Time was when people got paid for an honest day's work. Compensation was proportional to time and effort spent. At some point, however, clients and employers started adding significant marginal compensation for goals reached. Bonuses. "Success fees." "Landmark payments." "Contingency fees." And so forth.

Turns out Ehrlich consultant Julius Henson, who orchestrated allegedly illegal robo-calls to keep minority voters from going to the polls last year, would get a $30,000 bonus if Ehrlich won, in addition to his regular compensation.

From Luke Broadwater's story:

Though rejecting that plan, the campaign continued to pay Henson $16,000 a month — for a total of $112,000 — and promised a bonus of $30,000 should Ehrlich win

I believe bonuses paid based on political, legal, legislative or business outcomes are potentially insidious. All that money based on one little result can incentivize parties to go beyond what's proper. Maryland lobbyists are banned by law from getting exrtra payoffs for successful legislative accomplishments -- for good reason. Maybe the bonus was a factor in the Ehrlich campaign's ordering of these obnoxious calls telling African-Americans to "relax" and not vote.

Posted by Jay Hancock at 10:42 AM | Permalink | Comments (0)
        

Maryland Business for Responsive Government notes that Maryland's budget increase for the current fiscal year, as reported by the National Governor's Association, is 11.4 percent.

That's far higher than the national average for states of 2.9 percent. And it's higher -- but in most cases not greatly higher -- than that of Maryland's neighbors. Virginia's general fund expenditures are rising 7.1 percent this fiscal year. Delaware's are up 9.3 percent. West Virginia's are up 8.2 percent. Pennsylvania's are down 4.1 percent. Here's MBRG's commentary:

According to the report, Maryland has the highest increase in general fund spending between fiscal years 2011 and 2012 as compared to surrounding states Delaware, Pennsylvania, Virginia and West Virginia. Maryland also has the nation's seventh highest increase in the nation during the same period.

Overall, state 2012 enacted budgets will rise 2.9%, while Maryland's will rise 11.4%.

"These numbers clearly show that Maryland has a spending problem. Maryland's political leadership continues to feed the beast with hard earned taxpayer dollars through tax and fee increases instead of looking for cost savings in the budget," said MBRG President Kimberly M. Burns.

"Without an honest, bipartisan assessment of state spending, the budget will only continue to grow out of control and politicians will demand more and more revenue on a continued march towards big government."

Alaska had the highest budget increase for the year -- 21.3 percent. North Dakota was second highest at 20.7 percent. Oil and gas revenue! Read the whole report here. The year-over-year spending changes are in Table 6.

UPDATE: Warren Deschenaux, the General Assembly's chief budget analyst, says the 11 percent increase isn't being spent on new programs. Mostly it's to replace disappearing federal stimulus money. "It's not as though we're improving anything by 11 percent," he said. "We're just maintaining what we had." He adds via email:

Actually the general fund budget increases by $91 million, or 0.6% (less than 1%) when adjusted for three things. First was the replacement of $1.2 billion in federal stimulus funds (largely for Medicaid and education aid) from the American Recovery and Reinvestment Act of 2009. Second, Maryland used $350 million in fiscal 2011 from the local income tax reserve to support education spending (those funds will be repaid over multiple years) which also artificially lowered the base. Finally, the State received $124 million in Education Jobs Funds which allowed the reduction of $124 million in fiscal 2012. Those funds will be replaced in the 2013 budget, but for purposes of consistent presentation are included in the adjusted 2012 budget.

UPDATE: O'Malley spokeswoman Raquel Guillory weighs in.

Maryland growth rate in FY 2012 is distorted by our use of federal ARRA State Fiscal Stabilization Funds for education and public safety in FY 10 ($377 M) and FY 11 ($501 M). Most states spent all of their money in FY 2010 and backfilled with state dollars in FY 2011. Maryland chose instead to prudently spread the dollars over two years (which allowed the Governor to fully fund the growth in education aid in both years). Maryland was thus backfilling for the lost federal dollars in FY 2012 while most other states backfilled in FY 2011.

To avoid the distortions created by the timing of when federal stimulus dollars were spent, we compared the FY 2010 general fund spending of each of our neighbors to the FY 2012 general fund spending. Maryland has increased general fund spending more slowly over the last two years than most of our neighbors.

