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Power to the People

Organizations Flock To Annapolis To Protest BGE Rate Hikes

Jefferson Jackson Steele
FEED OFF THE ENERGY: Nnamdi Lumumba (center), who helped organize the Annapolis protest of BGE's rate increases, stands in front of the Governor's mansion and outlines complaints about the rate hikes being imposed on the citizens of Baltimore.

By Laura Laing | Posted 7/4/2007

The BGE rate increases might seem like a done deal, but to a group of impassioned activists the fight has just begun. The Maryland Coalition to Stop the BGE Rate Hikes is expecting electricity customers to rise up in opposition once the June bills hit their mailboxes. The 72 percent rate increase, brought on by the state's deregulation of electric utilities, has been rolled out over a nearly two-year period. Last summer, BGE increased rates by 15 percent. For customers who opted for a rate-stabilization program, another 38 percent increase went into effect on June 1; the remaining 12 percent increase will hit them Jan. 1, 2008. Those BGE customers who didn't sign up for the stabilization program were hit with the full 50 percent upsurge in their June bills.

The group is ready for reregulation, a phenomenon experienced by at least four states across the country, including Maryland's more conservative neighbor to the south, Virginia.

"No one can afford injustice," says coalition Chairman Leo Burroughs, a Bolton Hill retiree who has a long history of social activism. "It's an injustice to working people. It's a kind of economic violence that's been perpetrated on the poor and children and senior citizens."

On June 23, the coalition--which is made up of nine community organizations, including the All People's Congress, Baltimore Green Party, Democracy4Baltimore, and Unity for Action--staged a rally in Annapolis. The event began at Lawyers Mall, in front of the governor's mansion, before the group took an impromptu march through the city.

"Saturday was mighty fine," says Maria Allwine, coalition leader and Green candidate for Baltimore City Council president. About 60 people attended the rally, she says, and 40 more joined in for the march. "We had a lot of support," Allwine says, reporting that onlookers gave them the thumbs-up or honked their horns.

Additional events are planned for the summer, as well as a class-action suit and pressure on legislators to reregulate. Burroughs believes that the group will become stronger and larger as the rate hikes become reality. "Theoretically, [BGE customers] are angry," he says. "Staying the course is what we're about. We must be consistent and active."

Chris Bush, a Baltimore County accountant and self-taught rates expert notes that the reports on the increases have been confusing and difficult to follow. He presented cold, hard numbers at a Senate Finance Committee on March 6--numbers that BGE officials reject.

According to Bush, the total cost of producing and distributing electric power is between 5.85 and 13 cents per kilowatt hour; 2.5 cents per kilowatt hour is needed to cover distribution of the electricity, a rate that is controlled by the Maryland Public Service Commission. Constellation Generation Group owns nine power plants in the state that produce 80 percent of BGE's electricity, with 50 percent generated from nuclear power and 20 percent from coal. Nuclear power costs 3 cents per kilowatt hour to produce, while power generated from coal costs 5 cents per kilowatt hour. Out-of-state production is more costly, since it usually depends on natural gas. Bush notes that this fee is 13 cents per kilowatt hour.

Bush asserts that these figures are not simply the cost of electricity itself but also encompass salaries, overhead, and a 5 percent profit for the company--a notion that BGE officials flatly deny.

"I'm not sure how he would know that," says Rob Gould, chief spokesman for Constellation Energy Group, BGE's parent company. "As with any business, there are other costs involved. It's easy to throw those numbers out, but you could say the same thing about a can of Coke."

But Bush and Allwine don't stop there. They believe that BGE is purchasing in-state electricity at the open-market price of 10.5 cents per kilowatt hour--from Constellation Energy. As Bush describes it, Constellation sells the electricity to other states, and BGE buys it back from outside the state. "They're making massive profits," Bush says, citing the Constellation CEO's $6.9 million salary.

Again, BGE officials deny this. "The power is put on the grid," Gould says. "[Rate increases are] nothing more than a global energy issue." Hurricane Katrina helped up the cost of producing energy, and had the caps not gone into place in 1999, BGE customers would be in exactly the same place they are today, Gould says.

