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Charged by the market : electricity deregulation is finally starting to stir up retail competition in Maryland



Charged by the Market: Electricity Deregulation is Finally Starting to Stir Up Retail Competition in Maryland In Maryland, residen-tial customers of thestate’s leading power supplier were recently awakened from their rate-capped slumber of six years. Beginning in July, the average house- hold was told it could expect to pay 72 percent, or $743 a year, more for electricity supplied by Baltimore Gas & Electric (BGE). This wasn’t how deregulation of the Maryland elec- tricity industry was supposed to work out. Residential customers had been assured that retail prices would go down as a result of competition — but prices instead leapt upward. BGE’s industrial customers likewise experienced a rate increase, of up to 39 percent for small- and medium- sized businesses. BGE no longer sells electricity to large commercial cus- tomers because alternative suppliers have taken over that market. Rate caps for all industrial customers expired two years ago, and since then they have been paying the market rates. The electricity industry is the last major energy sector to move to competition. For a long time, electricity’s traditional monopoly structure was thought to be the most efficient and inexpensive way to provide power. The long-held belief was that utilities which owned massive generating plants, combined with their transmission and distribution systems, possessed the scale needed to make average production costs much lower than smaller power plants could achieve. Over time, how- ever, changes in the technology of power production and transmis- sion, dissatisfaction over rising electricity prices due to large utility construction and fuel costs, as well as new laws that facilitated the entry of smaller power pro- ducers prompted the old structure to shift to competition. Economists and policy- makers recognized that unshackling the electric- ity generation business from the transmission and distribution compo- nents of a vertically integrated monopoly could potentially give

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