Maryland’s spending growth across all funds in FY 2012 is only 4.4% (much less than the 11% general fund growth).

The idea is that Maryland would look better in this comparison if it hadn't nursed the ARRA stimulus money over more than one year instead of blowing it all in one wad like some states did. However Maryland would also look better if it had cut more spending to make up for the vanishing ARRA money.

Posted by Jay Hancock at 11:14 AM | Permalink | Comments (7)
        

In his latest dispatch to clients (no link) economist Ed Yardeni says:

US CORPORATE PROFITS: The corporate profits data released last week for the third quarter along with GDP in the National Income & Product Accounts (NIPA) confirm the remarkable rebound that's been evident in the S&P 500 earnings since early 2009. Profits' share of total National Income (NI) typically increases during economic recoveries. However, it has snapped back much faster than in the past, surpassing previous cyclical peaks. It is unlikely to rise much higher in 2012. However, profits may continue to rise along with National Income next year.

What about labor's share of NI? It's been going down for many years. The share of wages and salaries in NI fell below 50% for the first time on record during Q2-2010.

However, he adds, personal income has held up fairly well thanks to social payments such as unemployment insurance, Social Security etc.

Posted by Jay Hancock at 10:39 AM | Permalink | Comments (2)
        

The latest in groundbreaking work from Bloomberg News, which sued to get access to secret bailout data held by the Federal Reserve:

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Posted by Jay Hancock at 12:02 PM | Permalink | Comments (0)
Categories: The Great Recession
        

WBAL's John Patti and I talk about the legacy of Bill Miller, who announced Thursday that he'll step down as co-manager of Legg Mason's famous Value Trust fund.

And Maryland Public TV's Jeff Salkin and I discuss prospects for an increase in the Maryland gas tax:

Posted by Jay Hancock at 2:35 PM | Permalink | Comments (0)
        

WGES, which sells a lot of renewable energy credits in Maryland in combo with its alternative offerings to the standard products from the utilities, got an award from the Energy Department.
From the press release:

WASHINGTON GAS ENERGY SERVICES RECEIVES PRESTIGIOUS GREEN POWER SUPPLIER OF THE YEAR AWARD Herndon, VA. – Today, the U.S. Department of Energy (DOE) presented Washington Gas Energy Services (WGES) with the 2011 Green Power Supplier of the Year Award in the non-utility category. The award recognizes non-utility providers for outstanding efforts, initiatives and programs that significantly advance the development of green power sources.

“At WGES we strive to provide meaningful, innovative and sustainable clean energy options to all consumers,” said Harry Warren, President of Washington Gas Energy Services. “We are honored to receive this national environmental leadership award. We thank our loyal customers and the Department of Energy for recognizing our efforts to provide market-driven, cleaner and greener, electric and natural gas energy options to business, government and residential customers.” In presenting the award to WGES, the DOE noted that the company is one of the largest and most experienced competitive energy suppliers in the mid-Atlantic region and has a history of innovative green energy leadership. WGES was the first company in the area to include wind power in their 2002 standard electric offer, buying renewable energy from the first wind farm to come online in the local region. Customer response has accelerated in recent years; from 2009 to 2010, the company’s wind power load has more than tripled. In the past three years, the company has further expanded its green energy portfolio to include commercial solar projects and natural gas products matched with carbon offsets.

Posted by Jay Hancock at 11:48 AM | Permalink | Comments (0)
        

I walked out of the Thursday morning session of T. Rowe Price's biennial investment symposium wanting to move more money into stocks. I couldn't stick around long because I had to head back to the newsroom. But my overall impression from the first few speakers was that T. Rowe likes emerging markets, is pretty positive on the United States and believes the fear factor driven by ongoing financial crises is overdone.

Some snippets of the first 90 minutes. There's "an unrealistic quest for safety" which is driving up some bond prices and driving down yields, said Brian Rogers, T. Rowe's chief investment officer. "Investors are investing conservatively and nobody is willing to take any risk." There's almost, he said, "irrational exuberance in reverse."

Actions (or non actions) by governments continue to be key to markets, Rogers said. "It does not seem to us these days that there are an awful lot of Profiles In Courage moments in Washington." While money-market funds pay basically zero, Rogers said, many stocks pay dividends of 3 percent or 4 percent. Emerging markets, he said are "a great opportunity."

