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Maryland Restructuring
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Last Updated: September 2008 05/07: Senate Bill 400 was passed by the Maryland General Assembly. The bill requested that the Public Service Commission “reevaluate the general regulatory structure, agreements, orders, and other prior actions of the Public Service Commission under the 1999 Maryland Customer Choice and Competition Act. The newly passed bill also requested the “determination of and allowances for stranded costs” and to “conduct hearings” as part of its evaluation of the 1999 Settlement. 11/06: “On November 8, 2006, the Public Service Commission (“Commission”) issued Order No. 81102, establishing, inter alia, a
procurement program for Standard Offer Service (“SOS”) for Residential and Type
I commercial customers. The program applied
to the investor-owned electric public service companies for the provision of
SOS which was scheduled to begin on June 1, 2007. In Order
No. 81102, the Commission also stated that bid week schedules for SOS
procurement would include a public hearing for the purpose of receiving a
briefing from the Commission’s SOS consultant and the Commission’s Technical
Staff (“Staff”) concerning the conduct and results of the SOS solicitation.” 10/06: Constellation
Energy and FPL Group terminated plans to merge. 09/06: Maryland Court of Appeals overturned legislature’s efforts to
depose the Public Service Commission (PSC). However, the court stated that the legislature was in it
rights to remake the PSC and did have authority over appointing members. 07/06: The
Maryland General Assembly planned to limit the 72-percent rise in BGE
electricity prices by placing a cap on price increases of 15-percent and to
defer the BGE from collecting the difference for 11 months. 07/06: The rate
freeze in the BGE service territory expired. The market price obtained through
the Standard Offer Service competitive auction process in the BGE service
territory was expected to increase 72 percent. 07/06: The
Maryland General Assembly planned to limit the 72-percent rise in BGE
electricity prices by placing a cap on price increases of 15 and to defer the
BGE from collecting the difference for 11 months. PEPCO and Delmarva customers
were offered a similar arrangement with the opportunity to pay back deferred
expenses over 18 months. 06/06 Senate Bill-1 and House Bill-1 vetoes were overwritten. 06/06: Senate Bill-1 was vetoed by
Governor Ehrlich. 06/06: Senate Bill
1 (SB1) and House Bill 1 (HB 1) were introduced in the Maryland General Assembly. SB1 and HB 1 were intended to
implement the following goals: “Limiting the increase in
electricity rates in a specified service territory for a specified period;
requiring specified electric companies to obtain electricity supply for
extended standard offer service to specified customers in specified manners;
authorizing the Public Service Commission (PSC) to take specified actions
concerning competitive auctions and implementation of electricity rates;
altering the criteria for appointment to the PSC and the method of appointment
of the People's Counsel; etc.” SB 1 also
proposed eliminating the People’s Council. 06/06: Maryland Public Service
Commission instructed BG&E to implement Order
No. 80764. 06/06: Maryland
state government held a special session to deal with electricity price crisis.
Governor Ehrlich suggested following a rate stabilization plan with utilities
allowing “customers to limit the rate increase exposure to 15% this year, 25%
next year, and then market level in January 2008. Opting in to this plan
would allow customers to repay the deferred charges interest-free.” 05/06: Baltimore city Circuit Court issued an order “vacating, reversing,
and remanding Order No. 80764. 05/06: Maryland Office of the People’s Council restated its opinion released in March 2006: “The current process for procuring power, as approved by the previous Public Service Commission and agreed to by the utilities and the former People’s Counsel, requires the utilities to buy power using a particular mix of one, two, and three year contracts. This method is not optimal for customer pricing…In our complaint, we argue that the current method of procuring electricity must be changed to encourage: 1. competitive energy procurement solicitations for contracts covering
varying lengths of time; 05/06: Maryland Office of the
People’s Council recommended eliminating the interest payment. 04/06: Constellation Energy announced that: “its subsidiary, Baltimore Gas and Electric Company, has filed a comprehensive rate stabilization plan with the Maryland Public Service Commission (PSC) that would allow BGE's residential electric customers to reduce and defer the pending July 1 rate increase…The rate stabilization plan is optional; it provides the time for customers to plan for the inevitable impact of a global energy crisis." If approved by the PSC, the plan would allow BGE customers to select or "opt-in" to a rate stabilization program that would reduce the initial increase and spread out the remainder. Those who opt-in would see a rate increase of 19.4 percent July 1.” 04/06:
The Public Service Commission of Maryland released a Rate Stabilization Plan to
help Pepco and Delmarva Power and Light Company customers more gradually adjust
to upcoming electric bill increases. The standard offer service prices
resulting from this year’s procurement process would go into effect on June 1, 2006 for Pepco and Delmarva residential customers. Based on the competitive
bidding process, for Pepco residential customers, a typical bill would increase
by approximately 39%, or $468 annually at that time. For residential customers
of Delmarva, a typical electric bill on an annual basis would increase
approximately 35% or $464 annually. 04/06: Public Service Commission issued Order No. 80764 which
modified Order 80638 “to make it an opt-in plan, to treat interest as a
deferred asset, and to extend the plan to three and four years.” 03/06:
On March 6, 2006, the Commission issued Order No.
