http://www.gazette.net/stories/062008/poliras201351_32362.shtml

Getting power to the people

Rascovar on Politics | Barry Rascovar

Gazette; June 20, 2008

Here we go again!

Another new chairman for the Public Service Commission - the third in 16 months - and another attempt to beat up on electric utilities and fulfill a campaign pledge that can't be kept.

All of this is part of a dangerous game, with heavy political overtones, that could prove so counter-productive consumers end up facing electric brownouts and blackouts with little hope for relief.

The current PSC chairman, Steve Larsen, is leaving without adequately explaining his premature departure. A capable former insurance commissioner, Larsen was handed an impossible mission by Gov. Martin O'Malley - to lower electric rates even as energy prices soar worldwide.

Larsen also was supposed to crack down on alleged unfair price increases by electric companies while at the same time persuading them to build new power plants in Maryland.

Now it is Douglas Nazarian's turn to work a miracle. With O'Malley anxious to prove electric companies ripped off consumers - a campaign charge Larsen investigated but couldn't corroborate - Nazarian may discover he, too, is being asked to pull a political rabbit out of an empty bag.

This change of command comes on the heels of another effort by the O'Malley administration to politicize PSC activities.

The panel recently joined a few other states in lodging a complaint with federal regulators seeking refunds for excessive power rates that a regional consortium negotiated for the next three years.

Daily newspapers quickly seized on the PSC's action, giving readers the misleading impression Maryland was about to recover $2 million for customers.

O'Malley employed his usual overheated rhetoric to accuse utilities of unfairly grabbing billions out of ‘‘the pockets of Maryland families." The governor said this was ‘‘simply unacceptable."

Then O'Malley's political mouthpiece, the state Democratic Party, rushed out a stirring press release entitled, ‘‘The Fight for Maryland Ratepayers Continues," that praised the governor for standing up for working families.

Yet if you examine the details closely, you may come to the conclusion this is much ado about nothing.

The chance of customers receiving rebates is virtually nil. In fact, it's even debatable if the PSC has its facts right.

Here are a few details:

Three years ago, the group that coordinates the electric supply for 51 million people in 13 states, PJM Interconnection, developed a new approach for obtaining future reserve power through annual auctions. The idea is to set prices at the auction high enough to encourage construction of additional power plants in the region.

But the PSC and other state regulatory panels complain that so far this approach hasn't led to any new construction. Consumers have been conned, Larsen says.

Have they? There's no way of knowing until we see how high energy prices are when this reserve power is delivered to local utilities over the next three years. And we also have to see if this new system convinces companies to start building power plants during that period.

Thus, it's way too early to write off PJM's approach, called the Reliability Pricing Model.

Indeed, PJM's most recent auction yielded 4.2 megawatts of new power-generating sources and a 37 percent drop in the auction price for reserve power. That's darned good given the tumult in energy markets.

A PJM official said the first three auctions have resulted in an additional 16 megawatts of reserve generating capacity - through energy-saving efficiencies, through improvements to existing power plants and through additions to current plants.

By 2011, we should know if this pricing model is encouraging companies to invest in hugely expense energy plants. To try to wipe out this new approach now could court disaster.

Let's assume O'Malley and his hand-picked PSC win their protest. Yes, $2 billion could be returned to consumers here. But that refund would doom any new nuclear reactor at Calvert Cliffs or any other new electric plants in Maryland. Investors would be scared off.

An independent consultant to PJM had predicted, quite accurately, that the initial auctions under this new pricing model would not lead to rapid construction by utilities. In a few years, though, ‘‘One should expect to see the market responding with new proposals for capacity expansion."

But if O'Malley & Co. win their protest and PJM scraps these auctions, the consultant noted, ‘‘it is not clear how major investments could occur, since investors would have no assurance that the markets would support the level of investments [in the billions of dollars] needed."

Indeed, the mere threat to overturn PJM's pricing plan could put the kibosh on new energy plants in Maryland.

So, welcome to the PSC chairmanship, Mr. Nazarian. You may discover your boss, the governor, often leaps into a controversy before examining all the implications.

It's the latest indication that this governor still doesn't have a coherent energy policy that will ensure an adequate power supply for the state's growing population in the years ahead.