February 7, 2011
The Baltimore Sun
Jim Rosapepe
Your Feb. 4 editorial ("State of leadership" reflected a deep misunderstanding of the radical impact electric deregulation has had on Maryland's economy.)
By now, virtually everyone else understands that deregulation failed to meet its two major promises — lower rates and more reliable service. In his Thursday address, Gov. Martin O'Malley, a courageous champion of reregulation, simply noted what is plain to every ratepayer, particularly in the PEPCO service area. Since deregulation in 1999, rates have risen more than 70 percent — and the reliability of service has dropped. Your editorial claims that blaming the power failures on deregulation "makes no sense." It is your editorial that makes no sense.
Deregulation drove power failure in at least two ways.
First, it encouraged a culture of financial speculation in utility boardrooms. Inside the corporate bureaucracies, the financial engineers took over control from the electrical engineers. The public utility culture of service was replaced by the Wall Street culture of "the deal." Thus, former investment bankers at the helm of Constellation almost bankrupted the company in 2008.
Second, it encouraged a strategy of "light touch" regulation, in which the power companies were trusted to do the right thing, just as Alan Greenspan trusted the big banks to correct their own financial bubble. Financial deregulation didn't work on Wall Street, and electric regulation didn't work on Main Street, Maryland. Why else doesn't the Public Service Commission already have strong standards for reliable service with effective penalties for power failures? That is total deregulation.
Governor O'Malley is right. Deregulation failed to lower rates or to keep the lights turned on. It's time to scrap it.