Testimony of
Founder and President
African American Environmentalist Association
On the
[SB 1]
And
June 20, 2006
Governor Ehrlich and Lt. Governor Steele, my name is
Norris McDonald and I am the founder and president of the African American
Environmentalist Association (AAEA).
AAEA, founded in 1985, is an organization dedicated to protecting the
environment, enhancing human, animal and plant ecologies and promoting the
efficient use of natural resources. AAEA includes an African American point of view in
environmental policy decision-making and resolves environmental racism and
injustice issues through the application of practical environmental solutions. AAEA opposes SB 1 and recommends
that you veto the emergency legislation.
We believe the same politics that produced the flawed utility
deregulation plan in 1999 that put us in this dramatic rate hike situation by
freezing rates will pollute the environment for maintaining reliable utility
service in Maryland. We prefer Governor
Ehrlich’s plan that was approved by the Maryland Public Service Commission
(PSC).
Governor Ehrlich recommended a practical plan to address
utility rates during the regular legislative session. The legislature rejected the plan and could not formulate or pass
an alternative plan. When the PSC
approved Governor Ehrlich’s graduated rate hike plan, his opponent for the
governor’s office, Baltimore Mayor Martin O’Malley, sued and a judge sent all parties back to the negotiating table Governor Ehrlich called for a special session of the Maryland
legislature in an attempt to formulate a reasonable compromise that would
please all stakeholders, but instead political one-upmanship, a power grab and
another seriously flawed piece of legislation passed that puts ratepayers at
risk.
We oppose SB 1
because:
1.
Firing the PSC was a
regulatory coup d’etat that was unnecessary and establishes a bad precedent.
2.
It could hurt air
pollution control investment decisions.
3.
It threatens the
Constellation and Florida Power merger.
4.
It could run
Constellation out of the state and leave us with a weaker electricity provider.
5.
It will cost ratepayers
$109 million in interest charges
6.
It is political theater
to upstage the Governor’s PSC-approved plan and is a political tool to put a
Democrat back in the Governor’s Office.
7.
Does not address
stimulating real competition for electricity service.
8.
It serves as another
warning to businesses to stay away from Maryland.
9.
It could hurt our
growing economy
10.
It could hurt investment
decisions related to new emission-free electricity generating plants.
11.
The plan does not do
enough to help consumers?
12.
Constellation should
not have to contribute money to consumers to help reduce increasing electricity
costs. Deregulation should provide
reliable electricity at a reasonable price.
13.
This plan is woefully
inadequate in providing stability to electric rates in the future. Raiding the PSC sends the wrong signal to
Wall Street, Florida Power and Light and other prospective corporate partners.
14.
A rate mitigation plan
should be optional in terms of providing a one-time payment or graduated
payments. A mandatory program hurts all
stakeholders.
15.
Consumers opting out of
a rate mitigation plan should not be required to pay any fees.
Baltimore Gas and Electric (BG&E), a subsidiary of
Constellation Energy Group, is increasing electricity prices by 72% for its 1.2
million residential customers because rate caps instituted as part of
Maryland’s deregulation of the electricity industry in 1999 expire July 1,
2006.
The Assembly plan passed during the special session as an
emergency bill on June 15, 2006 caps the rate increase at 15 percent for 11
months, gives consumers the option of another undeveloped and undefined
deferral after that and moves to the full 72 percent market rate increase on
Jan. 1, 2008. The measure also fires the
members of the state PSC and replaces them with a group chosen by the governor
from lists of names provided by the legislature.
Under the new rate plan, BG&E’s 1.2 million ratepayers will be charged $2.19 per month starting in January 2007, which would pay the interest on loans BGE would have to take out to cover the costs of selling electricity for less than its cost. Constellation Energy Group would give back certain fees it collects, so customers will not pay extra to BGE beyond the higher cost of electricity. A customer with a yearly electric bill of $1,000 would save about $500 but would be required to pay back about half that total over 10 years.
Governor
Ehrlich's proposal capped rates, deferred the rate increase for 18 months and
allowed consumers to repay it over three years. The PSC approved the plan on a
4-1 vote. Under the Ehrlich plan,
customers who chose to enroll in the deferral program would see their rates
rise 19.4 percent in July 2006, followed by a 5 percent increase in January
2007, a 25 percent increase in June 2007 and a subsequent rise to market prices
in January 2008. Customers would be charged a monthly fee - $19 a month on
average - to repay the principal and interest.
Regardless of the final plan,
BG&E will have to borrow money to offset its costs for new capped
rates. Of course, capping rates placed
us in the current rate increase predicament.
BGE would charge its 1.2 million ratepayers $109 million in interest
during a 10-year repayment period after it borrowed money to keep operating
while electricity rates are kept low. However, the legislature secured more
than $386 million in givebacks from BG&E that are expected to cover all of
the interest and much of the principal.
Although Governor Ehrlich’s plan included interest charges of $132
million spread over 10 years, it also included $600 million in givebacks from
the company, but all were contingent on the success of the merger between
Constellation Energy and Florida Power and Light.
The $386 million in the current plan
is not contingent on the merger, and the measure requires the new PSC to apply
any savings from the merger to reducing customer bills. BG&E also saves about $220 million in
givebacks.
In conclusion, Maryland could end up like California,
with a plan that ultimately leads to blackouts, utility bankruptcies and much
higher utility rates. We need real deregulation
in Maryland and it appears that the market is still being negatively
manipulated by political considerations instead of an effective plan for
utilities to provide reliable electricity services at reasonable prices.