Ehrlich in Awkward Spot on Rates

Washington Post
Mar. 27, 2006

The furor over rising electricity prices has caught Maryland Gov. Robert L. Ehrlich Jr. between his loyalty to the state's business community and an electorate bracing for bloated bills this summer.

As Maryland lawmakers tried to squeeze concessions from the state's largest electric company last week and utility lobbyists hustled to Annapolis to preserve their interests, the Republican governor declared himself a "neutral broker."

It was an unexpected statement from the governor, who has repeatedly told Marylanders his job is to set the agenda on such pivotal matters. But it highlighted a rare dilemma for Ehrlich, the state's first Republican governor in a generation and one who has committed himself to improving the state's business climate. That has included remaking the state's utilities commission in what he describes as a pro-business mold.

"He can't turn his back on the [utilities] completely," said Matthew Crenson, a Johns Hopkins University political science professor. "But if people get angry enough, he'll have to respond to the public outcry."

Since news of rising rates for Pepco and Baltimore Gas and Electric Co. customers broke this month, the governor has said rate increases of as much as 72 percent "will not stand." But his failure to offer a firm plan to forestall rate hikes is a sign, Crenson and others said, of the governor's awkward position.

Ehrlich was candid about his dual role in an interview last week. He said that he is concerned about working-class Maryland residents who would be pressed to pay $742 more a year for electricity but that he also must look out for the financial health of Constellation Energy Group's BGE -- a major employer that keeps the lights on. He said he views himself as a go-between for the Democrat-controlled General Assembly and the utility companies.

"We're in the middle here as far as we're playing a little bit of the broker role," he said. "Brokers look at both sides, and brokers weigh merits, and brokers get to yes, and that's our bottom line."

It's too early to know how the struggle over electricity rates will play out; political leaders from both parties have been trying to negotiate a plan to scale back the hikes approved by the state's Public Service Commission. Pepco's customers in Montgomery and Prince George's counties would see a 38.5 percent increase this summer, raising their bills an average $468 annually.

If handled poorly, this could become a defining election issue for the governor and legislators this fall, analysts and politicians say.

There are certain issues that penetrate the electorate, much in the way rolling blackouts in California helped seal the fate of recalled Gov. Gray Davis or a failure to adequately plow streets after a blizzard cost mayors in Chicago and Denver their seats.

"Voters have these clonk-on-the-forehead moments," said Thomas Schaller, a political science professor at the University of Maryland Baltimore County who is backing one of the Democrats vying to unseat Ehrlich, Baltimore Mayor Martin O'Malley. "Some issues just sink in because they have a day-to-day resonance that's universal. Everybody has to pay an electric bill."

House Speaker Michael E. Busch (D-Anne Arundel) and Senate President Thomas V. Mike Miller Jr. (D-Calvert) said they have been surprised by the governor's neutral posture.

"The expectation is that the chief executive of the state would step up and take a leadership role," Busch said. "To date, he's offered no legislation and no clear direction to either chamber."

The General Assembly is vulnerable to criticism, as well, because the Democrat-controlled body approved electricity deregulation in 1999, setting in motion the process that led to the huge rate increases.

Last week, the House moved forward with legislation to gain leverage in slowing down the rate increases by appointing an independent counsel to investigate Constellation's planned merger with a Florida power company. The measure probably will move to the Senate this week.

Constellation has, in turn, offered to use a portion of the savings from the merger to reduce the shock of rate increases.

"This is a crisis situation," Miller said. "The governor needs to be hands-on."

Ehrlich's chief of staff, Chip DiPaula Jr., said the governor's strategy is deliberate. The administration is running through "many scenarios" and is ready at a moment's notice to work with lawmakers. But DiPaula said the governor is not going to get out ahead of legislators before they know what they want to do.

"It comes at a price in the short term," DiPaula said, "but is worth it to develop the appropriate solution."

When the governor has gotten out in front of lawmakers, on issues such as slot machine gambling and medical malpractice, it has brought losses for the Republican administration and strained relations with legislative leaders.

"If it's a Republican initiative, it's difficult from the start," Senate Minority Leader J. Lowell Stoltzfus (Somerset) said. "They bang him for not leading, and then they kill them and say, 'You haven't done anything.' It's the ironic, unfair nature of politics."

In this case, if Democrats ignore the governor's wishes, Ehrlich could always go it alone when the legislature adjourns in two weeks. He could negotiate a deal with Constellation, and the Public Service Commission could authorize a revised program to gradually increase rates, DiPaula said.

Democrats have criticized the commission, with four of five members appointed by Ehrlich, as too lenient on the utilities. When e-mails surfaced this month showing frequent, and what Democrats said was inappropriate, contact between the state's chief utility regulator and Pepco's lobbyist, the governor defended his appointees as being in keeping with his pro-business philosophy.

The administration, in turn, has cast the General Assembly as the "people who created the problem," reminding reporters that Miller was one of the leading proponents for passing electric deregulation in 1999. Moving to a free market was supposed to result in lower bills, but the competition has not materialized.

Ehrlich's press aides also handed out a timeline last week to show that the utilities commission has been preparing legislators in nearly two dozen meetings since January 2005 for the potential fallout from lifting rate caps for BGE customers.

In a sign of the campaign fight ahead, Ehrlich's Democratic challengers have taken up the issue. Montgomery County Executive Douglas M. Duncan called for new leadership at the commission and asked in a radio interview Saturday, "Where are they in the merger?"

O'Malley organized single mothers, retirees and small-business owners last week to deliver petitions with more than 4,000 signatures to the governor's office demanding relief from rate hikes and the "failed leadership" of the Ehrlich-appointed commission.

"First oil, then gas, then 72 percent," said Ellicott City innkeeper David Balderson. "It just keeps hitting us, and it's driving us crazy."