Restructuring Today
January 13, 2006

BG&E rate freeze to end, PSC seeks market method

Maryland regulators may come up with a plan to ease the impact of sharply higher power rates when Baltimore Gas & Electric's rate freeze ends this summer.

          But they won't do it by distorting supply prices.

          The PSC decided to begin a probe of potential savings in T&D and other components of utility bills after Gov Robert Ehrlich asked regulators to blunt the rate shock likely this summer (RT, 1/9).

          Rates have been capped at BG&E since 1999.  Caps at Potomac Electric Power and Conectiv ended already with rate rises reflecting standard offer supply bought through RFPs.

          BG&E's far-below-market rates are to end July 1.

          Bids are coming in now -- when the market is high but falling.

          The PSC doesn't see any evidence that higher supply rates likely next year show a flaw in the way utilities buy SOS supply or anti-competitive behavior ( seNumber=9052).

          "Expected price increases are due to price inflation of the fuel commodities used to produce electricity," the PSC wrote.

          Rather than distort price signals in the competitive market, the PSC prefers to consider a transition plan that would reflect market prices.

          It's directing staff to propose a plan for "mitigating the effects of rate shock on the non-bypassable portion of customers' bills."

          Thus the PSC is looking for a way to cut distribution rates while allowing commodity prices to rise to market levels.

          "This is a pretty big deal," NEMA President Craig Goodman told RT.

          "After decades of capping commodity prices first, the state of Maryland has reversed this policy trend and may be setting a new, more market-based national agenda."

          A review of non-bypassable charges is "long overdue," he added. 

          The PSC staff is to weigh consequences of delaying BG&E's being paid for non-commodity charges including the possibility of "disinvestment" that could affect reliability of service.

          The staff is to file a proposal Jan 20 and stakeholder comments or new proposals are due Feb 10.

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