Reply #28: Deregulation eyed in rising electric bills

[UpInArms]

http://www.mercurynews.com/mld/mercurynews/business/financial_markets/14051050.htm

BALTIMORE - Electric rates will surge for many Maryland residents this summer. And they are not alone. Electric rates are rising nationwide and many are blaming deregulation plans originally designed to spur cheap energy production as much as higher fuel prices.

In Maryland, state regulators say Baltimore Gas & Electric Co. residential customers will see their rates increase 72 percent, although a plan imposed this week will defer all but 21 percent of the increase. In Montana, higher rates have led to a move to scrap that state's deregulation scheme.

Such deregulation plans were promoted as a way to introduce competition into the electricity marketplace and move from the traditional regulated utility that owned its own power plants and transmission lines.

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But as electric deregulation went into effect in the late 1990s, there was a surge in the construction of power plants that run on natural gas, in large part because of its reputation as an inexpensive fuel. To make matters worse, the increase in natural gas demand coincided with a period in which companies that drill for the fuel struggled to keep up with the new demand.

Electric rates didn't change for many customers at first because rates were capped for a number of years to allow companies to recoup so-called `stranded costs' for the construction of power plants. Power plants, meanwhile, were sold off as many utilities split into generating companies and transmission companies, which buy power, charge for the transmission and bill the customer.

Customers are now finding that as the caps end, their electric rates are rising instead of falling.

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