Get ready for a high-stakes legislative debate over retail energy deregulation

A quarter century after Maryland allowed consumers to buy their electricity directly from suppliers, two powerful lawmakers, unhappy with the results, are planning to introduce legislation to add new guardrails on the system and strengthen consumer protections.

Del. Brian M. Crosby (D-St. Mary’s), vice chair of the House Economic Matters Committee, and Senate President Pro Tem Malcolm Augustine (D-Prince George’s) both said the system as it’s devised enables unscrupulous companies to overcharge unsuspecting ratepayers who think they are getting bargains.

“We’re looking into putting some real guardrails on retail supply,” said Augustine, who is chair of the Energy subcommittee on the Senate Committee on Education, Energy and the Environment. “The retail supply has been a real problem area for my constituents for my entire time in the legislature.”

At the same time, a colleague of Crosby’s on the Economic Matters Committee, Del. Adrian Boafo (D-Prince George’s), said he is contemplating legislation that might help to expand the state’s retail electricity market while also adding consumer safeguards.

“We have a bill I’m working on with industry about protecting consumers in Prince George’s and [Baltimore] city,” he said. “Our bill is essentially trying to raise the standard on how they operate.”

The forthcoming legislative debate comes at a time when consumer advocates, including a state agency that protects ratepayers’ interests on utility matters, are pressuring policymakers and regulators to crack down on unsavory practices by electric retailers. But at the same time, powerful players in the retail energy marketplace are urging lawmakers to consider creating more space for competition, which would put Maryland more in line with Texas and states in the South, which have little to no regulation.

Until the Maryland law to deregulate the retail energy market was passed in 1999, customers bought their power directly from the monopoly utilities around the state. But rather than adopting full-scale deregulation, which would have required every customer in the state to shop for an electricity supplier, state lawmakers created a failsafe: Ratepayers would automatically get their electric supply from the utilities unless they specifically wanted to shop for a better deal. This system became known as “standard offer service.”

Even so, hundreds of thousands of electric consumers a year avail themselves of the competitive market.

But over the years, it has become apparent that at least a segment of the electricity market has been occupied by bad actors who prey particularly on low income communities, offering cheap deals that sound good initially but can result in higher prices eventually. Many of these energy supply packages are sold door-to-door or in front of supermarkets or other retail outlets in poor neighborhoods.

An exhaustive study released earlier this year by a doctoral student at the University of California at Berkeley detailed the disparities between electricity rates paid by poorer residents in Baltimore and those in the rest of the state. And statistics supplied by Laurel Peltier, the chair of a group called the Maryland Energy Advocates Coalition and utility advocate for AARP Maryland, shows that in 2022, customers who bought their electricity through retail energy suppliers paid an average of $483 more for the year than if they had opted for standard offer service.

Peltier, who often counsels low-income ratepayers who are facing utility shut-offs, crunched her numbers from statistics released by the U.S. Energy Information Administration. She found that 1,970,755 Maryland households used standard offer service last year, while 368,589 shopped for electricity. The big utilities, like Baltimore Gas & Electric and Pepco, continue to distribute the energy.

Yet big-time national energy suppliers like NRG and Vistra continue to press the case that more competition in the electric marketplace would lower prices and expand the use of clean energy sources. In July, the Maryland Choose Who You Use Coalition, a 501c4 advocacy organization, put out a poll showing that Maryland consumers favored more competition in the gas and electric supply markets by strong margins.

Crosby, in an interview this week, said he questioned the poll’s language and veracity. The principal poll question said: “More than 80% of households in Maryland are involuntarily connected to their local utility, without knowing other energy providers and alternative energy sources are even available. Do you agree or disagree that Maryland should create true competition, where consumers can choose their own energy providers and select renewable energy sources?”

NRG has been pressing Crosby, who chairs the Economic Matters Public Utilities Subcommittee, for a meeting in recent weeks, which he has resisted. He said he has met with NRG’s lobbyists in the past and doesn’t think the company is offering anything new right now.

