Gov. Martin O'Malley nominated Steven B. Larsen, known as a strong consumer advocate, yesterday to head the Public Service Commission as it prepares to re-evaluate energy deregulation and look for ways to mitigate further utility rate increases.
With the appointment of Larsen, a former state insurance commissioner, and Susanne Brogan, a member of the PSC under Democratic governors William Donald Schaefer and Parris N. Glendening, O'Malley gained effective control of an agency that he sharply criticized during his campaign last fall.

O'Malley regularly accused his opponent, Republican Gov. Robert L. Ehrlich Jr., of stacking the commission too heavily in favor of industry, a politically potent charge at a time when the state's largest energy utility, BGE, was planning a 72 percent rate increase for its 1.1 million residential electric customers.

The two new members will join Harold D. Williams, a holdover Democrat whom O'Malley reappointed yesterday, to give him three of the five seats on the commission. Williams, who was Glendening's last remaining appointee on the board, was the lone dissenting voice during hearings on last year's proposed BGE rate increase.

'We will have a Public Service Commission that is professional, that understands we need to stand up for consumers and understands that a healthy utility, in the long run, is also in the best interests of the consumers,' O'Malley said at a news conference announcing the appointments. The governor did not directly answer a question about whether he will seek to replace the other two members of the commission.

Larsen, 47, a former legislative aide to Schaefer and Glendening, has no experience in utility regulation. But he won renown in the General Assembly and the public for his efforts to stop the for-profit conversion of CareFirst BlueCross BlueShield, a deal he concluded would have enriched company executives with large bonuses without helping consumers.

He replaces Kenneth D. Schisler, who became a lightning rod for criticism because he supported the rate increase and maintained close ties with industry lobbyists.

Larsen, currently the president and chief executive officer of Amerigroup Maryland Inc., a health insurer, deferred questions about how he will seek to mitigate rate increases. The commission is required by law to conduct reviews of the deregulation of electricity and of the way utilities buy their power, and Larsen said he does not know whether he will continue the previous commission's work or start over.

Brogan, 49, also has a long history in Annapolis. She, like Larsen, was once a legislative assistant in the General Assembly. After a nine-year stint on the PSC, which included the commission's approval of a plan to implement the 1999 deregulation of the electric industry, she became the director of development for the Radcliffe Creek School in Annapolis.

Little competition The deregulation plan became a central item of contention in the fight over the BGE rate increase, with many lawmakers and analysts arguing that rate caps the commission instituted were partly responsible for the spike in prices.

The idea behind deregulation was that energy companies would compete to offer service to consumers, but little competition emerged for residential customers.

The BGE price caps were due to expire last June 30, and the PSC's plan called for the company to buy the next year's worth of electricity all at once. Those auctions happened to occur at a time when electric prices were at a peak, causing the expected 72 percent spike.

Thomas A. Firey, the managing editor of the libertarian-leaning Cato Institute's Regulation magazine, said it's curious that O'Malley selected Brogan, one of the architects of that plan.

'The problem with the BGE design was made obvious last winter,' Firey wrote in an e-mail. 'I've never come across an explanation for the all-at-once requirement.'

Other former commission members argue that the PSC's plan to implement deregulation wasn't wholly to blame. Their successors should have altered the plan to match changing market conditions, they say.

Prince George's County State's Attorney Glenn F. Ivey, who was chairman of the PSC for part of Brogan's previous tenure, said her experience during the time of deregulation will be a plus.

'She'll be able to bring options and approaches to addressing the problems that have arisen,' Ivey said. 'It can really make a huge difference as far as moving forward in this environment.'

Brogan said yesterday that the commission could not have foreseen how the markets would develop six years later and that the experience has made her doubt that residential customers will ever benefit from competition in the electric market. 'I don't know if going back to re-regulation is the answer,' she said.

The nominees will require confirmation by the state Senate. Larsen and Brogan are both well known in the General Assembly, and Sen. Thomas M. Middleton, the chairman of the Finance Committee, which oversees utility issues, said he sees no reason why the two nominees and Williams will not be confirmed.

PSC members make just under $100,000 a year. The chairman makes $117,000 a year.

The nominees got good reviews from the state's major energy companies. Robert L. Gould, a spokesman for Constellation Energy Group Inc., which owns BGE, said the company welcomes the 'certainty and balance' the two appointments and the re-appointment of Williams bring to the board. 'Larsen and Brogan are well known and respected for a steady hand and professional approach, and both have a long track record of exercising good judgment when it comes balancing multiple interests,' Gould said.

Bob Dobkin, a spokesman for Pepco Holdings Inc., which supplies power in suburban Washington and the Eastern Shore, offered similar praise, describing the two as 'highly professional and well regarded.'

Deferral aftermath The aftermath of the General Assembly's 2006 rate deferral plan, which cut the 72 percent increase down to 15 percent, will be one of the first things the new commission will have to take up. Results of electricity bidding released this week show that BGE bills will go up on average of 49 percent in June, or about $581 annually. That would bring electricity bills to roughly the level they would have been had the legislature not enacted a rate relief package.

Part of the legislature's plan called for the PSC to craft another rate deferral plan before this June to help customers who can't manage the new increase.

Del. Warren E. Miller, a Howard County Republican who was active in discussions of the rate increase last year, said the old PSC got too much blame for the rate increase, which he said commissioners could not have avoided, given the legislature's 1999 deregulation vote.

He said he worries that the new commission could overstep its legal bounds in trying to be too pro-consumer. 'The onus is on these officials to prove that's not the case,' Miller said. 'They can go and say Constellation or any of the other utilities can't fairly charge their customs for the rate increases, but then we're going to see what happens in the federal courts, because federal courts have consistently ruled that the utilities have the right to recover their costs.'

But O'Malley said that the PSC has wide-ranging powers to help consumers and that he expects the new commission to exercise them. 'One of the first tasks before the PSC is to conduct a professional evaluation of that rate increase. That was something that was not done under the [Ehrlich-appointed] commission,' O'Malley said. 'The PSC had the tools and the resources in the past. What it lacked was the will. Now we have the will.'