The Commission prepared a final report to the legislature on "Options for Re-Regulation and New Generation" as had been statutorily required. The report updates an earlier interim report and draws upon analyses of two consulting firms. The Commission's report is recommending:

"incremental re-regulation for the purposes of ensuring a reliable supply of electricity or to obtain economic benefits for ratepayers. The Commission has authority under current law to require Maryland's IOUs to build, own and operate plants under cost-of-service regulation or to issue competitive solicitations for new plants. In addition to the reliability measures already under way, we will initiate an investigation in the coming year to determine whether and on what terms to build additional generation for economic reasons.

We cannot, however, recommend that the General Assembly pursue full re-regulation - the magnitude and uncertainty of the benefits, relative to the high cost of achieving the outcome do not clearly warrant the return to rate base regulation. Moreover, there are a number of other potentially serious risk factors that could create unanticipated, adverse consequences for Maryland's ratepayers. Rather than seeking to re-regulate, we recommend that the General Assembly consider legislation that would expand the range of options for obtaining new generation, while leaving the Commission the flexibility to respond to evolving economic and market conditions and ensure that new generation serves ratepayers' interests."

The Commission detailed why "full State-wide re-regulation" is not the best option for the State, including: 1) chilling effect on merchant generation; 2) likely requirement of ending customer choice; 3) ratepayer exposure to risk; 4) downside of reacquiring an aging existing generation fleet; 5) time and expense of managing and operating the assets; 6) difficulty of determining the fair market value of the assets; 7) transactions costs and likely protracted litigation; and 8) the uncertain impact on the State's credit rating if a State power authority were instituted requiring a large debt issuance.

The full texts of the Commission's Report as well as the consultants' State Analysis and Survey on Restructuring and Reregulation and Analysis of Resource and Policy Options for Maryland's Energy Future are available on the NEM Website.

In its recent order on Retail Access Programs, the Commission required that utilities with ESCO referral programs continue to operate them and those utilities that did not to file an implementation proposal. The utilities were also required to file proposals for ESCO funding of the referral programs.

Niagara Mohawk reports that the majority of the costs for its current referral program are associated with processing customer postcards of ESCO elections and that such cost is already being borne by participating ESCOs. Keyspan proposed that the costs of a referral program in its service territory would be recovered through an agreement reached with participating ESCOs in which total actual costs would be paid over a five year period.

Central Hudson notes that it currently incurs an "immaterial amount of cost" to operate its referral program. If future costs to operate Central Hudson's program increase, it proposes to assess an annual fee on participating ESCOs based on actual costs from the preceding calendar year.

NFG submitted a proposal for the terms under which it would reinstitute a referral program, how costs would be recovered from ESCOs as well as cost estimates. NFG proposes to institute a program using the Contract Model. It would utilize a third party call center to receive calls for the program. Incremental costs, advertising and promotional efforts would be paid by ESCOs. The full texts of the Utilities' Referral Program Filings are available from NEM headquarters.

Based on its determination in its gas "SEARCH" order that utility security requirements were a barrier to gas supplier participation in the market, the Commission has proposed changes to its rules to "better balance the ability of NGS [natural gas supplier] firms to provide adequte security with the NGDC's risk of a supplier default." The Commission proposes the following changes: 1) utility security level adjustments would only be triggered upon a significant change in supplier operation that would materially affect the utility's system operation or reliability or materially affect the supplier's creditworthiness; 2) the types of legal and financial instruments that would be acceptable for security would be expanded to include escrow accounts, accounts pledged to the utility or sold by the supplier in a utility POR program, and calls on capacity or other operational offsets that are mutually agreeable to the utility and supplier; 3) when practicable, utilities shall use NAESB forms and language for financial and legal instruments; and 4) utilities would be required to report on an annual basis as to the criteria to set and adjust security levels for suppliers operating on their systems. Comments on the proposed rule changes are due sixty days after publication in the Pennsylvania Bulletin. The full text of the Proposed Rulemaking Order is hotlinked here.