Overview
In its 1999 session, the Maryland General Assembly enacted the Electric Customer Choice and Competition Act of 1999 (“Act”), which provided for the phased-in implementation of retail competition, beginning July 1, 2000. Under the Act, retail choice was made available to all customers of investor-owned utilities no later than July 1, 2002. The Act directed the orderly transition to competitive markets, in part, by unbundling and deregulating the generation component of the bundled service package. This restructuring initiative allowed competition and customer choice for energy supply by permitting customers to shop, compare prices and choose the company that will generate or supply electricity services.

History and Future of Retail Competition in Maryland
In 2003, the Commission approved a Settlement Order that facilitated the orderly transition to competition and included two phases that addressed the terms and procedures for the provision of Standard Offer Services (“SOS”):

• Phase I of the Settlement Order established the framework for the provision of residential and non-residential SOS through the competitive selection of wholesale supply and set forth an administrative mechanism or “adder” to reflect the retail market price for SOS.
• Phase II of the Settlement permitted the utilities to “true-up” the incremental costs for providing SOS and developed a volumetric risk mechanism to insulate wholesale suppliers from customer migration.

July 1, 2004 established yet another milestone in Maryland’s journey to energy retail competition that allowed customers to move to or from SOS monthly, with no utility fees or charges. In some instances, customers might have been subjected to a minimum stay period of one billing cycle. These prohibitions on switching restrictions did not necessarily release a customer from contractual obligations with the selected supplier.

The introduction of full retail-priced SOS represented the real costs of providing retail services, which are paid by all retail suppliers and the utilities and include pricing components that are appropriate for different customer groups (residential, small, medium, and large commercial and industrial customers). As a result, Maryland customers had the benefit of an apples-to-apples comparison between competitive supply options and the new SOS rates during the SOS service periods.

Through the competitive bidding process, electric suppliers will compete to provide market-priced electric SOS for Maryland customers of distribution companies whose rate caps had expired. Rate caps have expired for Pepco and Delmarva Power and Light (DPL) as of 2004. In addition, rate caps for Baltimore Gas and Electric (BG&E) customers will expire in July 2006. Residential customers of Allegheny Power (AP) will continue to have frozen supply prices until January 2009.

While large commercial customers have received hourly priced service since 2005 under the terms of the Settlement, the rules for establishing a framework for SOS and for procuring market supply on behalf of smaller customers will be re-examined by regulators in the near future.

Regulatory Updates
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