The
Maryland Public Service Commission announced yesterday that BGE
electricity rates will increase 72 percent in July. This demonstrates
the failure of deregulation and a lack of leadership at the commission
to look out for Maryland consumers.
The state should be guided by the following principles as it develops a response to the rate increase.
1.
The “rate stabilization plan” put forth by the Public Service
Commission makes a bad situation worse. They are proposing to allow
consumers to defer some of the rate increase, but to make them pay it
later with interest. What is most shocking is that they are directing
BGE to automatically enroll everyone in this credit card-like scheme
except those who choose to opt out of it ahead of time.
2.
We should simply phase out the rate caps slowly. Twenty percent per
year with no future payback would be a good plan. BGE is complaining
that they were forced to charge “below-market” rates for the past
several years, but below what market? They’ve been making very strong
profits on residential electricity sales. They shouldn’t be charging
higher rates just because other utilities that are more dependent on
natural gas have been charging higher rates. If their margins need to
be slimmer over the next few years as their wholesale contracts turn
over, so be it. It will average out very nicely for them.
3.
Merger savings should be passed on to ratepayers. The sale of
Constellation Energy to Florida Power is expected to produce cost
savings of $250 million. Constellation is an attractive target for a
buyout because captive ratepayers have been paying for valuable assets
for years. Now Constellation is selling off those assets and pocketing
the profits. The PSC should not approve the merger unless some of the
merger savings are given back to ratepayers. This could smooth out rate
increases for a very long time.
4.
Re-regulate. This is an inherently uncompetitive industry. Florida
Power didn’t come to Maryland to compete with the local utility. They
are buying the local utility. They are not interested in competition.
They are interested in market power. There is no reason we cannot give
the PSC stronger authority and guidelines over rate cases like they had
before.
