Update on Constellation Settlement

by: Isaac Smith

Fri Apr 04, 2008 at 07:00 PM EDT

Last week's settlement between the state and Constellation may be hitting the skids, thanks to the always dramatic state Senate:

Gov. Martin O'Malley criticized the Senate this morning for voting to regulate future power plants, saying it was a "mistake" that could endanger a $2 billion settlement with Constellation Energy Group.

[...]

Last night, while considering a bill to ratify the settlement with Constellation, senators voted 27-18 in favor of an amendment that would require all new power plants built in Maryland to first offer their electricity for sale in the state and be regulated by the Public Service Commission.

That move sparked immediate outcry by the O'Malley administration that it could kill a pending deal finally putting to rest the state's prolonged legal battle with Constellation, which is BGE's parent company.

Coinciding with the Constellation settlement was a report from the Public Service Commission clearing Constellation of any wrongdoing in the 2005 auction of electricity that led to the infamous 72% rate increase for BGE customers. However, Jay Hancock observes that that's not the end of the story:

At first glance, however, there is one disturbing item: After initial bids flunked a test to ensure prices weren't too high above wholesale costs, the PSC and its consultant raised the threshold and allowed power companies to bid again.

The high-price protection was called the "Price Anomaly Threshold." According to Kaye Scholer [the law firm that conducted the study for the PSC], it was supposed "to protect against systemic problems that produce above-market results in the aggregate in order to prevent residential ratepayers from being charged more than a competitive market price for electricity supply." The PAT was based on various components of wholesale electricity prices. It was supposed to shield against the possibility that, for example, a scarcity of bidders could keep the auction from being competitive and could lead to companies winning BGE business at prices substantially above market.

BGE's auction for 2006, when the 72 percent increase kicked in, "saw a sharp decrease in the number of bidders," Kaye Scholer said. In the first round of bidding for the 2006 supply, every single bid exceeded the price anomaly threshold. So what did the PSC and its consultant do? They raised the threshold. The consultant "determined that it needed to modify the PAT," the report says, "to reflect more current market conditions."

Voila: In the next round of bidding, "all of the average bid prices came in below PAT," the report says. "Nothwithstanding issues with the PAT, both Boston Pacific [PSC's consultant] and the OPC's [Office of People's Counsel] consultant, Jonathan Wallach, certified the bidding process as competitive, although not as robust as in prior years."

Despite this, Kaye Scholer found that there was no reason to believe that the resulting BGE rates weren't "just and reasonable" and that regulators or BGE customers had any recourse.

In other words, the PSC under Ken Schisler fiddled with the protections against price-gouging until it got a result it (and BGE) liked. That's passing strange. Even stranger is why the current PSC (and Kae Scholer) concluded that there was no wrongdoing with the 2005 auction.

Assorted Links

by: Isaac Smith

Fri Jan 18, 2008 at 12:04 PM EST

• The latest finding in the Baltimore Sun poll: School superintendent Nancy Grasmick gets a C+ rating from voters, with a plurality (44%) in favor of replacing her with someone new.
• Despite concerns that the tight budget situation would prevent it, Gov. O'Malley will indeed provide funding for replacing touch-screen voting machines with paper ballots. In addition, the state Board of Elections is getting a grant from the Pew Center on the States to monitor the integrity of our voting system.
• Gov. O'Malley may be allocating $100 million for the Purple Line, but David Lublin isn't impressed.
• Dan Rodricks argues for a higher alcohol tax, which may well happen.
  
• Jay Hancock: The Public Service Commission's case against Constellation Energy is strong, but won't be effective.

O'Malley: Populist in Maryland, DLC Hack Nationwide

by: Isaac Smith

Mon Aug 13, 2007 at 06:00 PM EDT

Today's Post article on the new tough-on-big-business Public Service Commission under Gov. Martin O'Malley is a good read; despite the failure of the PSC to substantially mitigate the huge rate hike for Baltimore Gas & Electric customers, they've been aggressive in holding utility companies to account and in trying to lower overall energy bills for consumers through energy efficiency. Gov. O'Malley has gone so far as to call on the PSC to investigate the relationship between BGE and its parent company, Constellation Energy, and "determine whether customers should receive rebates and whether Constellation should be broken up."

