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June 7, 2006

Electrocuting The Elephant

Kevin E. Dayhoff

In response to a judge's decision on May 30 to overturn Gov. Robert L. Ehrlich Jr.'s "April Plan," to phase-in increases in electric rates, the Maryland Public Service Commission (PSC) decided last Friday to go back to the original "March Plan" to phase in Baltimore Gas & Electric's deregulated electric rates due to go into effect July 1.

Have you been successful in keeping up with all this? Read on - it gets worse.

Last week, State Senate President Thomas V. (Mike) Miller (D., Calvert/P.G.) and House of Delegates Speaker Michael E. Busch (D., Anne Arundel) agitated for a special session of the Maryland General Assembly so they could fire the Public Service Commission.

This begs the question: what will that accomplish? Will that lessen the world energy crisis and lower electric rates, which have escalated throughout the rest of the nation?

Hey, they don't call our state the "Peoples Republic of Maryland" for nothing. Nevertheless, the populism and pandering quivered in the Democratic Party controlled General Assembly cannot overrule world markets and basic economics.

As of last Monday, Governor Ehrlich seems to calling their bluff. He sent a letter to Senator Miller and Speaker Busch seeking "a special session of the General Assembly to undo the damages done to Baltimore Gas & Electric customers by Baltimore City's lawsuit against the Public Service Commission.

"The city's lawsuit led to an electric rate stabilization plan that is less consumer-friendly than the previously agreed-upon plan," the governor wrote.

To recap the story, as a result of the 1999 electric deregulation legislation, the cap on Baltimore Gas & Electric's (BGE) rates will be removed July 1.

July 1 is just weeks away at this point and nobody knows "who's on first or what's on second."

In accordance with the rules promulgated by that 1999 law, the PSC adopted the procedure by which the rates were set to escalate. BG&E, and its parent company, Constellation Energy, announced a 72 percent increase months ago. The PSC did not approve of the new rate, as it had no power to do so under that 1999 law.

The current PSC followed the regulations that were passed by the previous members of the commission, all the members of which were appointed by the Parris Glendening administration.

Much of the increase is a result of a worldwide energy crisis; increase costs of oil and natural gas, Katrina - and simply the fact that the rates have been frozen at the 1993 rates - minus 6.5 percent - since 1999.

Under the 1999 law, electric competition never came to fruition because no other electric supplier could compete against rates set so artificially low.

In May, Baltimore City officials sued in an attempt to get a better deal than the governor's plan for the Baltimore metropolitan region served by BGE. On May 30, Baltimore Circuit Judge Albert J. Matricciani, Jr., ruled that the PSC must hold another public hearing and come up with a better plan.

In the end, no one has a better plan to lessen the impact on Maryland families from rising electric rates. Rates have escalated throughout Maryland and the mid-Atlantic region; and yet Baltimore is the only entity politicizing the increase. Why is that?

The PSC said that it cannot constitutionally require a utility to sell electricity at a rate lower than its cost.

Only in Maryland would such a question need to be answered. Oh, and California. Remember, several years ago, the brainiacs on the left coast bankrupted their public utilities by requiring them to sell electricity below cost. It could happen here, too.

Until the Baltimore City administration decided to play politics, the plan agreed upon between BGE and Governor Ehrlich in April was to phase-in the increased costs over the next year and a half.

The plan was to cap the increase July 1 at 19.4 percent. Under the increased financial capability of a combined Florida Light and Power and Constellation Energy, the resulting merged company would take care of the carrying costs incurred by the difference in revenues and costs. Consumers, who opted to take advantage of the phased-in rates, would pay a $19 monthly fee to offset the administrative costs.

This plan was negotiated by the governor a few weeks after the Maryland General Assembly spent 90 days without a solution.

The plan adopted last Friday by the PSC, as a result of the Baltimore City administration's actions; is the plan it adopted last March. The July 1 rate increase would be 21 percent. The rest of the difference between the cost of electricity and the rate charged by the utility company would be made up by March of next year. Consumers, who participate in this plan, would be charged five percent interest.

Of course, the intelligent question is how have Maryland's families benefited?

So, what's really going on here?

Certainly Maryland's Democratic Party leadership is not really this economically challenged that they don't understand market forces or the results of the law they passed in 1999?

Suggesting that the members of the PSC ought to be sacked is quite silly, as they cannot change the laws and regulations approved by the Maryland General Assembly, under which they have to operate. Unless, perhaps it is being suggested that appointed Democrat members would ignore Maryland law or the laws of economics and arrive at another solution?

What this is really all about is killing "Topsy."

In 1902, there was an elephant at a park on Coney Island that was determined to be vicious and a dangerous. The elephant had been abused for years and had subsequently become violent.

Topsy was slated to be euthanized. There were discussions of attempting to hang the animal. Attempts to poison it failed.

It was none other than Thomas Edison who came up with the idea of electrocution. In the early years of electricity, a debate had raged between the Edisonites and Westinghouse as to whether direct current or alternating current was the best way to distribute the power.

Mr. Edison supported direct current because he felt that alternating current was dangerous. In the end, Topsy was killed by electrocution and Mr. Edison filmed the entire gruesome event on January 4, 1903. He then went about the country showing the film of the execution in a failed campaign to discredit alternating current.

Democrats want to avoid being shocked by this unfortunate turn of events in the BGE case - and politically take advantage of the escalating market cost of electricity, which will suddenly be forced upon Maryland's working families by the very legislation that they championed in 1999.

Attempts to otherwise "hang" Governor Ehrlich or "poison" him have failed.

Rather than work together for the best possible bi-partisan plan for Marylanders, they would rather "electrocute" the elephant in the statehouse and replace it with a donkey.

Kevin Dayhoff writes from Westminster. E-mail him at:

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