Facing the prospect of rolling blackouts and brownouts by 2011, the Public Service Commission on Thursday presented to a House committee a report detailing options to re-regulate the state?s energy supply.
The lack of new energy generation in the state, inadequate capability to get energy into homes, high costs of bringing in energy from other areas, and growing demand have all combined to threaten the state?s energy supply, the commission?s chairman and advisers told the House Economic Matters Committee.
“We have to take some type of action to proactively address the reliability issues we face and also keep prices low,” PSC Chairman Steven Larsen said.
Two new major transmission lines are expected to come online at nearly the same time the energy crisis is predicted, without which Maryland would face a capacity shortfall of 1,500 megawatts, more than total output of two medium-sized power plants, Larsen said.
Larsen, along with economist Richard Levitan and Randy Speck of Kaye Scholer LLP, presented five options for re-regulation. Full re-regulation, requiring utilities to reacquire the energy generation facilities they were forced to divest seven years ago, would cost between $18 billion and $24 billion, Speck said, but would represent a full return to regulated energy rates and would eliminate some costs of the wholesale market.
Another option is to direct utilities to enter into long-term contracts for thecreation of new generation facilities, which the PSC has advocated as the most cost-effective solution.
Currently, wholesale market rates include an additional margin intended to entice energy generators to develop new capacity, by illustrating the demand for energy supply in a particular region. But analyses by both Levitan and Kaye Scholer concluded that the practice isn?t working.
“It?s basically paying a lot of money up front and hoping the market will change, without any guarantees that it will,” said Speck. “The status quo favors existing generators ? they don?t have interest in changing these high prices because they benefit from them.”
Other options include the creation of a state Power Authority, which could be less efficient than a for-profit developer but gives the state greater control over new generation, and more comprehensive resource planning.
