Lawmakers slay rate hike dragon

Friday, June 16, 2006

The bill that wound its way through the state legislature’s special session was the incumbents’ latest attempt at saving their skins. Otherwise 1 million Baltimore area utility customers would have suffered a 72 percent rate hike two months before primary election day.

The new relief measure, cooked up by the legislature’s Democratic majority, is primarily designed to quell a voter rebellion by softening the 72 percent rate hit to 15 percent, at least through November.

Let’s ignore the fact that the Democrats’ plan is essentially the same as every other so-called rate relief plan offered to date — it doesn’t reduce the energy rate hikes, it merely defers them until well after Election Day, after which ratepayers must make up the difference (plus interest).

And let’s ignore the fact that Baltimore Gas and Electric’s 1 million customers are being forced, by law, into the plan. You can’t opt out by paying the full 72 percent increase now. Instead, the legislature is making you take out a loan from BGE that you must repay later together with the loan’s finance charges. Imagine buying a TV set and learning that state law requires you to finance your purchase rather than pay cash up front.

And let’s ignore the fact that the Democrats’ plan to fire the Public Service Commission and put it under Democratic control, recklessly politicizes Maryland’s regulatory process. After all, what can you say about a state legislature that sacks regulators for not protecting the public from the legislature’s own deregulation law?

Instead, the biggest problem with the new rate relief plan is that it’s a pig in a poke. Not only is the 72 percent hit delayed until after Election Day, so is any certainty about how much ratepayers will really end up paying.

For example, the new Democratic controlled PSC is supposed to scour the utilities’ records to recover any improper energy purchase charges. But the utilities have already opened their books, which appear to be on the up-and-up.

Likewise, the new PSC is supposed to ferret out the unconscionable bonuses and golden parachutes going to utility top brass. Yet, records indicate those payments are well within, or below, industry standards. No ratepayer savings there.

Well how about those ‘‘stranded costs” that customers paid for supposedly devalued energy plants that actually gained value? Any rate relief there? Sorry, the utilities got those stranded costs in exchange for six years of customer rate caps. Abrogate that contract and you lose in court — even in Baltimore! Besides most of those costs were paid by commercial customers, not residential customers.

Finally, no one knows how much long-term damage the new plan inflicts on Maryland’s utilities. How will Wall Street view the legislative wrecking ball swinging wildly through the utilities’ business structure? Will Maryland politicians ruin the utilities’ credit ratings, kill Constellation’s pending merger or put the utilities in bankruptcy? And who will pay to clean up the mess?

Yet, none of that really matters because the new rate relief plan accomplishes the lawmaker’s chief objective — getting themselves safely re-elected by postponing the pain and damage until after November. Beyond then, who cares?

You see, the politicians understand us. They know our aversion to confronting complex issues and our preference for instant gratification. Given the chance, we’ll defer hardship and suffering every time. Heck, we’re a credit card society, mired in national and personal debt, so just give us the 15 percent rate cap today and we’ll worry about our true energy costs tomorrow.

The Democrats’ rate plan is modeled after Maryland’s response to the 1960s savings and loan crisis. Back then, a host of Maryland S&Ls went under and the legislature put a temporary Band-Aid on the problem because it was easier and less expensive than really fixing it. Of course, when the chickens came home to roost 20 years later, it cost state taxpayers hundreds of millions of dollars.

The new BGE rate plan’s consequences will come home to roost, too. But that’s the next legislature’s and the next governor’s problem. Between now and Election Day, the rate crisis is solved. Mission accomplished.

In fact, by Election Day the BGE rate hikes probably won’t even be an issue. After all, who cares about a train wreck that never happened? Do you remember the last public emergency that merited a special legislative session? Just 18 months ago, Maryland’s medical malpractice crisis raised the specter of uninsured doctors closing shop and babies being born without medical care.

The governor called a special session demanding tort reform but the legislature’s solution was a HMO tax instead. The medical malpractice train wreck was averted and ceased to be a political controversy. Name one candidate who mentions medical malpractice in his or her 2006 stump speech.

So all those candidates out there claiming credit for saving the BGE ratepayers are probably wasting their breath. A month from now it will be a distant memory as we move onto the next crisis and the next makeshift solution.

Blair Lee is CEO of the Lee Development Group in Silver Spring and a regular commentator for WBAL radio. His column appears Fridays in The Gazette. His e-mail address is blair@leedg.com.