Deregulation heats up power bills
Before cranking up your air conditioner to cope with the scorching temperatures that have settled in over much of the country, keep in mind that this summer you quite likely will be paying more than ever before for every kilowatt of electricity you consume. The heat wave hitting the Northeast and Midwest happens to coincide with record rate increases now kicking in because of state lawmakers' decisions years ago on electricity deregulation.
Perhaps the hardest hit in the nation will be the 1 million customers in Baltimore and surrounding communities, where the heat index was expected to make it feel like 103 degrees today. If the temperature doesn't cause them to swoon, then their next electric bills might do the trick; a phase-in of Baltimore Gas & Electric's 72 percent electricity rate increase began July 1. Because of a last-minute move by the Maryland's General Assembly acting over Republican Gov. Robert Ehrlich's veto, customers will see only a 15 percent increase in the first year. But the rest will be phased in after 2007.
Maryland, like a number of states, made the decision in the 1990s to protect its consumers from electricity rate increases for several years as part of a move to a deregulated electricity market. The theory was that the caps would be necessary only temporarily, because competition would flourish and drive down the price of electricity.
In the intervening years, retail competition never did develop, and most consumers still have no real choice in their electricity provider. And in the meantime, the cost of natural gas and coal--the fuels that utilities use to power their plants?has skyrocketed. Now--for the first time in years--those prices are being passed along to consumers.
BGE, for its part, is floundering because of its inability to pass along the true costs of providing energy. Last week, it reported profits down 15 percent owing to fuel costs. Its debt was downgraded to junk status after the state legislature slowed the phase-in of its rate increase. And its parent company, Constellation Energy, is struggling to keep alive a proposed merger with FPL Group of Florida.
But for consumers, the electricity rate hikes come on top of higher home heating bills and $3-a-gallon gasoline.
"Consumers are getting hit across every energy sector, and that's a new phenomenon," says Mark Wolfe, executive director of the National Energy Assistance Directors' Association. Both his group and the American Gas Association, representing natural gas utilities, are asking the Bush administration to release $105 million in emergency federal funds to help low-income households pay their air-conditioning bills.
Among the electricity rate increases already approved by regulators and taking effect this year:
Baltimore Gas & Electric, 72 percent
Pepco, Maryland, 39 percent
Delmarva Power & Light, Maryland, 35 percent
Unitil, New Hampshire, 34 percent
Duke Energy Ohio, 30.8 percent
Connecticut Light & Power, 22.4 percent
Excel Energy, Colorado, 20 percent
Kentucky Power Co., 14.7 percent
Empire District Electric, Kansas, 14 percent
Central Maine Power, 10 percent
Arizona Public Service, 7.6 percent (the remainder of a 20 percent increase proposal is pending)