80638 (the “March 6 Order”), “which adopted a payment plan option for
Baltimore Gas and Electric Company (“BGE”) residential customers. The
plan adopted by the March 6 Order is an opt-out plan, includes interest charges
at five percent, and is two or three years in duration.” 03/06: Senate Bill 1102 (SB 1102)
was put forward and is a parallel piece of legislation to House Bill 1713 in the
Maryland Senate. SB 1102 was vetoed by Governor Ehrlich. 03/06: House Bill 1713 (HB 1713)
Emergency Bill intended to change PSC review requirements related to
electricity or gas acquisitions and mergers involving either a public service
company or a nonpublic service company. Essentially, requires PSC approval of
proposed merger between Constellation Energy Group and Florida-based FPL Group.
HB 1713 was
vetoed by the governor. 03/06: Senate Bill 1102 (SB 1102), prohibited “a specified
merger between FPL Group, Inc., and Constellation Energy Group, Inc., from
occurring and prohibited Baltimore Gas and Electric Company (BGE) from
increasing specified electricity rates until Constellation Energy returned a
specified amount of money in transition costs to BGE; requiring BGE to use
specified transition costs to reduce a specified increase in specified electricity
rates; etc.” SB 1102 effectively removed the
current members of the Maryland Public Service Commission. SB 1102 was vetoed by the governor. 03/06: Senate Bill 1050 (SB 1050) intended to “repeal the
authority for an electric company to earn a specified return in providing
standard offer service to residential and small commercial customers after the
Public Service Commission has made a specified finding that requires the
extension of the electric company's obligation to provide standard offer
service.” Standard Offer Service was viewed as a temporary measure which would
be used by fewer customers over time. SOS was meant to be automatically
provided to any user who did not designate an electricity supplier or a
consumer who opted to choose SOS. SOS was supposed to last only until July 1, 2003. During an intended four-year transitional phase, utilities were supposed to
provide SOS under frozen rates after an initial price reduction of 3 to 7.5
percent. The rate freeze was intended to come to an end on June 30, 2003; however, the rate freeze was extended until June 30, 2004, and then until July 2006 and
July 2008 under certain circumstances. 03/06: Senate Bill 1099 (SB 1099) intended to prohibit the
“specified merger between FPL Group, Inc., and Constellation Energy Group,
Inc., from occurring and prohibiting Baltimore Gas and Electric Company (BGE)
from increasing specified electricity rates until Constellation Energy returns
a specified amount of money in transition costs to BGE; requiring BGE to use
specified transition costs to reduce a specified increase in specified
electricity rates.” Measure was vetoed by Governor. 03/06: Maryland Office of the
People’s Council “petitioned the Maryland Public Service Commission…to
undertake an examination of the current procurement practices of the
electricity industry in Maryland, which were the result of deregulation and restructuring
of the electric industry by the General Assembly in 1999. OPC requested the
Commission to explore what the optimal structure of the procurement process
should be within the structure of retail competition in the market for
suppliers of electricity and safeguarding the consumers from radical and volatile
prices swings in the wholesale market.” 03/06: Senate Bill 1099 (SB 1099) was passed and required Constellation Energy to refund approximately $528 million dollars in stranded recovery costs as a condition of its proposed merger with FPL group. Governor Ehrlich vetoed this senate bill. 03/06: Governor
Robert L. Ehrlich Jr. offered $25 million to help defray the costs of higher
electricity to Maryland’s poor. 03/06: Senate Bill 1048 (SB 1048) was put forward and required that: “the Public Service Commission, when a specified rate cap or price freeze expires, to determine a specified impact on residential customer bills; requiring the Commission, if the expiration of a specified rate cap or price freeze occurred before a specified date, to determine a specified impact on residential customer bills; requiring the Commission to develop a specified price mitigation plan under specified circumstances; requiring a price mitigation plan to phase in a specified rate under specified circumstances; etc.” 03/06: Senate Bill 972 (SB 972) and House Bill 1736 (HB 1736)
were intended to reregulate electricity companies. The synopsis of HB 1736 and SB 972 read: “Returning electric
generation to the status of a utility service subject to regulation by the
Public Service Commission; requiring a public service company to charge just
and reasonable rates for its utility services; requiring a public service
company to file a specified tariff schedule of specified rates and charges with
the Commission; providing that a specified electric company or electricity