Housing is still a drag on the U.S. economy. "It's going to take three to five years" for housing to get back to normal, said Michael Gitlin, the firm's fixed-income director. But he doesn't expect the United States to fall into a decades-long, Japan-style slump. Japan has no population growth. Its banks were even more leveraged than U.S. banks. It had serious deflation. And wages fell there while they're holding steady or rising here, he said.

There are more than 200 companies in the S&P 500 whose dividend yields are greater than the yield on Treasury bonds, said John Linehan, head of T. Rowe's Equity Division.

On the subject of corporate America's cash hoard: "You'll see dividend payouts increase," said Linehan. And, he said, when economic uncertainty recedes, you'll see corporate mergers pick up.

Apple and Google, Linehan said, are not the next Microsoft (ie., about to reach a peak and stagnate). "I think those companies will continue to innovate and grow," he said.

T. Rowe Price is not a fan of high-frequency trading. "It's a real risk to the market," Linehan said.

Posted by Jay Hancock at 6:02 AM | Permalink | Comments (0)
        

Here are more of the promised "consumer benefits" from the merger of AirTran and Southwest Airlines. AirTran is canceling service to Bloomington, Ill., Charleston, W.Va., Knoxville, Tenn., Miami and Washington Dulles.

Of those, reports USA Today, only Dulles is also served by Southwest. So the combo carrier is abandoning four markets, three of them not exactly enjoying an overabundance of air service. For Baltimore, if you want to fly to Miami via the Southwest/AirTran combo, you now have to take the Southwest flight to Fort Lauderdale. The AirTran flight to MIA will be eliminated.

Says AirTran:

AirTran Airways says it can no longer support service to these particular markets in light of the realities of the challenging economic environment and sustained high fuel prices. The airline has a keen focus on aligning its service with Customer demand and making capacity available for future opportunities without growing the current fleet.

Says USA Today:

Still, the latest count means a total of nine AirTran airports now will not see Southwest-branded flights as part of the merger. The others – all previously announced – are Asheville, N.C.; Atlantic City, N.J.; Dallas/Fort Worth; Moline/Quad Cities, Ill.; and Newport News, Va.

Posted by Jay Hancock at 6:15 AM | Permalink | Comments (2)
Categories: Airlines
        

Or maybe not. There was bipartisan incredulity when it was reported that Louisiana banned the use of cash at Goodwill stores and flea markets. Some on the Ron Paul Forum thought it was outrageous.

So did Daily Kos.
"Lawmakers in Louisiana have effectively banned its citizens from freely using United States legal tender." one lawyer said.

Turns out that the ban was intended only to apply to dealers of secondhand stuff -- defined as people who buy and sell used goods at least once a month. From a Gannett paper:

This impression, Richardson said, was a misconception about the intention and purpose of the act, which went into effect Aug. 15.

"Act 389 does not affect the purchase of goods by a consumer from any business," he said in a statement in the days following the broadcast report.

Several news organizations have since reported about what sponsors have said were the true intentions of House Bill 195 and eventually Act 389, but that story has not been as widely disseminated, said Nancy Johnson, public information specialist with the state Legislature.

Still, a lot of antique & collectibles pickers buy stuff at garage sales and old farms and use cash. Still seems like a weird law.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (2)
        

Question: How did Europe and Asia and Canada all have a simultaneous housing boom as big if not bigger than that of the US? Were the Australians compelled to follow the CRA? Did Barney Frank influence the Belgians?

Were the US GSEs effecting policy in the UK? Or might some other factors — like ultra-low rates, excess leverage, demand for junk AAA-rated paper, misaligned incentives, and/or derivatives have been at play?

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (6)
Categories: The Great Recession
        

Big banks are trying to stick it to you one way or the other. Watch your statement. If new fees start showing up, fire them. Find a new bank. From the NYT:

Even the much-maligned debit usage charges have effectively been bundled into higher monthly fees on checking accounts. Bank of America abandoned its $5 a month debit card usage fee in late October amid a firestorm of criticism. Yet, it more quietly raised the cost of its basic MyAccess checking account by more than $3 a month earlier this year. Monthly maintenance fees now run $12 a month, up from $8.95.

