"O'Malley to offer energy package" | Baltimore Sun

This morning's Baltimore Sun has a front page article about how Maryland's recently elected governor, Martin O'Malley, is responding to looming energy and electrical power shortages in the state. The headline is "O'Malley to offer energy package." The article says that among the measures the governor's energy administration contemplates submitting to the legislature is a bill to have the state's power companies contribute money to a "strategic energy investment fund." The fund in turn would "invest in energy-efficient technologies and promote nonpolluting power alternatives."

oldstyleliberal lives in a suburb of Baltimore, Maryland, and buys his electrical power from Baltimore Gas & Electric, a part of the Constellation Energy Group. BGE and companies competing with it to sell electrical power in Maryland in 2006 ruffled consumers' feathers mightily by announcing steep price hikes. The rate increases were softened somewhat when politicos in the state legislature objected and threatened to take severe action — see New Electricity Rates on Tap for Maryland.

Since then, now-Governor O'Malley, a Democrat who was Baltimore's mayor at the time, ran against and defeated a Republican incumbent, Governor Robert L. Ehrlich. O'Malley, says today's article, "campaigned on the unfulfilled promise of undoing a 72 percent electricity rate increase for 1.2 million Baltimore Gas & Electric customers." This set of new proposals floated by the O'Malley administration instead "appears likely to ... further increase consumer costs in the short term."


The energy fund portion of the proposed legislative package — which also eyes laws "reducing overall electricity consumption by 15 percent by 2015" and "requiring utility companies to buy 20 percent of their power from wind, solar or other renewable sources by 2022" — would "not rely on tax revenue. Instead, the governor is banking on proceeds from the auction of "pollution credits" under an initiative of 10 states to voluntarily reduce carbon dioxide emissions." CO₂ emissions are a major part of the "greenhouse gases" that are said to promote global warming.

The O'Malley brain trust is banking on a regional "cap-and-trade" system, just getting under way, to generate something like $100 million in windfall revenues that would wind up in Maryland's energy fund. The Sun article is not totally clear on how this would work; it says, "Maryland expects to receive about $100 million a year from the sale of its pollution credits." This has to do with the Regional Greenhouse Gas Initiative, under which power plants in ten voluntarily participating Northeastern and Mid-Atlantic states, including Maryland, "must keep emissions below a downward-sliding limit, or buy credits from cleaner power plants."

The assumption here may be — it's not perfectly clear to oldstyleliberal — that power plants in other RGGI states, because they emit more greenhouse gases into the atmosphere than Maryland plants do, would have to buy up some of the permits issued to the (relatively clean) Maryland plants. The money the Maryland power utilities would receive would, under the O'Malley plan, wind up in the energy fund. That way, Maryland utilities would supposedly not have to pass along the costs of filling the fund to their customers in the form of higher electric bills.

At least, there is that hope. O'Malley's political opponents are, however, skeptical:

Del. Warren E. Miller, a Howard County Republican on the [Maryland House of Delegates] Economic Matters Committee, said he doubted that the "cap and trade" system would create even a $100 million windfall, and that added costs borne by power plants would probably show up on consumers' electrical bills.

The dollar size of the permits windfall is in doubt in part because "the yield won't be known until the first [RGGI] auction this summer." But Maryland Public Service Commission Chairman Steven B. Larsen, an O'Malley appointee, said (according to the article) that he expects "the amount could be twice as high."

There is also this consideration: " ... recent tax increases and economic uncertainty might spur a fight in the legislature this session if lawmakers prefer to give all or some of the $100 million back to consumers."

It sounds to oldstyleliberal as if the O'Malley people want to make sure one of two things happens:

1. If Maryland's power producers do reap an RGGI windfall, it (because the money goes right into the new fund) won't wind up reducing consumers' electric bills. Lowering electric rates would give consumers no incentive to conserve energy. That would wind up exacerbating global warming.
   
2. If by chance there is no such windfall, utilities would still have to pay the required money into the new fund, which would cause electric rates to go up as the utilities pass some or all of these costs on to consumers. Higher rates would encourage even more conservation.
   

Either way, the recently boosted Maryland electricity rates would tend not to go down, as O'Malley suggested on the campaign trail that he wanted, and might well go up. No matter where the money to be injected into the new energy fund comes from — from an RGGI windfall or from Maryland power companies' general revenues — it will ultimately come from energy consumers in Maryland, and/or those in other states participating in RGGI.

So the proposed fund would encourage energy conservation and ameliorate global warming in two ways. It would invest in sustainable, environment-friendly energy technologies. And it would encourage energy conservation by in effect adding a hidden surcharge on electric power consumption in Maryland, or elsewhere, to pay for the fund.