supplier may apply to the Commission to adjust specified rates and charges;
etc.” 02/06: House Bill 1334 (HB 1334) was enacted with the purpose of prohibiting standard offer service rates from increasing more than five percent for residential customers. 02/06: House Bill 1334 (HB 1334) was enacted and prohibits an electric company in
any year in which the electric company has an obligation to provide standard
offer service under a Public Service Commission order from increasing the rate
for electricity charged to residential customers by more than 5%; allowing an
electric company to recover the portion of the total rate that exceeds 5%
through a standard offer service transition charge over a 5-year period; etc. 02/06: Senate Bill 814 (SB 814) was enacted and “prohibits
an electric company in any year in which the electric company has an obligation
to provide standard offer service under a Public Service Commission order from
increasing the rate for electricity charged to residential customers by more
than 5%; allowing an electric company to recover the portion of the total rate
that exceeds 5% through a standard offer service transition charge over a
5-year period; etc.? Prohibiting an electric company in any year in which the
electric company has an obligation to provide standard offer service under a
Public Service Commission order from increasing the rate for electricity
charged to residential customers by more than 5%; allowing an electric company
to recover the portion of the total rate that exceeds 5% through a standard
offer service transition charge over a 5-year period; etc.” 12/05: Constellation
and FPL Group announced plans to merge. 02/05: House Bill 1525 (HB 1525)
was introduced in the Maryland House of Delegates. During the winter of 2005,
the market-based cost of electricity skyrocketed. In the wholesale electricity
auctions, the market-based cost of electricity for an average residential
customer was due to increase 72 percent in July 2006 in the BG&E service
territory. Increases of 35 percent and 39 percent were expected in services
territories covered by Delmarva and PEPCO, respectively. In response to a
pending 72 percent electricity price increase for residential customers of
BG&E, HB 1525 required the Public Service Commission (PSC) to
extend the obligation to provide standard offer service (SOS) to residential
and small commercial electric customers unless the PSC makes specified
findings; altering the required findings and terms for extending SOS; requiring
investor-owned electric companies to obtain electricity supply for extended SOS
to residential and small commercial customers in specified manners; authorizing
the Commission to take specified actions; etc.” HB
1525 failed in the Maryland Senate. SOS was automatically assigned to
any customer who did not opt to select an electricity supplier. 10/03: Maryland’s four investor-owned electric utilities, Allegheny Power,
Baltimore Gas and Electric Company, Delmarva Power & Light, and Potomac
Electric Power Company, “issued requests for proposals to solicit bids to
provide Standard Offer Service (SOS) for a share of its customer load. 09/03: The Public Service Commission issued Order No. 78710, which approved the technical details that support the standard offer service policy framework set forth in April 2003. 04/03: The Public Service Commission issued Order No. 78400, which required electric utilities to continue to provide electric supply to their customers via a standard offer service. 04/02: Senate Bill 285 (SB 285) required
electric companies in Maryland to "conduct a study that tracks shifts in generation
and emissions as a result of restructuring the electric industry." The
electric companies must submit their studies twice to the PSC and the
Department of the Environment on or before December 31, 2003 and on
or before December 31, 2005. If it is determined that restructuring has a negative impact
on Maryland's
environment, then the PSC will consider "establishing an air quality
surcharge or other mechanism." 01/02: The Office of the People's Counsel of Maryland claimed that the state's electric industry deregulation plan did not produce competition. In the year and a half since the commencement of deregulation, only 2.6 percent of residential customers of utilities with Electric Choice programs switched suppliers. The Office of the Peoples Counsel commanded that the General Assembly consider revising the Electric Choice program. 12/01: The Public
Service Commission established a plan for four utilities to provide electric
services at fixed rates, which was scheduled to expire around 2004. “A central
question was whether retail competition had advanced to such an extent that the
Commission could end this obligation or must the Commission require the four