All of which is fine -- it's good policy, not to mention good politics. Few people, after all, are going to come to Verizon or BGE's defense. What's peculiar about these populist impulses from O'Malley (think also of the living wage bill) is that, when on the national stage, he seems to go out of his way to shun any association with the progressive base of the Democratic Party. He has aligned himself with arguably the least progressive of the major presidential candidates, Hillary Clinton, and co-authored a now-infamous op-ed with the Democratic Leadership Council's Harold Ford Jr., in which they sang the usual DLC anthem of bashing partisanship and praising centrism.

PSC to Verizon: Can You Hear Me Now?

by: Isaac Smith

Thu Aug 09, 2007 at 04:32 PM EDT

Like a clown in a dunk tank, Verizon officials were pelted with questions by the Public Service Commission about accusations of severe delays in telephone repairs, some lasting as long as five days: 

The three commissioners at yesterday's hearing in Baltimore did not hide their frustration with Verizon representatives, challenging the company's assessment of what constitutes an acceptable delay in service and its efforts to keep details of problems from public view.

Commissioners said they fear the delays could leave customers who don't also have cellphone service with no way to call 911 in an emergency and expressed particular concern for those with medical conditions.

"For a person who doesn't have phone service for five days, an elderly person, that's the kind of thing we need to be concerned about," Chairman Steven B. Larsen told a Verizon attorney and director of customer operations. "Not having service is a public safety concern."

The one interesting thing about this article is that Verizon was trying to keep its data on service problems private, on the grounds that competitors (i.e., Comcast) aren't regulated by the PSC, even though, like Verizon, they offer phone service. This is actually a serious issue: traditionally, cable companies have been regulated far less than telephone companies, whose services were regarded as more essential to the public good. But now that both cable and phone companies are offering the same services, we have these regulatory dilemmas springing up. One of these dilemmas is net neutrality: the telcom giants have been arguing that, when it comes to the Internet, they should be treated not like telephone companies, which has a long history of common-carrier provisions, but like the cable companies, which can include or exclude almost anything it wants -- including, say, websites or services (like Vonage) it doesn't care for.

Back to the original topic: if you have any Verizon horror stories to tell, please leave them in the comments section.

BGE Rates Are Going Up

by: Isaac Smith

Thu May 24, 2007 at 04:44 PM EDT

I'm probably not the only one who hoped the Public Service Commission would keep the 50% rate hike for Baltimore Gas & Electric customers from going through, or at least mitigate it to some extent. As it turns out, the PSC did mitigate it, kinda sorta: you can either get your 50% increase in June or you can phase it in, interest-free, until January 2008. I'd say the fix was in going back to last year, if not 1999, when the electric utilities were deregulated. As Dan Rodricks notes, BGE didn't break any rules in raising its rates by 72% last year, the cozy relationship between former PSC Chair and Ehrlich appointee Kenny Schisler and BGE notwithstanding. Ultimately, the blame lies with the General Assembly for deregulating and then not realizing that competition, the only thing that makes deregulation work, wasn't materializing. MoCo Politics lays out the sordid story in more detail.

Another thing to consider is that it isn't the fact that rates are going up that's bad -- it would encourage more energy efficiency and conservation in some cases, or in the case of coal-fired power plants, make renewable energy more feasible -- it's the sharpness of the increase, which gives people, especially the poor, little time to adjust. As with gas prices, the key is some measure of stability, while at the same time sending the signal that the days of cheap gas and cheap coal are no more. A well-implemented tax on carbon dioxide could accomplish this, with the added benefit (from the point of view of equity) of the revenues being used to, say, reduce payroll taxes.

