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MD Electricity Price to Increase 72% on July 1st

On July 1st, 2006, my electricity provider, Baltimore Gas & Electric (BG&E), and other electricity providers in Maryland will no longer be subject to price caps on their SOS (Standard Offer Service) and can charge the market rate for electricity. Electricity in Maryland was deregulated over four years ago in an attempt to lower electricity prices by introducing competition and it appears as thought it will backfire because it’s been predicted that Maryland electric rates will surge (ignore that pun) 72% on July 1st. Mapgirl’s post [3] on the subject reminded me of a discussion among my co-workers about how electricity prices are going to skyrocket.

Certainly, some would say that this price increase is overdue because the prices have been kept artificially low by the government, a point I wholly agree with. However, it’s a situation created by the government and not by the consumer (you can argue that the consumer elects the official, but whatever), who is largely ignorant of the fact that electricity prices should have been increasing the last four years; and so the government should try to soften the blow.

One idea that has been floated in the legislature is a plan to phase in price increases over three years, with this summer’s bump capped at 15% (Baltimore Sun [4]). The justification for this, and it’s a good one, is because consumers have been paying for anticipated depreciation on BG&E facilities that never materialized (considered a stranded cost)!

So far, the Public Service Commission has approved one plan that would help consumers:

Last week, the PSC approved a plan that would automatically defer all but 21 percent of customers’ increased bills for two years but force them to pay 5 percent interest on the difference. Customers would be able to opt out of the plan.

Personally, I would opt out of that plan because I have enough funds to cover the hikes but this is a very important solution for those low income families to weather the storm if the rate caps aren’t approved.

Right now, the only reaction consumers have at this point (other than waiting and hoping) is to put that deregulation to use and start shopping around for other electricity providers. I live in Howard County, which is serviced by Baltimore Gas & Electric (BG&E), but according to Maryland’s Public Utility Sources I can switch to one of twenty other providers (link [5]).

If my bill goes up 72% as expected, then I’ll probably be looking at a $200+ electricity bill (based on last year’s summer bills) and that would really put a damper on the ole budget.