Get Ready for the Big Legislative Fight of 2023

House Economic Matters Chairman Dereck E. Davis (D-Prince George's). Photo by Danielle E. Gaines.

Sometimes in Annapolis a major legislative fight can be seen far off on the horizon.

That was certainly the feel during a public hearing in the House Economic Matters Committee Thursday that nobody outside a few dozen lawmakers, regulators, energy policy geeks and high-paid hired guns was liable to understand. Even the sponsor of the legislation in question, Del. Kathleen M. Dumais (D-Montgomery), the committee vice chair, all but conceded that the bill is doomed to fail this time.

“It’s an important conversation to start having,” she told her colleagues. She later added: “There’s work to do on the bill. I’m the first to acknowledge and admit that.”

Dumais’ measure is designed to open electricity and natural gas supply markets in Maryland to greater competition. Dumais and the bill’s supporters say this would offer consumers more choices and finally fulfill the promise of an epic 1999 legislative fight that resulted in  restructuring, but not full deregulation, of the state’s electric and gas utility markets.

Detractors say the bill attempts to solve a problem that doesn’t exist and threatens to destabilize a market that is working well and provides several built-in protections for consumers.

The debate is full of eyes-glaze-over jargon like “default customer,” “standard offer service,” and “supply-side infrastructure.”

“Very complex, arcane stuff,” observed Economic Matters Committee Chairman Dereck E. Davis (D-Prince George’s).

And if that wasn’t confusing enough, the state’s utility regulator, which is occasionally accused of being too cozy with the industry it oversees, thoroughly panned Dumais’ legislation as being detrimental to consumers, while the state agency that protects consumers on utility matters seemed open to a dialogue about deregulation in the future.

Muddying the picture even further: The bill’s proponents hold up Texas, where utilities just experienced catastrophic failures after an unprecedented snowstorm and cold snap, as the model for how a deregulated electricity market ought to work.

“Don’t panic,” Dumais told her colleagues. The rolling brownouts in Texas were caused by infrastructure failure, not supply problems, she and other bill proponents said.

Make no mistake: A lot of money is at stake. Thursday’s 90-minute hearing seemed like a dress rehearsal for a full Annapolis lobbypalooza that won’t fully flower until 2023 (because nobody wants to tackle an issue this complex in the pandemic year of 2021 or the election year of 2022).

The 1999 legislation, equally complex and arcane and certainly remote to every last electricity ratepayer in the state of Maryland, came after a year’s worth of study, and was largely embraced by the General Assembly leaders of that generation. One intent of the bill: To open the electricity supply market to more competition. It only worked up to a point.

Today, about 20% of Maryland ratepayers choose their own energy suppliers. They still rely on the big utilities — Baltimore Gas & Electric, say, in the Baltimore area, or Pepco in the Washington, D.C., suburbs — to distribute the energy. But they can choose to have someone other than the utilities supply the energy. Either way, consumers receive one bill, from their standard utility company, regardless of who is providing the energy.

A few years ago, according to regulators and lawmakers, more than 25% of consumers bought their energy on the open market. But the number went down after the polar vortex of 2014, when some people buying energy from loosely regulated suppliers discovered their heating bills had skyrocketed.

Now, about 80% of Marylanders automatically sign up for “standard offer service,” meaning they agree to use the energy supplied by the same utilities that are distributing the power they use — including Del. Richard K. Impallaria (R-Baltimore County), a member of the Economic Matters Committee, said he uses “SOS” for the electric service he uses at home and in his businesses.

“It’s just simply the easiest way for me to do it,” he said.

Impallaria added that, unlike shopping for food or drinks or clothing, where a consumer has choices, there’s no point in shopping for energy suppliers. “It doesn’t matter what electricity I get — it all tastes the same, it all smells the same, it all comes through the wire the same,” he said.

But Dumais and the people who testified in favor of her bill Thursday — all representatives of the energy generation giant NRG Energy — said more competition could lead to lower prices. What’s more, they said, if utilities get out of the energy supply business, they can focus on maintaining and improving the infrastructure that helps them distribute energy to businesses and homes.

Representatives of the state’s “Big 4 utilities” — Pepco, BGE, Delmarva Power and Potomac Edison — testified against the bill. They noted that several groups were opposing the bill, while the only entity testifying for it was NRG.

Jason M. Stanek, chairman of the Maryland Public Service Commission, said that even with 80% of ratepayers buying their electric supply from the same utilities that are distributing the energy, there are already 260 companies competing to supply electricity and natural gas in Maryland.

“I haven’t been approached by any of Maryland’s 6 million residents to have a competitive market similar to Texas,” Stanek, who testified in opposition to the legislation, said Thursday.

The PSC chairman complained he only learned about Dumais’ legislation on Feb. 8.

“It’s immense and breathtaking in the scope of what it envisions,” he said.

Asked by Del. Lorig Charkoudian (D-Montgomery) if a deregulated market would enable utility companies to spend more money and attention on infrastructure, as Dumais and the NRG representatives maintained, Stanek scoffed.

“I personally don’t think that’s a very compelling argument,” he said.

But if fans of more competition were roughed up a bit by Stanek, they may have gotten some comfort from David Lapp, the director of the Maryland Office of People’s Counsel, which represents consumers on utility matters in the state.

Lapp did testify against the bill, but said some aspects of the legislation might merit further study.

That should be enough to propel the debate for at least a few years more.

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Josh Kurtz
Co-founder and Editor Josh Kurtz is the leading chronicler of Maryland politics and government. He began covering the State House in 1995 for The Gazette newspapers, and has been writing about state and local politics ever since. He later became an editor at Roll Call, the Capitol Hill newspaper, and spent eight years at E&E News, an online subscription-only publisher of news websites covering energy and environmental issues. For seven of those years, he led a staff of 20 reporters at E&E Daily, which covers energy and environmental policy on Capitol Hill and in national politics. For 6 1/2 years he wrote a weekly column on state politics for Center Maryland and has written for several other Maryland publications as well. Kurtz has given speeches and appeared on TV and radio shows about Maryland politics through the years.