Published on: Tuesday, March 17, 2009

By Leah Gibbons, Maryland State Chair, RESA

Contrary to popular belief, deregulation in Maryland has succeeded in bringing huge savings and new options for buying electricity to tens of thousands of Maryland businesses.

In fact, 72 percent of the electricity consumed by Maryland businesses and governments is provided through the competitive market. Customers across the State and Prince George’s County are shopping, finding lower priced electricity, and buying that electricity in a way that meets their unique needs.

The benefit of shopping for the lowest cost electric supply has resulted in tens, and possibly hundreds, of millions of dollars of savings for these customers.

For example:

• The Maryland State Government has saved $50 million since 2004.

•  Baltimore Regional Purchasing Cooperative has saved $30 million since 2006.

• The Eastern Shore Public Schools and County Governments has saved $7 million since 2001.

• The Apartment and Office Buildings Association has saved $10.6 million for 2007–2008.

Every dollar saved in energy expense is a dollar that goes to the bottom line for these businesses and those savings get passed on to consumers in the form of lower priced products and services and other community benefits. And for government entities that shop for electricity, those savings get passed on as taxpayer savings for all Maryland citizens. It is true that competition has been slower to develop for Maryland’s residential customers but there are reasons for the slow growth.

Competition, and the innovation and downward pressure on price it fosters, cannot grow in an environment where the threat of re-regulation lingers.

No competitive supplier can make a decision to invest tens of millions of dollars setting up a new business in Maryland to serve residential customers with the constant threat of re-regulation and the possibility that government will put them out of business.

Now Governor O’Malley and the legislature are attempting to turn back the clock and re-regulate in an effort to create a state-run energy monopoly.

Our state government is falling back on the failed idea of re-regulation when in fact, impediments to competition in the residential market is a failure of their own doing. 

The very rate caps the People’s Counsel advocated for were put in place for years with no adjustment to market to ease rate shock and they also prevented competitive retail suppliers from entering the market to serve residential customers.

This, compounded by regulatory policies that languished at the Public Service Commission for years with no effort on the part of policy makers to make the market work for residential customers the way they made it work for Maryland businesses and governments, is why competition has been slow to develop for residential customers. That’s just not fair.

Re-regulation will not lower current electricity rates

RESA believes that just as business and government have taken to shopping and saving so to will residential customers if they are educated about their choices and policy makers do what they need to do to develop the market. Policy makers need to face the fact that — as the governor even admitted in his press conference—re-regulating Maryland’s electric industry and ending choice will not provide ratepayer bill relief. Here’s why:

The cost of electricity has risen in recent years in the face of unprecedented increases in the cost of the fuel used to generate it. So yes, it is true, energy prices are higher today than they were 10 years ago before the state deregulated. But what consumer product isn’t more expensive today then it was back then?

The price of bread today is higher than it was 10 years ago, so is the price of milk, eggs and gasoline. World energy markets drive the cost of electricity. Maryland’s strict environmental regulations contribute to the rise of the cost of electricity. And the current credit crisis impacts the price of electricity.

The good news now is that the global market forces that drive fuel costs have eased and the cost of electricity at the wholesale level has decreased. Maryland consumers should have an opportunity for relief in their monthly bills.

But those lower wholesale costs will not be reflected in residential customer bills until the long-term contracts (that the Maryland Public Service Commission required the utilities to enter into when fuel costs were high) expire.

Re-regulation will not change this reality. World markets do not give discounts to regulated utilities. In fact re-regulation could do more harm than good.

Re-regulation will force all Maryland customers to pay for new generating plants that the utilities will be told to build. Re-regulation will take away Maryland customers’ ability to shop for cheaper alternatives.

And re-regulation will increase the cost to Maryland businesses who are currently finding savings by shopping, and that threatens jobs, may increase the costs for everyday goods and services customers buy, and may increase taxes to Maryland taxpayers.

The only way residential customers can find rate relief now is to shop from an alternative supplier. There are at least two competitive suppliers now offering prices that are 10 to 15 percent lower than utility rates. And who doesn’t like to shop for a bargain?

Competition provides the downward pressure on price that comes from competing entities vying to sell power to customers. It’s happening in New York and in Texas – there are over 20 marketers in each state selling to residential customers. Maryland simply cannot afford to go backwards.

Now is the time to make the market work for Maryland’s residential consumers so they can take advantage of the benefits of competition, just like Maryland businesses and government do today.

Leah Gibbons   

Maryland State Chair

Retail Energy Supply Association