Maryland legislators made many bad decisions this session. Approving legislation to make it possible for taxpayers to buy racetracks and manage the Preakness Stakes is probably the worst and creates yet another subsidy for a failing industry.
But House members of the Economic Matters Committee chaired by Del. Dereck Davis, a Democrat from Prince George’s County, did the right thing by stopping legislation to re-regulate Maryland’s energy industry.
As Del. Rick Impallaria, a Republican member of the committee, said in an email update to his constituents, “The bill has come to our committee with little time for review of its merits (or lack of them), or for making changes. This is like a re-run of the situation in 1999 when de-regulation was passed — just take our word for it that this is best.”
In a year when doing anything in the name of alleviating the economic crisis is considered good policy, Davis and other members of the committee deserve high praise for not bowing to pressure to rush the legislation through before the session closed Monday.
Gov. Martin O’Malley supported moves to give the state’s Public Service Commission the right to decide when we need more power
generation and force utilities to build plants in the name of reducing customers’ bills.
Guilt for failing to stop electricity rate hikes he promised to thwart during his campaign for governor may have been the impetus for the legislation. But it was the antithesis of how the state should “lead the way in promoting and investing in long-term solutions that make energy more affordable, that are better for the environment and that create jobs” – another campaign promise.
Proposed legislation would have imposed a surcharge on large commercial businesses to pay for new facilities and eliminated the
right to choose electricity providers for consumers and small businesses.
According to the PSC, this would not reduce consumers’ bills in the short-term and potentially not in the long-term. Second, making more supply readily available encourages consumption, not conservation, a key goal of Gov. O’Malley. And businesses strongly opposed re-regulation bills because they benefit from the lower prices competition brings.
Safeway Inc., which employs about 8,800 people at its grocery stores and other facilities in Maryland testified, “We receive the best
customer service and experience the best product and service innovation from competitive retail suppliers operating in organized
competitive customer choice energy markets.
In addition, the utilities operating in competitive markets are more progressive, more attentive to customer needs, and demonstrate more innovation and service options than their counterparts in regulated states.”
Safeway knows – it deals with about 300 providers throughout the U.S. Surcharges increase costs and hurt its ability to hire employees and invest in facilities.
In short, Maryland does not need a new formula for managing electricity. It needs its elected and appointed officials to stop
hyperventilating over fixing something – high bills – that regulation can not solve since Maryland does not control the cost of commodities that power electric plants.
As University of Maryland economics professor Peter Cramton said, “We certainly need planning and well-designed market rules.”
But the problem in Maryland is not a lack of regulation, he said. Maryland already has strong regulation. What the state needs is to keep encouraging a “competitive and efficient supply of electricity.”
He recommends deploying devices to help consumers better manage their electricity use and reward them financially for cutting it during peak times. Doing so would reduce the overall capacity needed in Maryland since a few really hot summer days skew the requirements higher. Pilot programs for smart meters are in the works, but he said they need legislative support to cover the entire state.
So instead of scurrying around garnering votes for legislation to turn back the clock over the eight months before the next session, why don’t legislators explore ways to improve the system we already have?
Using a market-based solution to nudge consumers to conserve would burnish Maryland’s business image at a time when it needs it most. It would also mark Gov. O’Malley as a leader in energy innovation. House legislators did the right thing this year by stopping re-regulation.
They can do better next year by giving consumers and business more tools to reduce their energy use and reward them for it.
Examiner columnist Marta H. Mossburg is a senior fellow at the Maryland Public Policy Institute.
