Electric shock: energy costs have spiked since electric restructuring, and price controls set then are expiring. Customers and legislators now face the pain of market prices.

• Author: Rewey, Christina

Maryland consumers got an electric shock recently, but it's not the kind of jolt one might imagine. What stood their hair on end was the potential for an increase in the price of electricity--a dramatic 72 percent more for 1.2 million customers to begin on July 1, 2006. Debate raged in the mayor's office, the regulatory commission, the Legislature and the governor's office about how to address consumer outrage over the increase.

Overriding Governor Robert Ehrlich's veto during a special session in late June, the Maryland Legislature passed a bill providing temporary relief from the rise in electric rates for Baltimore Gas and Electric (BGE) customers. The law calls for a 15 percent increase in the total electricity rate for every BGE residential customer from July 1, 2006 through May 31, 2007, and defers the transition to full market rates until January 2008. Earlier this year, rates went up for Pepco customers by 30 percent and Delmarva Power and Light customers by 35 percent.

Unfortunately, Maryland's predicament is not unique. Simply put, price controls are expiring, and customers previously shielded from the actual cost of their power now face the wrath of market prices. It all goes back to 1999, when Maryland joined many states across the country in restructuring their electric industries. The prevailing wisdom held that competition should be brought to all monopolistic industries. In this vision, the familiar utility would be a thing of the past as customers shopped among options and prices that used to be available only at wholesale.

Most states, including Maryland, included a transition period in their restructuring plans. The idea was to freeze, cap or reduce consumers' rates while giving the electric industry time to switch to a competitive market. And the transition periods have postponed what many see as the inevitable. Governor Ehrlich says the electric deregulation plan (including capping residential rates below 1993 levels) set customers up for "a painful rate shock." He says the plan failed to attract competition in the residential market.

Pennsylvania has had much success with residential customers switching to new electricity providers after restructuring. The credit goes to a state marketing program that gave consumers the information they needed to make decisions about staying with their present company or switching to another electricity provider.

In other states, restructuring has benefited mostly big electricity...