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Looming power shortages demand attention

While recent General Assembly sessions have seen efforts to overturn the 1999 decision to deregulate the electric industry, legislators will address predictions this year that Maryland could experience electricity supply shortages in the future.

Senate Finance Committee Chairman Thomas M. “Mac” Middleton, D-Charles, says that despite energy conservation efforts, the lack of new power plants needs is a concern.

“We have been able to reduce demand,” Middleton said, “but we’re getting to the point now where if we don’t have additional capacity, we could be facing those issues again.”

Without new plants in Maryland, the electric supply coming from other states could dry up as demand increases across the regional grid. The state Department of Energy in a 2009 memo supporting re-regulation, said Maryland imports 30 percent of its energy from nearby states and is dependent on wholesale markets and transmission.

The department also found that because of this situation, there are projected electricity shortages during peak demand in coming years.

A 2007 study by PJM Interconnection, which regulates the power supply in Maryland and 12 other states and the District of Columbia, warned that without more power pumped into the grid, shortages could begin as early as 2015.

Last week, the Public Service Commission issued a draft proposal seeking offers for new generating facilities in or around Maryland from electric distribution companies like Baltimore Gas & Electric and Pepco, which deliver power to homes. The commission has the authority to require state utilities to build new generating facilities.

Meanwhile, low electric prices and greater competition among more suppliers is expected to diminish calls for a return to a regulated industry in Maryland.

“I don’t see anything in terms of the body looking at” re-regulation, said Budget and Taxation Committee Vice Chairman Edward J. Kasemeyer, D-Howard and Baltimore.

Efforts to undo deregulation have been pushed by Gov. Martin O’Malley and bills have been introduced in past years after price caps were removed in 2007 and BGE customers saw large increases in their bills. But the efforts were unsuccessful and electric prices have since dropped, undercutting support for re-regulation.

“A lot of the momentum has gone,” Middleton said. “I don’t see any appetite for moving to re-regulate the industry this year.”

The average annual price for electricity for residential customers increased from $1,033 in 2005 to a high of $2,004 in 2009.

Prices have declined about 15 percent over the last two years. Last year though, utilities announced the cost of electricity was on the downturn. In Maryland, from June 2011 through May 2012, the average annual residential default, or “standard offer service,” rate is expected to decrease as much as 14 percent.

But, Middleton said as soon as prices start to creep upward again, the call to re-regulate would also resurface.

“It’s probably going to be on the back burner for this year,” Middleton said. “I think it will probably stay there until the next time there’s a peak in electricity prices.”