utilities to provide some form of Standard Offer Service (SSO).” 09/01: BG&E awarded contracts for its wholesale power supplies over the final three years of the transition period. Constellation Energy Source would supply 90 percent and Allegheny Energy Supply Company would supply 10 percent of BG&E's power needs, from July 1, 2003, to June 30, 2006. The contracts were awarded through a competitive bidding process. BG&E stated that the wholesale contract prices did not exceed the frozen retail rates in effect through the transition period. 09/00: A Baltimore City Circuit Court Judge issued an order and opinion upholding the Maryland Public Service Commission's (PSC) approval of Baltimore Gas & Electric's (BGE) electric restructuring settlement and generation asset transfers. The decision followed an August 23 hearing in which the Mid-Atlantic Power Supply Association (MAPSA) and Shell Energy LLC challenged the PSC deregulation settlement and generation asset transfer orders. 08/00: In a hearing on August 4, 2000, the Baltimore City Circuit Court allowed Baltimore Gas and Electric (BG&E) to implement a 6.5-percent rate reduction and stranded cost recovery plan, lifting a stay imposed in July. BG&E would provide retroactive savings from July 1, when customer choice began in Maryland. BG&E was scheduled to defend the restructuring agreement in court at an upcoming hearing. 08/00: The Maryland Court of Appeals remanded the case back to the Circuit Court in Baltimore on July 20, reversing the stay issued earlier. The Circuit Court, however, issued an interim 2 week stay on the restructuring order, scheduling a hearing on August 4. Meanwhile, BG&E's consumers would not begin receiving the rate reductions or the ability to choose generation supplier that were to go into effect July 1. 07/00: The Maryland Court of Appeals ruled to delay the beginning of retail access in Baltimore Gas & Electric's territory. The Court issued the stay on the Maryland PSC's November 1999 order that approved BG&E's restructuring settlement at the request of MAPSA, a trade organization representing a group of competitive generation suppliers. MAPSA had complained that the standard offer rate set in BG&E's territory was too low to attract competitive suppliers. Retail access and a 6.5-percent rate reduction for residential consumers would have gone into effect July 1 in BG&E's territory. The other utility territories in the State were not affected by the court ruling. 07/00: Standard offer rates at the four investor-owned utilities in Maryland went into effect July 1, with the opening of retail access across the State. Standard offer rates for residential consumers at Allegheny Power were 4.34 cents/kWh; Conectiv's were 4.92 cents/kWh; Potomac Electric Power's were 4.99 cents/kWh; and BG&E's were 4.06 cents/kWh, and scheduled to rise to 4.28 cents/kWh by May 2003. 07/00: Rate reductions went into effect July 1, as approved in the settlement plans for the investor-owned utilities. 07/00: As planned in the restructuring settlement, BGE froze retail rates at a level approximately 6.5 percent below the current rates at the time. The rate freeze was scheduled to be in effect until June 2006. 01/00: The PSC approved PEPCO's restructuring plan. PEPCO customers were scheduled to begin retail direct access in July 2000. PEPCO also received approval to sell its generation assets. 01/00: Allegheny Energy Inc.'s settlement plan for restructuring was approved by the PSC in December 1999. Highlights of the plan included: Retail direct access for almost all Maryland customers by July 1, 2000; a 7-percent residential rate reduction, effective January 1, 2002, through Dec. 31, 2008; a cap on residential generation rates from Jan. 1, 2002, through January 1, 2008; a cap on nonresidential rates through Jan. 1, 2004; a cap on transmission and distribution rates for all customers from January 1, 2002, through January 1, 2004; authorization to transfer all generation assets to Allegheny's unregulated affiliate company, Allegheny Energy Supply Company, LLC, at book value; the recovery of purchased power costs incurred as the result of contracts with PURPA QF facilities; and establishment of a fund for the development and use of energy efficient technologies. 12/99: PEPCO began a consumer education program, PEPCO Answers, to provide information to Maryland consumers on electricity competition. Consumers were told that they may begin "shopping" for power in the spring of 2000, and begin receiving power from competitive companies by July 2000. PEPCO had filed proposals with the Maryland and DC PSC's to sell its power plants. 11/99: BG&E's restructuring settlement was approved. All consumers were scheduled to have retail choice on July 1, 2000. Residential consumers would receive a 6.5-percent rate reduction. 09/99: PEPCO is seeking approval of its deregulation plan that would include a 3- percent rate reduction over 4 years beginning in July 2000, and another 4-percent reduction by eliminating a surcharge that had funded energy conservation programs over the last decade. 