Maryland PIRG respectfully requests
a favorable report of HB 1246.
When the Maryland General Assembly
passed electricity restructuring legislation in 1999, it was broadly believed
that restructuring of the electricity market would create competition, which
would in turn drive down prices, providing Marylanders with cheaper
electricity.
Nine years later, it is clear that
restructuring has not delivered on this promise. Competition has failed to
appear. Constellation Energy continues to dominate the market for wholesale
electricity generation in Maryland,
supplying more than 70 percent of power in the BGE wholesale auction. The
percentage of households that have switched suppliers is in the single-digits.
Electricity rates have skyrocketed for residents across the state, and the
state is facing blackouts as early as 2011.
Beyond rising rates, one of the
most contentious issues around deregulation has been the issue of stranded
costs. Under deregulation, BGE transferred ownership of its power plants
to its parent company, Constellation Energy and then convinced the state to
make ratepayers pay nearly another $1 billion for taking the plants off BGE's
hands. These plants, especially the Calvert Cliffs nuclear plants, produce
electricity at a low operating cost, and under regulation, BGE had passed that
low price on to customers. In a deregulated market, natural gas sets the market
price at a much higher rate than it costs to produce power at the Calvert
Cliffs plants, so Constellation Energy can charge that market rate and earn
tremendous windfall profits from operating Calvert Cliffs. Not only did BGE
customers lose the plants, but they also paid Constellation $1 billion for
taking them and now are paying even more in big markups that never would have been
allowed under regulation.
Constellation Energy has proposed building a third reactor
at the Calvert Cliffs nuclear power plant in Maryland. Not only would building a third
reactor at Calvert Cliffs threaten public health and safety, and damage the environment,
but it would be extremely expensive.
Initially, Constellation estimated the reactor would cost
$2.5 - $3 billion to construct. However, cost estimates for building nuclear
power plants are notoriously inaccurate. Areva, a French-government owned
company and Constellation’s partner in the proposed third reactor, has fallen
2.5 years behind on the construction of a reactor of the same size and design
in Finland.
Some analysts estimate that the delays have added $2.2 billion to the cost of
the plant which is 50 percent above original estimates. According to an October
2007 report, Moody’s Investor Services predicts construction costs for new
reactors to be $5,000-$6,000/kw, which for Calvert Cliffs-3 would be in the $8
to $9.5 billion range.
Constellation Energy is looking for taxpayer money to help
finance the proposed reactor. The company has already secured promises from Calvert County for $300 million in tax breaks. This
is equal to $4,500 per taxpayer in Calvert
County. The company
claims the new plant will add 450 full-time jobs in the county, but at a cost
to taxpayers of approximately $750,000 per job. Constellation could also try to
force ratepayers to pay the cost of its license application, whether or not it
decides to build the reactor, as other utilities have tried elsewhere. And
Constellation is counting on federal taxpayer subsidies to cover loan
guarantees and insurance in case of an accident or terrorist attack at the
plant.
HB 1246 would settle the tab
between Constellation Energy and Maryland
ratepayers. The bill would make sure that before Constellation is allowed to
embark on building another nuclear power plant in Maryland, they return stranded costs for the
existing plants to ratepayers.
Maryland PIRG respectfully
requests a favorable report on HB 1246.
