Electricity Proposal to Bring Maryland Higher Bills, Dirtier Air

January 15, 2003

Media Contact(s):

Wendy Koch, 202-507-4753, Senior Director, Marketing & Communications

BALTIMORE, MD — New plans for electricity service in Maryland will bring higher bills, less stable rates, and more pollution, according to a group of eleven environmental organizations and advocates of clean energy. In a letter released today to the Maryland Public Service Commission, the groups urged the commission not to approve a "settlement agreement" recently signed by the state's major electric companies, large power users, the commission staff, and other state officials. If approved, the agreement would govern the terms of service for over 95% of Maryland's electricity rate-payers -- those who have not chosen to switch electricity suppliers and continue to be supplied from their traditional electric companies under "Standard Offer Service."

In their letter, the groups recommend that the commission not accept the settlement in its present form, but rather act to ensure that Standard Offer Service includes specified amounts of electricity from clean renewable sources under long-term agreements and that previous stipulations to restore energy efficiency programs for electric customers be carried out and expanded.

"This settlement agreement ignores the role energy efficiency and renewable energy can and should play in ensuring reliable and affordable electric service for Maryland consumers," said Gigi Kellett, public interest advocate at the Maryland Public Interest Research Group. "Our air quality problems remain severe, and power plants are major contributors. Yet this agreement offers no assurances that either energy efficiency or clean renewable energy will be more accessible in Maryland -- measures which can help reduce pollution and save consumers money."

The Settlement Agreement contains binding ground rules for the provision of "Standard Offer Service" to homeowners and other retail customers in Maryland during the four-year period that follows the expiration of the rate-freeze period of each of Maryland's four investor-owned electric distribution companies (beginning July 1, 2004 for Pepco and Connectiv customers). In brief, the Settlement Agreement requires that -

  • The four incumbent electric companies will procure electric power for customers who have not switched electricity suppliers;
  • This power procurement is to be undertaken in increments of short duration (at least 50% in one-year contracts) and at seasonally differentiated prices;
  • No contracts are to extend beyond the four-year period, unless subsequently allowed or directed by the Commission.

In addition to the price fluctuations that will result from short-term contracting, retail customer rates are to be increased by a so-called Administrative Charge of 4 mills for residential customers and 5.5 mills for small commercial customers, of which not less than 1.5 mills and 2 mills, respectively will be retained by the electric companies explicitly for the benefit of their stockholders. The agreement is silent on energy efficiency programs for electric customers -- programs that were largely dismantled by the electric companies with the approval of the Public Service Commission.

"Many of the rosy predictions made four years ago about deregulated electricity markets came crashing down with Enron," said Bill Prindle, Deputy Director of the American Council for an Energy-Efficient Economy. "This agreement -- with its reliance on short-term contracting -- will bring Maryland consumers face-to-face with the same price volatility that has shaken the electric power industry all the way to Wall Street. Energy efficiency is a cheap insurance policy against these risks, but the settlement is silent on efficiency and dumps these risks on the consumer. It's incomprehensible that our Public Service Commission -- charged with looking out for the public interest -- would agree to it."

"Recent polls have shown that residents throughout Maryland are concerned about air pollution and global warming, and support renewable energy and energy efficiency," said Mike Tidwell, Director of the Chesapeake Climate Action Network. "If the Public Service Commission cannot apply the law more effectively to restore energy conservation programs and reduce our reliance on dirty fossil fuels, then we need either new laws, new commissioners, or both."

"Energy efficiency and renewable energy should be part of the portfolio of electricity resources going forward," Kellett concluded. "Both can serve as hedges against the price swings and demand spikes that are inevitable in the wholesale power market. Their environmental attributes come as a bonus for anyone who takes a breath in Maryland."

The following organizations signed the letter to PSC Chair Catherine I. Riley: Alliance to Save Energy, American Council for an Energy-Efficient Economy, Anacostia Watershed Society, Chesapeake Bay Foundation, Chesapeake Climate Action Network, Clean Water Action, The Cleanup Coalition, Maryland Conservation Council, Maryland Public Interest Research Group, Natural Resources Defense Council, and Northeast Energy Efficiency Partnerships, Inc.

The full text of the letter is available in pdf format at /tstimony/marylandsos.pdf.