09/99: Under its proposed restructuring plan, BG&E's shopping credit for residential consumers would be 4.224 cents per kilowatt-hour and rise to 5.02 cents in 6 years, too low according to competitive companies seeking to enter the retail electricity market in Maryland at the time. The Mid-Atlantic Power Supply Association suggested the credit be set at 5.7 cents. BG&E said that the low credit reflected its low prices. 08/99: Public hearings on BG&E's proposed restructuring settlement began in August. The Mid-Atlantic Power Supply Association (a coalition of energy supply companies) opposed the settlement on the grounds that the price to compare for BG&E, set at 4.3 cents per kilowatt-hour, was too low to allow competition. Also suggested was that the stranded cost recovery for BG&E get lowered. The three-day hearings were concluded August 13; closings arguments were due August 30; and rebuttals due by September 30. The PSC was scheduled to issue a decision in October. 07/99: Baltimore Gas & Electric filed a proposed restructuring plan with the PSC. The plan included a 6.5% rate decrease over six years for residential customers, $528 million for stranded costs, a six year rate freeze and phase out of transition costs, and customer choice for all residential and business customers by July 1, 2000. Public hearings were set for July and August for comments to the plan. 06/99: The restructuring legislation prompted Maryland utilities to revise their restructuring proposals. BG&E submitted its new plan to the PSC: all customers would have retail access beginning July 2000; residential rates would be decreased 6.5 percent beginning July 2000; $528 million in transition costs would be recovered over 6 years from customers; rates would be unbundled and generation assets transferred to an affiliate company; and BG&E would provide the initial funding of a low-income assistance fund and act as default supplier for customers deciding not to switch suppliers. 04/99: With House Bill
703 (HB 703) and Senate Bill (SB 300), “Maryland
Customer Choice and Competition Act,” restructuring legislation was enacted.
The legislation included at least a 3 percent rate reduction for residential
consumers, funding for low-income programs, stranded cost recovery to be
determined by the Public Service Commission, disclosure of fuel sources by
electric suppliers, recovery of stranded costs through a non bypassable wires
charge, and a 3-year phase-in for competition beginning in July 2000 and
becoming complete by July 2002. As of July 1, 2000, all
customers of electric companies (had) the opportunity to choose electric
suppliers. By default, however, a customer remains with the electricity
supplied by the distributing electric company under Standard Offer Service. The
PSC (had) extended the opportunity to provide SOS.” “Part of this Act
required that all customers receive a rate reduction, followed by a rate
freeze. The rate reduction of 6.5% for BGE customers was based on the last BGE
rate case which was in 1993. The Commission’s Technical Staff estimated that in
2005 alone, this rate reduction saved customers $474 million or an average of
$30 per month per customer.” 02/99: PEPCO signed an agreement with the Maryland PSC for a plan to bring retail choice to its Maryland consumers as early as next year. The plan required Maryland legislation and concurrence with the District of Columbia PSC for the sale of PEPCO's power plants. 01/99: House Bill 3 (HB 3) and Senate Bill 65 (SB 65) allowed BG&E to form a holding company. The law was
intended to make it easier for BG&E to enter into new business ventures in
a competitive market. Maryland was the only state that prevented public utilities from
forming holding companies by enacting HB 3
and SB 65. 10/98: Five utilities in Maryland announced that they asked a state court to stop the PSC deregulation effort until several issues were resolved, including the issue of stranded costs recovery. 04/98: A PSC order established roundtable discussions on
restructuring issues: universal service, supplier authorization, demand-side
management programs, customer protection, competitive billing, and consumer
education. The discussion groups were to submit reports in May 1999 and July
1999. 12/97: The Legislative Task Force held hearings and issued
conclusions and recommendations. 12/97: The PSC issued an Order
8738 establishing a framework for the
restructuring of the electric power industry. The plan's schedule: a third of
the State's consumers would have retail access by July 2000; another third by
July 2001; and the entire state by July 2002. Round table discussions to
address implementation of specific issues were to commence in April 1998. For
the order to be effective, legislation needed to be passed. 12/97: A PSC order stated that utilities would be allowed recovery of stranded costs. Utilities would have to file plans for stranded cost recovery by March 1998. Competitive transition charges (CTC) and securitization were also being considered. 04/97:
Senate Bill 851 (SB 851) created a task
force on electric industry restructuring that was scheduled to issue a report
by December 1997. |