A mid-October letter to Crosby from Sarah Battisti, NRG’s government affairs director, asks the lawmaker what his plans for legislation in 2024 are and restates the company’s assertion that its goals for a more competitive marketplace can mesh with Maryland’s clean energy and climate mandates. In the letter, obtained recently by Maryland Matters, Battisti acknowledges “the presence of ‘bad actors’ who engage in predatory and misleading sales tactics” in the competitive market — and said NRG would be open to supporting broader legislation that also cracks down on door-to-door electricity sales.

“As you know, Governor Moore has positioned the State of Maryland at the national forefront of the fight against climate change, establishing highly ambitious and laudable timeframes for reducing our dependence on fossil fuels and attaining net zero emissions status,” she wrote. “Retail competition provides consumers with the opportunity to do their part by purchasing electricity from renewable sources — in fact retail competition has driven demand for renewable energy. Given the emphasis on the fight against climate change, and the proliferation of events throughout the country and across the world that reinforce the urgency to act, why would the [General Assembly] eliminate a vital piece of the solution at this of all times?”

In 2021, then-Del. Kathleen M. Dumais (D-Montgomery), who was at then the vice chair of the Economic Matters Committee, introduced a bill to offer significantly more competition in the electricity markets. But it died a swift death.

“I don’t think the state is ready for that,” Boafo conceded in a recent interview, but said he thinks it’s possible to craft a bill that could open the door to more competition while also strengthening consumer protections.

“I’m in favor of folks having more choices or options,” he said.

‘Just do right by Marylanders’

But the prevailing political sentiment in Annapolis — at least for now — is moving away from more deregulation and toward greater reins on the industry.

Crosby notes that the last big push for more deregulation in Maryland two decades ago came when the defunct energy giant Enron, a company that practically wrecked the U.S. economy, was promoting the idea.

“If you’re saying Maryland should go for a product that has never really existed and was fought for by Enron, that’s never going to happen,” he said.

Crosby said Maryland policymakers have better data than ever and that it irrefutably shows that standard-offer service is the “cheapest option and best for consumers.”

Crosby and Augustine said they aren’t ready to share details of their pending legislation on the retail electric market yet, but one thing they insist is that they aren’t looking to dismantle deregulation altogether.

“I have heard a persistent rumor about a move to re-regulate the supply market,” Augustine said. “I have not talked to any legislator who is looking to do that.”

The lawmakers both describe the bill they are working on as a consumer protection measure first and foremost.

“That’s what the government does — protect people,” Crosby said.

Augustine added: “We’re not going to create guardrails that will injure an entity that is doing right by Marylanders. Just do right by Marylanders and you don’t have anything to worry about.”

To achieve their goals, he said, the lawmakers are “going through and looking at what we can and cannot do with this industry.”

But advocates for more competition in the electric marketplace may have more to worry about than just what happens in Annapolis. Earlier this year, the Maryland Energy Advocates Coalition asked the Maryland Public Service Commission (PSC), which regulates utilities, to end the practice known as “purchase of receivables.”

Under this system, which has existed since deregulation took hold in Maryland, utilities assume responsibility for billing the amounts shopping customers owe retail suppliers and reimburse the supplier for those bills within five days, regardless of whether the customer actually pays the bill. Typical customers see supply and distribution on their electric bill. Critics say this enables the suppliers to get paid without having to worry about their customers’ credit-worthiness or ability to meet their bills, and also makes it more likely that they’ll sign any customer.

In a filing with the PSC, the Maryland Office of People’s Counsel, which represents consumers’ interests on utility matters, urged the commission to use this moment to evaluate whether the deregulated electric market is working. David S. Lapp, the people’s counsel, said a major overhaul of the rules governing retail energy choice is necessary to protect residential customers.

“Existing regulations are full of loopholes that allow retail suppliers to take advantage of customers,” he said. “Consumers are being harmed by a lack of effective regulations covering supplier licensing, marketing practices, and customer disclosures.”

While working through its regulatory scheme, the five commissioners at the PSC — three of whom were appointed to the commission this year by Gov. Wes Moore (D) — are watching the legislative action closely but not yet ready to stake out a position. However, the previous PSC chair, Jason M. Stanek, who was appointed by former Gov. Larry Hogan (R), became increasingly critical of retail energy deregulation, and in a recent interview, the new chair, Fred Hoover, expressed skepticism as well.

“My view is, standard offer service is an important option for consumers to have,” he said, “and I’ve had real concerns about the elimination of it.”

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