But Bush proposes a blended rate of 6.5 cents per kilowatt hour to take into account the in- or out-of-state production and the different methods of producing electricity. Before June 1, BGE customers were paying 5.85 cents per kilowatt hour of electricity.

So what are the new rates? A whopping 13.6 cents per kilowatt hour. "That's important for people to understand because that's what they're paying now," Bush says. "They're paying 13.6 cents--about double what it costs BGE."

It's certainly double what they were paying, but the process simply doesn't work that way, BGE officials say. Electricity is put out for bid by as many as 10 to 15 qualified suppliers, says Mark Case, BGE's senior vice president for business performance, strategy, and regulatory affairs. It's all about who has the lowest price, he says.

Gould doesn't argue that the rate hikes are "staggering." However, he points to the fact that since caps were instituted in 1999, Constellation shareholders were footing the bill and shouldering the risk for new power plants and maintenance--all in a fluctuating energy market. Reregulation would not solve any problems, he says.

"Assuming you can unscramble that egg, somebody has to pay for it," he says.

In the meantime, Constellation's stock has almost doubled in value, and even before the new rates went into effect the company reported a 72 percent increase in profits in the first quarter of 2007, Allwine says. Gould, however, says these increases are not due to the BGE rate increases; rather, he says, they are due to the fact that the company is the largest producer of electricity in North America.

Case says that generating power is not all about profit, even though Bush says Constellation nets a double-digit percent return on capital. "This is not a windfall profit," Case argues, noting that it is expensive to run, maintain, and shoulder the liabilities associated with power plants.

But these activists aren't just angry with BGE. They're ticked off at Gov. Martin O'Malley, who during his campaign promised to stop the rate increases. Allwine points to an $80,000 campaign contribution by Constellation as proof that O'Malley was bribed. (Robert Ehrlich's campaign received a $70,000 contribution.)

"When companies contribute to a campaign--and they do it all the time--they don't do it because they like the guy or they think he's cute," she says. "It's quid pro quo. Anybody who doesn't believe that the $80,000 that O'Malley took isn't guiding his decisions is just misinformed."

On May 28, Allwine sent a letter to Patricia Jessamy, state's attorney for Baltimore City, alleging that O'Malley was bribed by Constellation and BGE. She hasn't received a response. "Were asking for a bribery investigation," Bush says. The governor's office did not respond to requests for interviews for this story.

The Maryland Coalition to Stop the BGE Rate Hikes is also pushing for a special session of the General Assembly to discuss reregulation. Del. Jill Carter (D-Baltimore City) has called for the special session. (Carter is also a candidate for Baltimore City mayor.) Last summer's special session resulted in rolling out the rate increases over a nearly two-year period.

"The legislators, they all go along with it," Allwine says. "All of them have accepted money from BGE--small amounts, but money. Of course it influences their vote, of course it does. Only a fool would think that it doesn't."

Allwine would like to see Baltimore City become more involved in advocating for reregulation. "The city could pressure the state. They're doing nothing, nothing,"she says.

With the increases already in effect, Allwine admits that the coalition is less visible. "When there was a Republican governor around to bash, there were more groups involved," she says. "It's taken us a little longer to get our message out, but it is getting out there."

Meanwhile, advocacy groups like Association of Community Organizations for Reform Now (ACORN) are noticeably absent from the coalition. Stuart Katzenberg, head organizer for Maryland ACORN, explains that the organization is helping its members apply for Maryland Energy Assistance Program funds. "Part of it is getting our members resourced up," he says. "There's a kind of yin and yang" with member services and political action.

"This issue is a perfect example of why people don't get involved in politics," Allwine says. "We've been shafted."

Still, the David vs. Goliath fight between activists and BGE is empowering to Burroughs, and additional protests and rallies will be scheduled throughout the summer. "It is incumbent upon us to rally community support to pressure our legislators to reregulate the company," he says.

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