Chase and Citigroup, which quickly distanced themselves from the debit card usage fee, ratcheted up the price of their entry-level checking products without the public relations nightmare. This month, Citigroup’s basic checking account jumped to $10 a month, up from $8. Chase raised the fee on its standard checking account to $12 a month in February; many of those customers were previously charged nothing at all.

This is from a February 13 Hancock column on bank fees:

It was the fee for confirming her balance that prompted her to write a letter to top bank officials. She needed the account information on bank stationery for her daughter's financial-aid application for college.

That'll be $25, said the branch folks.

"I've been with this bank since it was Union Trust," Foreman remembers saying, after she objected to the fee.

"Well, I'm a Wells Fargo employee, and you have to give me $25," replied a branch staffer, according to Foreman.

Whether or not this depicts the future of American banking depends on you, the customer. It certainly has the potential.

Posted by Jay Hancock at 11:36 AM | Permalink | Comments (1)
Categories: Finance
        

Terrific 60 Minutes piece last night based on Peter Schweizer's book, Throw Them All Out. Repeated examples of what's basically insider trading from congressional members of both parties.

In these cases the inside information isn't generally on corporate buyouts or surprising financial results about to be announced. The information is on impending changes in government policy that will affect corporate profits or the value of other assets. But guess what? Members of Congress are exempt from laws that apply to others in Washington banning profiting from inside political information. (For example, Bernanke can't go out and short bonds and stocks the day before he announces a huge increase in interest rates. For good reason.)

Check out this little flip by Dennis Hastert, from the 60 Minutes script:

When Illinois Congressman Dennis Hastert became speaker of the House in 1999, he was worth a few hundred thousand dollars. He left the job eight years later a multi-millionaire.

Jan Strasma: The road that Hastert wants to build will go through these farm fields right here.

In 2005, Speaker Hastert got a $207 million federal earmark to build the Prairie Parkway through these cornfields near his home. What Jan Strasma and his neighbors didn't know was that Hastert had also bought some land adjacent to where the highway is supposed to go.

Strasma: And five months after this earmark went through he sold that land and made a bundle of money.

Kroft: How much?

Strasma: Two million dollars.

Kroft: What do you think of it?

Strasma: It stinks.

Posted by Jay Hancock at 9:04 AM | Permalink | Comments (1)
Categories: Politics
        

At least for old women at risk of being tried as witches, in France, in the 1600s. Read Tyler Cowen's post here.

Posted by Jay Hancock at 2:09 PM | Permalink | Comments (0)
        

Folks in Owings Mills must be thrilled that General Growth Properties will finally do something about the decaying mall there. I yack about it here on the radio with WBAL's Bill Vanko.

Posted by Jay Hancock at 11:40 AM | Permalink | Comments (0)
        

(Not to be confused with the Bloody Bucket, named by the City Paper as one of Baltimore's best karaoke bars.) Or at one of the other establishments listed by the Telegraph as having Britain's strangest pub names.

Posted by Jay Hancock at 11:20 AM | Permalink | Comments (0)
        

Sunday's column is about the Entrepreneur Access to Capital Act, which would exempt small stock offerings from oversight by the SEC or state regulators. As written the bill is nuts. It's an invitation to defraud small investors. But it's getting lots of bipartisan support. I'm not surprised that the right is in favor. Many conservatives favor almost any deregulation.

But some on the left are climbing on board, too. Check out this post, "Don't Occupy Wall Street, Ditch It!", at the Post Carbon Institute by Michael Shuman. The Entrepreneur Access to Capital Act (also known as the crowdfunding bill), in his view, is great because it would let ordinary investors bypass Wall Street:

If we were to legalize investment in local businesses, including co-ops, farms, and community investment funds, Wall Street would be history. And the good news is that it’s on the verge of happening... If we could overhaul securities laws that we enacted during the early Jurassic Period, local businesses could be fabulous investments. They are the most important job producers in the economy.

Apparently it's unconscionable for investors to be ripped off by the 1 percent. But if it's done by the 99 percent it'll be OK. Enabling crowdfunding of small businesses might be a good idea. But so far the legislation is dangerously free of anything that would provide oversight and protection to the public.

