't agree with all aspects of the bill, but he said it is pleased to see some finality to the issue for customers.

"We've said from the start that our top priority was a plan that helped BGE's residential customers manage the July 1 adjustment to market prices, while at the same time assuring the financial strength and viability of BGE," Gould said. "This bill appears to meet both objectives."

The legislature wrapped up its special session in one tiring day, accomplishing what it failed to do during the annual 90-day legislative session that ended this spring. Each day the legislature spends in Annapolis costs taxpayers about $45,000, state officials say.

Ehrlich made no public comments after the Senate vote, but earlier in the evening he said he didn't like the direction it was going. On Tuesday, he had complained that the bill would be damaging to BGE and its corporate parent, Constellation Energy Group, but yesterday he said the legislature was giving too much to the company.

"It's fascinating because the amendments appear all to be going Constellation's way against consumers, and that's obviously of interest to us and not a positive sign," Ehrlich said.

Republican legislators met with Ehrlich for an hour yesterday afternoon to craft amendments the governor said he hoped would both aid consumers and help ensure the success of the pending merger between Constellation and Florida-based FPL Group Inc.

Without them, he said, he wouldn't hesitate to veto the legislature's efforts to help BGE customers deal with the pending increase

"You've got that right," Ehrlich said. "If, on the other hand, they improve the bill, if they make it more consumer-friendly, if they depoliticize it, if they protect the merger, I'll sign it."

None of the Republicans' amendments passed the Senate. The governor would have six working days - not counting Sunday - to decide whether to sign the bill, veto it or let it become law without his signature.

The proposal that prompted the most debate was an amendment to preserve the Public Service Commission. The commissioners have been pummeled by Democrats and some Republicans for not acting sooner to thwart the rate increase.

A Baltimore circuit judge ruled last month that they failed in their duty to look out for consumers, and the state Open Meetings Compliance Board said they had held an illegal closed meeting.

The agency has also been criticized for being too cozy with utility company executives, a claim bolstered by e-mails showing that commission Chairman Kenneth D. Schisler discussed strategy with industry lobbyists and planning a hunting trip and other social outings with a utility company official.

Sen. J. Lowell Stoltzfus, a Somerset County Republican, argued that although "some of the [PSC's] behavior was inappropriate" the entire commission should not be punished. He blamed the previous members of the Public Service Commission, individuals who sat on the board in 1999 when the rate plan was signed, for the 72 percent rate increase."My problem is when we blow up a whole commission it destabilizes it," Stoltzfus said.

Some Republicans said dismissing the PSC sets a bad precedent. "It's not appropriate to fire people because we disagree with their decision," said Sen. Allan H. Kittleman, a Howard County Republican.

Others asserted that the commissioners had shown they had forgotten their main mission - to advocate for consumers.

"We don't like the behavior of the Public Service Commission, and we realize that there has to be change," said Sen. Paula C. Hollinger, a Baltimore County Democrat.

If the governor signs the bill or if it is enacted over his veto, it appears unlikely to draw a lawsuit from Constellation Energy, a result that could have extended consumers' uncertainty for months.

Constellation officials said that concessions made by the legislature yesterday give the company the financial security it needs while customers make the transition to market rates.

With little debate, the Assembly approved a key concession requested by Constellation: The date at which all customers will pay market rates for electricity would be Jan. 1, 2008, instead of June 1 of that year. Company officials said that change would help it maintain its credit rating, which is crucial for BGE because of the large amounts of money it must borrow to maintain its distribution lines.

The legislature also agreed to change the plan for how rates would be determined from June 1, 2007 - when the 15 percent cap on the rate increase expires - until customers pay market price. In that period, consumers will either begin paying full market rates or have the chance to participate in a transitional rate-stabilization plan.

That mechanism helps guarantee BGE's ability to fully recover its costs, but participation would add to the monthly fee that customers have to pay.

The bill could still face a legal challenge from the PSC. When the legislature passed a similar bill during the legislative session, Schisler, the board chairman, filed a suit in the circuit court of Talbot County, where he lives and practiced law, challenging its constitutionality.

The commission won a temporary injunction, but the suit became moot when Ehrlich vetoed the bill and the legislature failed to override.

PSC spokeswoman Christine E. Nizer said firing the commission would do nothing to help BGE ratepayers, but she said no decision has been made about whether to revive the lawsuit.

In the bill being considered yesterday, the Assembly included several provisions designed to reduce the likelihood that a second suit would be successful.

It stipulated that any challenges to the constitutionality of the statute would have to be filed in Baltimore Circuit Court - a move to keep Schisler out of his hometown courthouse. It also said that no public funds could be used to finance a suit; Schisler used PSC money to hire a partner from his former law firm to file the first suit.

Supporters of the plan said the PSC failed to protect consumers, failed to ask any tough questions of the utility and failed to follow its own rules in its quick approval of an earlier plan to defer the rate increase.

"There were opportunities for this Public Service Commission to protect the consumer," said Sen. E.J. Pipkin, an Eastern Shore Republican and one of the Assembly's leaders on rates issues. "They chose a different path."

The legislature also added amendments yesterday to provide some rate relief for customers of PEPCO in suburban Washington and Delmarva Power on the Eastern Shore.

One thing last night's votes appear almost certain not to change is the intense politicking around the issue. It has taken center stage in the governor's race, with Ehrlich saying the legislature's plan is another example of the excesses of Democratic leadership and the governor's opponents claiming the Republican has sided with corporate interests against consumers.

Ehrlich said yesterday that Democrats have made sure "that the people get socked" and have again sent terrible signals to the world that Maryland is hostile to business. He said he will not hesitate to take that message to the campaign trail.

One of Ehrlich's prospective opponents, Baltimore Mayor Martin O'Malley came to Annapolis last night to watch the final votes in the House of Delegates. O'Malley has already begun running campaign commercials on television spotlighting his efforts to secure rate relief.

He said it isn't surprising that Ehrlich wasn't involved in crafting any of the legislation in the special session and proposed no ideas of his own.

"He's not a person that's as committed to finding solutions as he is to casting aspersions and trying to divide and belittle those that would try to make government work," O'Malley said.

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Copyright (c) 2006, The Baltimore Sun

Distributed by Knight Ridder/Tribune Business News.

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Source: The Baltimore Sun, Maryland

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