Committee drains energy from re-regulation push
Legislators uneasy with O'Malley plan after utility deregulation failure
Members of the House Economic Matters Committee said this week that they aren't yet convinced that a proposal to re-regulate the state's electricity providers is the best way to lower energy bills for Maryland ratepayers.
Winning delegates over could prove to be the highest legislative hurdle for Gov. Martin O'Malley to overcome in 2010 when, he says, re-regulation will be a priority.
The House committee will take a fresh look at utility markets when it meets Tuesday in Annapolis, but is not committed to re-regulation, Chairman Dereck E. Davis said.
"I don't want to characterize it as re-regulation, because that might not be the case," said Davis (D-Dist. 25) of Upper Marlboro, who promised a "comprehensive review of where we are."
The meeting, with the Public Service Commission, electricity providers and consumer interests, will be the first time the committee addresses the issue of Maryland's electricity rates since April, when, in the final days of the 2009 legislative session, the panel rejected an O'Malley re-regulation plan.
Complicating matters is a proposed merger between Constellation Energy Group, the state's largest utility, and Electricité de France.
On Thursday, the state's Public Service Commission called for a review of the proposed sale of Constellation's nuclear assets to EDF and what it could mean for Maryland ratepayers.
O'Malley (D) is banking on re-regulation — and its promise of long-term rate relief — to play well with voters, though he has repeatedly stressed that ratepayers will not see lower bills immediately.
Pushing re-regulation through the General Assembly would allow O'Malley to claim that he has acted to rein in runaway rates, something he hammered Gov. Robert L. Ehrlich Jr. (R) on during the 2006 campaign.
Earlier this year, the Senate passed, 27-19, a re-regulation bill based on a midsession proposal by O'Malley. The bill, sponsored by Senate Finance Committee Chairman Thomas McLain Middleton, was the product of nearly two months of work by the committee and survived a long floor debate that defied party lines.
The House Economic Matters Committee rejected the bill on a 21-2 vote.
Delegates said they were uneasy about putting the bill on the fast track, citing a 1999 vote to deregulate the state's utilities that some felt was done in haste and led to the failure of deregulation to bring rate relief.
"The governor's going to have to use political capital to get [people] where he is with this bill," said Del. Brian J. Feldman (D-Dist. 15) of Potomac, a member of the House Economic Matters Committee.
But the election year will raise the stakes on lawmakers as well.
"I think a lot of voters would like to see some action, some movement on this issue," Feldman said. "So I think that puts some pressure on some members of the legislature."
It was a good move by O'Malley to come out six months before the next session, "laying a marker that this is going to be a huge issue in the fourth year of a four-year term," Feldman said.
O'Malley made a campaign promise to lower utility rates, noted Johanna Neumann, state director of consumer watchdog group Maryland PIRG, who praised the governor's efforts. "I think he's exploring all avenues to make that happen," she said.
Others were critical of O'Malley's approach.
"I'm sorry he made a campaign promise, but this is no way to keep energy rates low," Del. Warren E. Miller said of the governor's plan, which would allow the state to order a utility company to build new power plants, would eliminate the option for small businesses and residential customers to contract with alternative energy providers and would lower a surcharge paid for transmitting power across long distances.
"Re-regulation is not the gold standard of things that are going to help ratepayers," said Miller (R-Dist. 9A) of Woodbine. The General Assembly has been moving away from actions that could attract power plant builders to Maryland and lead to lower electricity bills, he said.
Miller questioned the state's scrutiny of the Constellation-EDF merger before Thursday's PSC order.
"I don't know what it gets us collectively to try to block a deal from going through," he said on Wednesday.
Middleton (D-Dist. 28) of Waldorf downplayed the political gamble the governor is taking, saying that O'Malley already has fulfilled his 2006 campaign promise.
"I don't see how it's a political liability," Middleton said. "The governor has said he's going to do all he can to bring rate relief to BGE customers. I think he can already say he's done that with the master settlement with Constellation Energy."
The settlement, announced in March 2008, included $187 million in rate relief for customers by putting responsibility for the future decommissioning of its Calvert Cliffs nuclear power facilities squarely on the shoulders of Constellation. Ratepayers would have incurred decommissioning costs of $33 million annually from 2016 through 2036.
The Senate Finance Committee has done its work on O'Malley's proposal and has no plans to revisit re-regulation during the interim, Middleton said.
"A lot of this is going to play out at the PSC over the next couple of years, if not the next couple of decades," said Maryland PIRG's Neumann.
In the meantime, delegates have nothing to lose by taking a closer look at the utilities market, Davis said.
"I don't think anybody's taking a gamble by being willing to stay out front and work hard," he said.