Thursday News Round-up

by: Isaac Smith

Thu Apr 19, 2007 at 12:57 PM EDT

• The Board of Public Works has finalized the purchase of the vast majority of the land near the Blackwater National Wildlife Refuge on the Eastern Shore, thus ending a standoff between developers and environmentalists. The Chesapeake Bay Foundation says of the purchase in a press release:

  "This is a major victory for the Chesapeake Bay, the Blackwater National Refuge, and agriculture in Maryland," said CBF President Will Baker. "This case reinforces the need for Maryland and local governments to protect the environment, follow local growth plans, listen to the citizens, and consider the widespread and long-term impacts that sprawling development can have on our natural resources."

• The Chesapeake Bay is still in terrible shape, according to two new studies. It's not clear yet whether Bob Ehrlich's "flush tax" is having much, if any, effect. And more ambitious measures, like the Green Fund bill proposed this year, still have to overcome budgetary obstacles.
• The two miners trapped in a coal pit in Western Maryland still haven't been found. Meanwhile, the Sun describes the safety record of the mine company in question, Tri-Star Mining, Inc., thus:

  Federal records show eight violations and $597 in penalties since April 2004 at the strip mine in Garrett County, including one for not having adequate safety equipment and brakes on trucks. The mine has also been the site of four minor accidents since 2005, including a worker who missed work after hurting his head during the loading of a truck, records show.

  I hope this doesn't turn into another Sago.

• As the Public Service Commission continues its inquiry into Baltimore Gas & Electric's 50% rate increase, folks are getting angry:

  The crowd of about 30 assembled at Baltimore's War Memorial Building... Several people clad in T-shirts reading, "O'Malley's PSC, bought and paid for by Constellation," said that state officials are doing nothing to stop the utility from profiting on the backs of the poor.

  "They're already rich; they just want to get richer," said Renee Washington. "We're already poor; we ain't got nowhere to go but being homeless."

  The crowd erupted in mocking laughter when Mark Case, the head of regulatory services for BGE, said the company does everything it can to keep its prices low.

• One bit of good news: The Prince George's County hospital system will stay open for at least 15 more months, until the County Council and the state figure out how to keep it financially viable.

BGE on the Hot Seat

by: Isaac Smith

Wed Apr 18, 2007 at 04:39 PM EDT

Instead of focusing only on the specific details of that "rate stabilization" plan, commission members took a wider view. They asked what is causing power costs to rise, who is benefiting from the increases, and whether it is worth revisiting the regulatory structure of the industry to try to keep prices down.

The PSC - three of the five members joined the regulatory panel this year - spent the better part of a day-long hearing grilling Mark Case, BGE's vice president of business performance, strategy and regulatory services, about the company's plan and the circumstances surrounding it.

The stakes are high for this hearing. Soon after he was designated for the office by Gov. Martin O'Malley, PSC Chairman Steven B. Larsen vowed to undertake an examination of the default "standard offer" service that most customers use and how it is priced.

The commission also is beginning to gather information for a reconsideration - mandated by the General Assembly this year - of the state's deregulation plan, and this case could set the tone for that process.

It's too early to tell whether Larsen intends to re-regulate electric utilities whole hog, or merely implement smaller adjustments to the current regulatory environment. In any case, he should try, if nothing else, to prevent severe spikes in the cost of electricity. A 15% rate increase is a lot easier to bear than 72% or even 50%; and that, I think underlies why Marylanders were up in arms over last year's proposed rate hike. Small increases over time allow one, at least, to take steps toward efficiency and conservation. Large, sudden increases, on the other hand, throw everything out of whack, especially for people with not much income to spare.

There's a New PSC in Town

by: Isaac Smith

Thu Mar 08, 2007 at 02:35 PM EST

The PSC, in a statement, said the hearings would consider whether the increases are based on "verifiable, prudently incurred costs, plus a reasonable rate of return." The hearings also will consider whether a rate mitigation plan would be appropriate for BGE ratepayers.

Predictably, the Republican leadership in the General Assembly is crying foul. But, strangely enough, the managing director of Constellation Energy, which owns BGE, says he welcomes the new PSC. Does he know something we don't? Or does the prospect of professional regulators sound (comparatively) a lot better than yet another political drama?