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Foxes, Henhouses, and Boondoggles

The same crew of Democrats who forced a half-assed electric deregulation policy down Maryland’s throat now want to….force a half-assed re-regulation policy down Maryland’s throat:

The soaring costs of electricity will not decrease soon unless the government takes action, according to the state’s power regulators.

That is because deregulation – a process that allowed power plants to sell electricity according to market rates in order to lower costs – has failed Maryland, according to a report from the Public Service Commission.

Now, it is up to Gov. Martin O’Malley, the General Assembly, the Maryland Energy Administration, the PSC, and Maryland’s power regulators to craft a workable power future without creating another disaster for consumers.

“After almost seven full years, Maryland ratepayers face among the highest capacity and locational marginal prices in all of (the region), and the prospect of draconian brown-outs in the next five years,” said the recently released report, which maps out future courses of action. “By these measures, Maryland is not better off than it was before deregulation.”

Mr. O’Malley and the energy administration will prepare a plan in time for the legislative session that begins in January and include “some similarities” to the PSC recommendations, said Rick Abbruzzese, the governor’s press secretary.

Now as somebody who believes in the free markets, the problem with the concept that Maryland’s markets were ever deregulated in the first place is a fallacy. The General Assembly kept caps in place on prices and never allowed the market to be fully regulated.

The problem is that through re-regulation, the O’Malley crowd may in fact be creating the type of end of the world disaster that they allegedly are trying to avoid. Let’s face it, the kind of reregulation that the Democrats would wish to force through the General Assembly would probably severely inhibit the ability of power generating companies to cover their cost of doing business in Maryland. That would leave Maryland electric customers with fewer choices and in all likelihood electric rates that go beyond even the current cost of electricity in the rate of the 72% rate hikes.

Except one of the proposed regulations tries to go where California went:

Rather, the PSC proposed flexing its long-dormant muscles by forcing utilities such as BGE to sign long-term power purchase contracts from newly constructed power plants, locking in prices for customers for several years.

Which sounds very neat and panglossian, except that while the power price for customers may be locked in, the price for power on the wholesale electric market may not be. Which means that when BGE’s power consumption exceeds their generating capacity, they will be potentially forced to buy power at ridiculously high rates without the capability of recouping their costs. The puts us on a path to a California style energy crisis, energy shortages, and rolling blackouts.

There is no easy solution to this, as the General Assembly really botched things up in the first place when they “deregulated” electricity in 1999. But the O’Malley/PSC plan that is currently in the works seems to be designed to put Marylanders in the same place California electric customers were in 2000 and 2001. As usual, O’Malley and company are backing plans that put the consumer and the working classes at the highest risk of absorbing higher costs and in this case, a potentially third-world situation as it relates to the availability of electric power.

(Crossposted)






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