UPDATE: Jamie Smith Hopkins writes in today's paper about just the kind of entrepreneur who's likely to have access to your capital under this legislation:

Andrew Hamilton Williams Jr., 60, of Metro Dream Homes promised to pay off people's mortgages if they invested in his company, according to the U.S. attorney for Maryland. But it was nothing but a Ponzi scheme, prosecutors said. Williams and other company officials used some of the proceeds to enrich themselves, at one point hiring chauffeurs to drive them around in a fleet of luxury cars.

OK, so under the crowdfunding bill's "bad actor" section convicts such as Williams could be disqualified from participating. But the legislation would breed many future Williamses.

Posted by Jay Hancock at 9:14 AM | Permalink | Comments (2)
Categories: Finance
        

Judges sentencing doctors convicted of implanting medically unnecessary coronary artery stents are not messing around. On Thursday U.S. District Judge William D. Quarles Jr. called overstenting by Dr. John McLean "a crime of greed" and gave him eight years in prison. McLean was convicted of falsifying patient records in connection with needless stents put in at Peninsula Regional Medical Center on the Eastern Shore.

The hospital itself settled recently with the government without admitting liability. But in an August news release U.S. Attorney Rod Rosenstein said there was a "failure of senior medical staff at PRMC to follow up on evidence presented to them through the complaints of staff in the cardiac catheterization laboratory about the medically unnecessary nature of the procedures that Dr. McLean was performing."

Also this week Dr. Mehmood Patel in Louisiana appealed his 10-year sentence for installing unneeded stents. From the Advertiser.com:

A three-judge panel from the 5th U.S. Circuit Court of Appeals didn't immediately rule after hearing arguments in Dr. Mehmood Patel's case.

In December 2008, a jury convicted Patel of 51 counts of health care fraud but acquitted him of 40 other counts.

Prosecutors say Patel lied to patients about their medical conditions, performed risky tests and procedures, falsified medical records to make them appear justified and then fraudulently billed insurance companies for the work.

Posted by Jay Hancock at 8:45 AM | Permalink | Comments (0)
Categories: Health Care
        

Here's an excerpt from the NYT story on Nixon's newly released grand jury testimony that will interest national security historians and send conspiracy theorists into orbit:

Despite the decades that have passed, some passages were redacted because they contained still-classified information. Nixon told prosecutors that “only if there is an absolute guarantee that there will not be disclosure of what I say, I will reveal for the first time information with regard to why wiretaps were proposed, information which, if it is made public, will be terribly damaging to the United States.” But his disclosure appears to have been cut from the transcript.

Posted by Jay Hancock at 10:08 PM | Permalink | Comments (0)
        

Another slots dog & pony show. More lavish promises and optimistic plans. Annie Linskey covers Tuesday's public hearing on plans for Rocky Gap, the white-elephant resort that has failed to secure a slots developer for a while now. At least developers are interested:

One group that wants to open a casino at the Rocky Gap Lodge and Resort envisions amenities including five restaurants, a spa, a golf and tennis academy and an automobile museum. The other promises to invest $62 million to build a 50,000-square-foot gambling palace and stresses that its team has the experience to get the job done.

But all the plans and artist renderings in the world won't make a Rocky Gap offer work without financing. Developers need their own capital or a banker's to sink millions into this resort. And capital is hard to come by in this economy. Lack of financing has killed slots offers over and over. Lobbyist and former House Speaker Caz Taylor, who represents the Rocky Gap bondholders, said nice things about the offers to the Cumberland Times-News:

“Both proposals are quality proposals,” said Casper Taylor Jr., who represents bondholders in the resort. “This is good news for our local economy, which is in need of good news.”

That suggests bondholders could accept one of the offers instead of foreclosing on Rocky Gap. (The bondholders are the only party likely to get any money back from previous investments in Rocky Gap. Not the state.) But to pay the bondholders and invest in the property, developers have to come up with dough. Whether they can is not a sure thing.

Posted by Jay Hancock at 9:03 AM | Permalink | Comments (0)
Categories: Slots
        

For today's column on alleged fraud at Kernan Hospital, I interviewed Dr. Scot Silverstein. He's an MD, consultant, adjunct prof at Drexel and an expert on electronic patient records.

