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Competition Without Freedom

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Maryland is currently in an energy crisis, more specifically a cost of energy crisis, more specifically a price-that-utility-consumers-pay crisis. Rates are scheduled to increase 50% on June 1. I have been trying to figure out what has happened for some time and have been listening to several politicians and radio talk show hosts explain the situation. Today I finally grasped the issue.

To provide some context, Maryland has been essentially a one-party state for the last 30+ (almost 40) years, with the Democrats controlling the governorship and both houses since the Agnew days. In 2002 an anomaly occurred: a Republican governor was elected. He lost in 2006 to a Democrat. The essential reason the Republican won in 2002 was because of the excessive corruption and incompetence within the previous Democratic governorship. To show you how incompetent they were, the Lieutenant Governor had the Kennedy clan name and she still lost. Let’s move on to the energy price issue.

In 1999, apparently riding the national wave of deregulation, the state legislature and governor decided to “deregulate” energy costs and introduce competition. BG&E (the utility), would be allowed to charge consumers the cost of energy, and competitors would be allowed to enter the market. None did. Why? As part of the “deregulation” agreement, the rates were rolled back to 1993 prices. BG&E and their competitors could only charge a capped price using costs that were based on prices from 1993. BG&E had contracts for electricity that ran through 2007, at which point they could charge market prices. Of course, electric rates are now scheduled to go through the roof.

The Republican Governor, at the time, tried to warn the state legislature that this was going to happen and that the 1999 law needed to be revisited to try to alleviate the blow. The Democrats, not wanting to give the Republican a positive issue to run on during the upcoming election year, did nothing. The Democrat candidate attacked the Republican administration for allowing rates to increase by 72%. The Republican countered that there was nothing to do because they were following the 1999 law and the current legislature did not want to revisit or rewrite the law. The Republican lost the election in 2006.

(Please don’t laugh when you read the following.) When the Democrat got into office, he and the legislature tried to “do something” to save the “people on fixed income” and the “small businesses who would be devastated” by the rise in rates. The first thing that was done was to lower the 72% increase to 15% during the first year (2006), after which the rates would increase 50% (2007). Now, what rate do you get if you add 50% on top of a 15% increase? Why you get 50% + 15% + 7% = you do the math. That’s not all, as part of the agreement to defer the 72% increase to 15% during the first year, BG&E gets to keep track of what consumers would have paid, puts that money in an account, and charges the consumers interest over a 10 year period. (OK, now you can laugh).

On the political side, one of the things that the Democrat legislature tried to do was replace the Republican appointed Public Service Commision with their own cronnies. The State Appeals Court ruled this was unconstitutional since the appointments are the prerogative of the executive branch. When the Democrats came to power, the Governor appointed his own PSC commisioner (the same person who was in charge back in 1999 by the way), and his salary was increased from $118k to $180k. (Now you can cry.)

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*laughs at appropriate place*

All I can say after reading all that is:

Thank god for Romantic Art. Because reality doesn't always do it for me.

In seriousness though, are there any linkages attached to your post. Search engines are throwing up some wildly differing sites when throwing some appropriate keywords at it. What I find even more disturbing is how far back some of the sites I am being directed to go. I hit one from 2000 and a few from 2005. As a local I am hoping you could hit me up with some more appropriate sources.

Good luck in getting some rational policies in regard to Energy in your state.

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*laughs at appropriate place*

All I can say after reading all that is:

Thank god for Romantic Art. Because reality doesn't always do it for me.

In seriousness though, are there any linkages attached to your post. Search engines are throwing up some wildly differing sites when throwing some appropriate keywords at it. What I find even more disturbing is how far back some of the sites I am being directed to go. I hit one from 2000 and a few from 2005. As a local I am hoping you could hit me up with some more appropriate sources.

Good luck in getting some rational policies in regard to Energy in your state.

I don't have particular links. News reports have been extremely poor in reporting information that integrates more than a few weeks (should I say days?) of information. I've been mostly listening to radio talk shows here in the area. I grabbed little bits of information upon each listening, and asked questions about things that weren't answered. Until I finally got an answer from someone else on another day. Fortunately, our ex-Governor now is a talk show host on Saturday mornings. I just happened to wake up and put the radio on this morning to hear him explain all of the missing pieces to me. I found this link to the discussion of the radio show this morning: Rate Hike Discussion. What's funny about that story is that the man who is complaining about the rate hike, signed a contract with another company!!

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(Please don’t laugh when you read the following.) When the Democrat got into office, he and the legislature tried to “do something” to save the “people on fixed income” and the “small businesses who would be devastated” by the rise in rates. The first thing that was done was to lower the 72% increase to 15% during the first year (2006), after which the rates would increase 50% (2007). Now, what rate do you get if you add 50% on top of a 15% increase? Why you get 50% + 15% + 7% = you do the math. That’s not all, as part of the agreement to defer the 72% increase to 15% during the first year, BG&E gets to keep track of what consumers would have paid, puts that money in an account, and charges the consumers interest over a 10 year period. (OK, now you can laugh).

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There is one more note that needs to be mentioned with regard to the interest charges. Consumers were legally forbidden from choosing an option to voluntarily pay the entire 72% in the first year if they wanted to avoid interest rate charges.

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There is one more note that needs to be mentioned with regard to the interest charges. Consumers were legally forbidden from choosing an option to voluntarily pay the entire 72% in the first year if they wanted to avoid interest rate charges.

Oh, naturally. That would have been a benefit provided only to people who could afford to pay the higher rate (i.e. to the rich) and is thus utterly unthinkable.

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I have been trying to figure out what has happened for some time and have been listening to several politicians and radio talk show hosts explain the situation.

