- Maryland General Assembly,
- Maryland Governor's Race 2010,
- Utility Rates
In the United States, the powers of chief executives are limited. This is, in some ways, the entire point of our nation's existence.
So governors aren't just able to arbitrarily set the prices for goods and services. Cars can't just cost three bucks if the governor wishes it so, and beans can't just cost seven cents.
Beginning in 1999, when the General Assembly voted to deregulate the electricity market, Maryland applied this same standard to electric power. A Public Service Commission, with five members appointed by the governor, would be empowered to approve rate hikes. But what they could do to control rates was quite limited, based on the market rate for electricity.
Seven years later, Baltimore Mayor Martin O'Malley was running for governor, and repeatedly attacked the Republican incumbent, Bob Ehrlich, for offering a tepid response to a proposed 72 percent rate increase by Baltimore Gas & Electric. Ehrlich's hands were basically tied — the governor didn't have the power to stop increases.
O'Malley won the election, and guess what happened? Utility rates went up.
Now there's a role reversal going on: Ehrlich is trying to get back his old job from incumbent O'Malley, and the utility-related attacks are going in the opposite direction. A TV ad Ehrlich released last week revisits the utility episode. But does it paint an accurate picture?
"Remember this promise? 'Martin O'Malley, taking on BG&E to stop the rate hikes.' [Note: The previous quote is from a 2006 O'Malley campaign ad.] Never happened. Your bill went up 72 percent..."
Ehrlich elaborated a bit on this point at a press conference Monday.
"Martin O’Malley in 2006 said he would stop the rate hike," Ehrlich said. "All that stuff, all that demagoguery, all those press conferences … was for show and everybody knew it. Come 2007, the rate hikes take effect and Governor O’Malley says ‘I tried. Sorry. Boom. Done.'”
O'Malley did make his promise to fight electric rate hikes a centerpiece of his campaign against Ehrlich in 2006, hammering the Republican for appointing a public service commission that was too friendly to utility companies.
Unfortunately, as O'Malley knew at the time, there isn't much the governor can do to stop rate hikes. And so it was only a few months after the election that the Public Service Commission approved a 50 percent increase.
Note that it was 50 percent, not the 72 percent that the Ehrlich campaign claims. To get there, Ehrlich cites, of all things, a column by the Baltimore Sun's ombudsman. Here's what the story says (emphasis ours):
So when The Sun's lead front-page article on May 24 proclaimed, "50% increase in BGE rates OK'd by PSC," it was obvious that O'Malley's promise to stop the huge increases had failed. This article focused mainly on important consumer issues. But, in my view, it did not clearly explain that combined with the 15 percent rate increase approved by the General Assembly in 2006, BGE customers would now be paying the 72 percent that produced such an outcry when the prospect surfaced last year.
In 2006, BGE asked for a 72 percent increase. The General Assembly — of which every member was up for re-election — passed a law capping the increase at 15 percent. The next year, the Public Service Commission approved a 50 percent increase. If you do the math, it works out to 72 percent.
Is it fair to hold O'Malley accountable for actions the General Assembly took a year before he entered office? It's hard to say. O'Malley's actions on the campaign trail probably encouraged them to pass the 15 percent law, and all it did was delay the inevitable.
"... And O'Malley gave the bureaucrat who approved the rate hike a huge raise." While the narrator doesn't say the amount, a graphic makes it clear the raise was $68,000. The man O'Malley appointed to chair the Public Service Commission, Steven Larsen, was paid $185,000 a year. Ehrlich's last chairman, Kenneth Schisler, a former Republican member of the House of Delegates, was paid $117,000 a year. That's a $68,000 raise.
O'Malley officials justified the raise by pointing out that Larsen had previously been a well-paid insurance executive, and even with his raise, he was taking a significant pay cut.
And at the time, O'Malley asked for raises for all Public Service Commission members and staffers. He hoped higher pay could attract top-flight talent.
The O'Malley campaign hasn't actively tried to defend Larsen's pay increase, but a Sun editorial yesterday did:
Mr. O'Malley did pay Mr. Larsen $68,000 more than his predecessor, but considering the substantial benefits Mr. Larsen helped get for consumers, that was a pretty good deal. Mr. Larsen secured $187 million in direct energy rebates for BGE customers (that came out to $170 apiece) as part of an agreement by the utility to give up $2 billion in future charges. Given that Mr. Larsen was in the job for a year, taxpayers got a 29,000 percent return on investment for that $68,000 in additional pay.
While the raise part is true, it's an oversimplification to say Larsen approved the rate increase himself. The commission consists of five members, and they were unanimous in "reluctantly" approving the 50 percent rate increase.
"Now Martin O'Malley promises we're moving forward. 'The fact of the matter is our economy is doing much better now.' [Note: The previous quote is from a video of O'Malley speaking] Really? Nearly 7,000 Marylanders lost their jobs last month."
Is Maryland's economy doing better? Depends on the timeframe. Since January, Maryland has been on a general upward job trend. But unemployment remains sky-high when compared to before the recession began in January 2007. And if you want to compare July to August, as the ad does, 7,000 Marylanders did lose their jobs.
This ad is based on the premise that since O'Malley couldn't stop rate hikes, he was ineffective in fighting BGE. Was he? We'll take a look at that tomorrow when we fact-check the ad O'Malley put out in response.
But the first round of this fight goes to Ehrlich. His ad is Mostly On Point.