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Maryland Governor Proposes to Reregulate State Energy Market

Maryland Gov. Martin O’Malley last week introduced to the state Legislature a blueprint that would partially reregulate the state’s energy markets and reverse a deregulation law that has been widely thought a failure.

The decade-old policy was passed to lower consumer power prices through market competition, but Marylanders are paying 85% more for electricity than they were before deregulation. The deal also allowed generation plants in the states to be sold to other firms, putting Maryland in the precarious position of using 30% more power than it generates. The state Public Service Commission (PSC) has warned that unless state utilities find ways to generate more power, Maryland will face brownouts or blackouts starting in 2011.

“Deregulation has failed us,” O’Malley said in a statement last week. “Today, we announce that the days of blind faith in broken, deregulated markets are over in Maryland. We will reregulate Maryland’s electricity supply going forward whenever it is in the best interests of Maryland consumers and families. Rather than relying on the market forces that have failed to deliver for us, we’ll put those important decisions about securing our energy future into the hands of the Public Service Commission.”

The governor’s plan proposes to authorize the state to make decisions concerning construction of new power plants. He said the PSC would rule “in the interests of consumers”—not energy companies who have so far made such decisions “when it suits their own economic interests.” It will also give the PSC the authority to determine when new generation is needed, “rather than relying on broken energy markets to make the determination.”

Added to this, the state would “direct the establishment of new generation plants when it is determined by the PSC that an energy company is not developing a generating site due to private economic interests.” O’Malley said that despite the urgent need for new generation, “some energy companies are not building new plants, even when they have land on which to build. This legislation would grant the PSC the authority to direct the development of a plant on those sites when it is in the public interest to do so.”

Gov. O’Malley stressed the prohibitive cost and risk to taxpayers of returning to full, retrospective reregulation. “The immediate cost of buying back the energy plants from private utilities would be passed on to consumers, thus having an increasing effect on utility bills,” he said. In addition, $1.5 billion of the $2 billion settlement won by the state from Constellation Energy would be lost, since returning Constellation’s nuclear power plants would return to ratepayers the cost of decommissioning them. Buying back these plants could also jeopardize the development of Calvert Cliffs 3 and the thousands of jobs it will create.”

According to the Baltimore Sun, industry officials have warned that “if the state turns its back on deregulation, consumer choice would be squashed and energy companies would avoid doing business in the state.”

A strident opponent of reregulation, Constellation Energy Chairman, President, and CEO Mayo A. Shattuck III said in a statement last week that the governor’s proposed laws are “unworkable attempts to reach into the past, change the regulatory assumptions surrounding existing ownership of power plants and would lead to further destabilization of the Maryland energy markets.”

“Based on what we heard today, we expect to be engaged in a new and different form of dialogue about the state’s energy future, a dialogue we welcome and one that we hope can lead to a constructive outcome for all stakeholders,” he added.

Sources: Office of the Governor of Maryland, Maryland PSC, Constellation Energy, Baltimore Sun

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