GBC’s Fry: Re-regulation issue merits caution, not haste

Don Fry Commentary on WYPR

This winter, Marylanders have been very angry about unusually high utility bills. That’s why lawmakers in Annapolis feel a certain amount of pressure to revert our state back to full-fledged regulation of electricity prices.

As a former legislator, I remember the same kinds of pressure during the late 1990s that ultimately led to the passage of electricity de-regulation. We have since learned some things about the risks of trying to legislate market behavior.

That’s why, this time, state lawmakers should exercise caution, not haste. Our General Assembly should be careful not to act with the best of intentions, but produce the worst possible result.

That’s essentially the conclusion of the state Public Service Commission, which spent two years and millions of dollars on an exhaustive study into the risks and benefits of different regulatory courses our state might take.

The PSC’s recent report recommended that the General Assembly not pursue full re-regulation. It sounded several warnings about statewide re-regulation, including observations that it would discourage new privately-financed power plants, stifle emerging competition from alternative suppliers, shift high capital costs to ratepayers, and expose them to much market risk.

Given the expertise of the PSC and its advisors, we should be careful not to impose a solution that works politically in the short-term, but brings about long-term unintended consequences that far outweigh its short-term benefits.

Members of the General Assembly would be well advised to re-read the PSC report.

This is a complex issue, with prices largely driven by global markets. Utility costs are rising similarly in both regulated and deregulated states. Maryland consumers and businesses depend on affordable energy to function. We need to be cautious in addressing an issue that impacts so much of Maryland’s economy.

Our state needs new electricity generation. And we need private investment to make that happen. It’s entirely appropriate and timely for the legislature to consider our growing electricity and energy challenges but they must do so deliberately and cautiously and not out of political expediency.

For the Regional Business Report, this is Don Fry, President and CEO of the Greater Baltimore Committee, for 88.1 WYPR, your NPR news station.

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