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DOCUMENTS


The Tentacle


June 12, 2006

Maryland’s Deregulation Drama

Richard B. Weldon Jr.

Before the curtain rises on the planned special session this week, I thought I’d fall back on my theater background to “set the stage” on this unfolding drama.

First, the actors:

Gov. Robert L. Ehrlich, Jr. – The “A” list celebrity in this show, with as much to gain (or lose) as any other character. Governor Ehrlich basically has nothing at all to do with the increase in electric rates for Baltimore Gas & Electric customers. While he is blameless in the creation of the problem, he cannot avoid his ultimate responsibility for overseeing a resolution that would be widely viewed as beneficial.

Senate President Thomas “Mike” Miller (D., Calvert/PG) – He is the actor with the trickiest role in this show. Senator Miller has to hide the fact that he was the co-sponsor and chief vote-getter for the badly flawed deregulation bill in 1999. The passage of that bill has resulted in the dramatic electric rate increases. His role requires him to find another scapegoat, someone he can point to as a culprit to shift the focus from his own handiwork.

The Public Service Commission (PSC) – The quasi-independent state regulatory agency responsible for oversight of the utility industry, everything from electricity to taxicabs. This body generally flies below the radar, avoiding the spotlight of political scrutiny.

  1. Current Chair Ken Schisler – An attorney and former delegate from Easton, who has been criticized for having a “cozy” relationship with the electric generators. He is in a difficult Catch-22. He is expected to increase competition by courting electric generation companies, while maintaining independent judgment and separation.
  2. Harold D. Williams – A former BGE company executive, and the last remaining PSC appointee of the Parris Glendening Administration. Commissioner Williams has been a vocal critic of his Ehrlich-appointed colleagues, especially critical of a meeting the others held with Ehrlich’s chief of staff, “Chip” DiPaula during the last General Assembly session.
  3. Allen M. Freifeld – A former cable executive, Mr. Freifeld is also an attorney. Like Commissioner Williams, it was his knowledge of the cable industry that made him an attractive applicant for a PSC post. His legal expertise aids in the quasi-judicial function of the PSC.
  4. Charles R. “Chuck” Boutin – An attorney, a former city council member and mayor of Aberdeen, and a two-term delegate from Harford County, Commissioner Boutin had a reputation for being a reasonable legislator. He had dealt with utility issues throughout his public service career.
  5. Karen A. Smith – An attorney, a key Ehrlich campaign staffer, and most recently, the governor’s Director of Intergovernmental Relations. She also served as an assistant state’s attorney and has legal expertise in child welfare issues. Ms. Smith’s confirmation hearing was one of the most contentious, as a number of Democrat senators, including President Miller, attacked her lack of experience in utility issues.

Speaker of the House Mike Busch (D., Anne Arundel) – While normally a co-equal with the governor and Senate president, he has a unique role in this drama. He has the ability to sit back and analyze the motives and interests of the other lead actors, adapting his own strategy motivated by the best interests of the members of his legislative body. He led his chamber to adopt a better rate plan than is currently on the table, the failure occurred in the Senate. He can legitimately claim that he worked in a bi-partisan fashion to create a better solution for BGE customers, but President Miller and his gang choked at the last minute.

Mayo Shattuck and BGE – Mr. Shattuck, the CEO of BGE, looks like the bad guy in this play. A wealthy industrial tycoon makes an easy villain, especially when Democrat lawmakers write the script. A confluence of events, from high fuel prices to a lack of expected competition, conspired to drive the cost of electricity to the current rates. At the same time, Constellation, BGE’s parent company, was negotiating a huge merger with Florida Power & Light. The merger was designed to ensure Constellation’s future success, recognizing that business units like BGE will always operate in margins, while a utility like FP&L show a much more favorable balance sheet.

Baltimore Mayor Martin O’Malley – as a Democrat candidate for governor, Mayor O’Malley has to force some form of action on this issue. His constituent base, the city and surrounding areas, are all going to receive rate increases from BGE. He has taken the recent PSC decision to court, and obtained a favorable ruling that essentially forces an additional round of hearings on the PSC plan. Governor Ehrlich argues that the action from Mayor O’Malley has done nothing to mitigate the rate increase, and amounts to little more than political posturing. The dirty little secret here is that BGE and Constellation have pumped thousands into O’Malley’s campaign coffers. Can you say hypocrite?

Montgomery County Executive Douglas Duncan – Truly a bit player, both because most Dems have already given up on his chances and because he has consciously decided to take a wait and see position. His principal addition to this debate has been to call for re-regulation, something most credible analysts think would exacerbate the problem, not solve it. Rest assured that Doug Duncan will keep reminding Martin O’Malley about those pesky BGE and Constellation contributions!

Democrats in the House and Senate – There are two forces at work with the majority in the House and Senate. On one hand, the majority party can unite around their goal of denying Governor Ehrlich a policy victory. They can accomplish that by shifting blame for high electric bills away from the legislature to the Ehrlich appointees on the Public Service Commission. Since the BGE service area includes a large number of legislators, those votes will be easy for leaders to round up. The other force at work is disgust over the lack of any kind of attention to other areas of the state that have already seen dramatic rate increases. There was no legislative hue and cry when the Delmarva Power and Light (DP&L) or Southern Maryland Energy Cooperative (SMECO) customers saw their bills increase by more than 50%. Most of this energy is because Mayor O’Malley cannot sit still for a large rate increase on his customers.

Republicans in the House and Senate – Similarly, two competing forces are pulling at Republicans during a special session. Republicans generally tend to support the interests of the governor, and in this case that means defending the Public Service Commission and the whole concept of free enterprise. Well, most Republicans, anyway. There are a number of GOP delegates and senators who will abandon the governor, and you probably won’t be surprised to find that they represent the BGE service area. As former House of Representatives’ Speaker Tip O’Neill once said; “All politics are local.”

So the cast is set. The performance space will be the State House and the committee rooms in the House Office Building. Unlike a normal legislative session, the presiding officers are refusing to pay for hotel expenses for most members. They have agreed to cover hotel expenses for committee members who deal with the specific issues, but other members will either have to commute or just eat their costs. No big deal, but it is evidence that President Miller and Speaker Busch are concerned about the cost of this little political drama. If they reconvene the legislature and produce nothing meaningful, they’ll go from hero to goat faster than a speeding bullet.

While the script for a legislative drama is usually carefully crafted, this special session includes one wildcard. Senator Miller has agreed to allow consideration of child sexual predator legislation in addition to the advertised utility rate issue.

During the last General Assembly session, Del. Anthony Brown (D., PG) killed a bill called Jessica’s Law on a procedural maneuver. Delegate Brown is also on the O’Malley ticket as the lieutenant governor candidate. Clearly, Democratic Party officials are worried about a stain on the O’Malley reputation as result of the failure of the bill.

The schedule is this:

Monday at 4 P.M. – Democrat legislators will meet in caucus. They’ll be briefed on the policy implications by the staff of the Department of Legislative Services (DLS). Then they’ll meet to discuss the political ramifications.

Monday at 6 P.M. – Republicans will meet, getting their DLS briefing and then discussing the political strategies. The GOP Caucus will probably include staffers from the Ehrlich Administration.

Tuesday morning – The Committees will hold day-long public hearings.

- House Economic Matters/ Senate Finance – Utility Rates, PSC, Constellation merger with FP&L

- House Judiciary/Senate Judicial Proceedings – Child Sexual Predators

Wednesday morning – 10 A.M. – Official start of the special session

Thursday morning – Continuation of session (only if necessary)



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