You want to understand what has happened so you listen to politicians? :P

Maryland is not alone in this. The same thing is happening in Maine and other states. "Deregulation" only meant changing the regulations, with the resulting disasters blamed on "deregulation". Jack Wakeland wrote a comprehensive article on the political cause of the energy shortages in California in the Intellectual Activist a few years ago. The cost of actually producing energy has of course been increasing because of the viros. This fact is obscured in the "regulation vs. deregulation" political finger pointing.

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Out of curiosity, once this rate increase takes effect, how much will you be paying (per kilowatt-hour) for electricity in Maryland? Any idea how that will compare with rates in nearby states?

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I have been trying to figure out what has happened for some time and have been listening to several politicians and radio talk show hosts explain the situation.

You want to understand what has happened so you listen to politicians? :P

Actually, the Republicans in Maryland are pretty good when it comes to truthfully explaining the political issues. The problem is that the Democrat public is so cynical and used to listening to lies that it can't distinguish facts when it hears the truth. Ehrlich, the ex-Republican governor, actually banned two reporters from the Baltimore Sun from attending his news conferences and prevented anyone in his administration from talking to them. He was excoriated for this, but he stuck to his guns and didn't give in to the liars.

Maryland is not alone in this. The same thing is happening in Maine and other states. "Deregulation" only meant changing the regulations, with the resulting disasters blamed on "deregulation". Jack Wakeland wrote a comprehensive article on the political cause of the energy shortages in California in the Intellectual Activist a few years ago. The cost of actually producing energy has of course been increasing because of the viros. This fact is obscured in the "regulation vs. deregulation" political finger pointing.

Yes, I remember reading about what happened in California. Every state has its own distinctive story, I'm sure. The ignorance here is bountiful. During yesterday's radio show, one caller said that he doesn't believe what Ehrlich said and that the problem is entirely from BG&E. The caller said that in order to keep the cost of electricity low, all electricity produced in the state should only be sold within the state at regulated prices. Ehrlich pointed out that that is not how the electricity business system works. There hasn't been a generating plant built in the state in over 30 years. BG&E doesn't generate electricity, they only transmit and distribute it, it was pointed out. BG&E buys electricity from a grid that serves several states in the East. The caller, who said he voted Democrat, couldn't understand this and was adamant about his position.

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Out of curiosity, once this rate increase takes effect, how much will you be paying (per kilowatt-hour) for electricity in Maryland? Any idea how that will compare with rates in nearby states?

As far as I can find out from all the numbers, the rate as of Jan 1, 2007 is 10.88 ¢/kWh. Add 50% after June 1.

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BG&E doesn't generate electricity, they only transmit and distribute it, it was pointed out. BG&E buys electricity from a grid that serves several states in the East.

The same thing happened in Maine. Bangor Hydro was forced (under "deregulation") to divest all power production and now only transmits it. As far as I know there are no competitors for the transmission because no one else wants to do it, but the the delivery costs have not risen much, if at all, while there have been large increases in consumer total prices because of cost increases at the source.

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Out of curiosity, once this rate increase takes effect, how much will you be paying (per kilowatt-hour) for electricity in Maryland? Any idea how that will compare with rates in nearby states?

As far as I can find out from all the numbers, the rate as of Jan 1, 2007 is 10.88 ¢/kWh. Add 50% after June 1.

Thanks. It looks like there is also a "delivery service charge" of 2.37 c/kWh. So if that goes up by 50% also, rates will be about 20c/kWh. Quite high.

The ignorance you document is mind-boggling, but it's just as bad in other places. Here (Washington) for example, people recently approved an initiative that will require 15% of electricity to come from "renewable" sources by 2020. (Never mind that 80% already comes from hydroelectric - that doesn't count as renewable!) And our legislature recently passed a law prohibiting the importation of more coal-generated electricity. But the average person who voted for, or approves of, these laws, would no doubt deny that they will result in higher electric rates. "We'll just build windmills or solar panels" would be their response. It will come as a complete surprise to them when they find out that these "alternative" forms of electricity generation are quite expensive.

Most people have little idea what has to happen to make the lights go on when they throw the switch. They don't connect, in their own minds, environmentalist legislation with later price increases in things they need to live.

....

Given what's happening in Maryland though, it would be interesting to see people's response there if somebody came along and proposed building a few nuclear reactors. Obviously, the ecofreaks would oppose this, but I wonder if somebody who has seen his electric bill jump up would be able to see that more power generation would be a good thing.

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Here (Washington) for example, people recently approved an initiative that will require 15% of electricity to come from "renewable" sources by 2020. (Never mind that 80% already comes from hydroelectric - that doesn't count as renewable!)

The viros are succeeding in destroying hydro power dams to "restore rivers and fish passage" all over the country. Ten years ago this was one of the things few would take seriously as a threat. Today it is routine and celebrated in the media.

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I have been following BG&E stock lately, as it has been doing quite well. What is the likelihood that the increase will be further rolled back?

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The viros are succeeding in destroying hydro power dams to "restore rivers and fish passage" all over the country. Ten years ago this was one of the things few would take seriously as a threat. Today it is routine and celebrated in the media.

Yes, I know. So far they haven't managed to destroy any of the big ones on the Columbia and Snake rivers, but they're trying. (I believe one or two small hydroelectric dams on the Olympic peninsula were torn out, however.)

For years, though, the Bonneville Power Administration (which runs the federally-owned hydroelectric dams in the Northwest) has been forced to spill some water without using it to generate electricity - supposedly to take care of the fish. I believe this lowers their generating capacity by about 1,000 megawatts.

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