The U.S. attorney for Maryland said that Kernan's secondary diagnosis in 2008 of a severe, rare kind of malnutrition was a bogus attempt to increase reimbursement. The more severe a patient's condition, the more money hospitals get paid. The disase, kwashiorkor, is rarely seen outside of developing nations, but in 2008 Kernan was diagnosing one out of every eight patients with kwashiorkor. From the column:

But somehow Kernan experienced an apparent kwashiorkor outbreak starting in 2006, the only Maryland hospital to do so. Its cases of kwashiorkor as a secondary diagnosis grew a hundredfold, from three in 2005 to 358 in 2008, according to data from the state Health Services Cost Review Commission.

That was more than a third of all the diagnosed kwashiorkor cases statewide. At Kernan, 12.7 percent of all patients were diagnosed in 2008 with the rare ailment. At all Maryland hospitals, on the other hand, only 0.13 percent of that year's patients had kwashiorkor on their charts, according to the HSCRC data

The increasing computerization of medical records may be raising hospitals' tendency to do this sort of alleged "upcoding." When hospital personnel enter cases into the computer, prompts will come up nudging them to add disease codes that will increase reimbursement. Silverstein, blogging at Health Care Renewal, says that in any case the spike in kwashiorkor diagnoses must have been a red flag for government auditors, who have their own software to identify this kind of thing. Silverstein:

I note that I could have easily advised the hospital not to use the diagnosis of kwashiorkor or do these things, had I been on staff there. I would have opined that it would stick out like a sore thumb via the algorithms payers use to detect fraud, e.g., via sudden, strange changes in claims. One wonders why nobody else gave that advice ... (fear?)

Here's a commenter on Silverstein's blog:

For years I've been jumping up and down telling folks that this was bad news. Kwashiorkor doesn't exist in developed nations. It is simply wrong to code for it 99.99% of the time.

Everyone seems to be blinded by the potential to get more money and taking the risk to not be audited!

Posted by Jay Hancock at 11:20 AM | Permalink | Comments (0)
Categories: Health Care
        

Denise Whiting's apology for trademarking the term "Hon" sounds very sincere. Her admission of how the backlash against the trademark caused her sleepless nights and a big drop in business is poignant. She clearly said "I am sorry" with no ifs, ands or buts. So often public apologies come with hedges and conditions: "If anyone was offended, I regret that" or words to that effect.

But whether consciously or not, she also seems to have gotten more PR savvy. Maybe Gordon Ramsay helped. A big part of Whiting's problem, I would argue, was not that she trademarked a beloved Balmer term. That happened years ago, although nobody knew it. Her problem was her response when it was reported. Her are her comments to the Sun's Jill Rosen in December 2010:

"I took ownership of it," she says of the word "Hon." "No one along the line has celebrated it or created as much with it as I have. When I started doing Cafe Hon in 1992, 18 and a half years ago, where was the city then? Where was Hampden? So you could say I took a little word, celebrated it and created change. Big change."

She tried to undo that little display of presumption in a letter a week later to the Sun, which said: "I am sorry that our basic assertion of commercial rights was taken the wrong way." (Big hedge.) Her lawyer, Ned Himmelrich, didn't do her any favors when he told the Baltimore Messenger: "The apology doesn't change her legal position. She's been taking sound business practices."

Sound legal practices. Terrible PR practices. Finally Whiting is heeding the fundamental tenets of Crisis Publicity: Apologize unequivocally. Make sure everybody knows. Apologize again. Stop doing whatever it was that made people mad. Forever. Be humble. And say you're sorry.

See you in Hampden for some Cafe Hon crabcakes.

Posted by Jay Hancock at 9:10 AM | Permalink | Comments (1)
        

This is small consolation to the BGE customers who were without power for a week after Hurricane Irene. But AP is reporting that as of this morning 50,000 Connecticut residents (does that mean 50,000 households?) were without power more than a week after the big snowstorm.

That seems even worse than BGE did after Irene. Eight days after Irene the Sun was reporting that "hundreds" of BGE households still lacked power.

Connecticut politicians are unhappy, Connecticut Light is apologizing, and it all looks familiar.
AP:

The electrical outages, the legacy of a storm that hammered the Northeast on Oct. 29 and 30, were largely an unpleasant memory by Sunday night for most of the 3 million who lost power at the height of the storm. But in Connecticut, about 50,000 residents remained without electricity by Monday morning, nine days after the storm. In New Jersey and Massachusetts, only a few hundred customers remained without power.

Posted by Jay Hancock at 8:23 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

As Internet commerce grows, so does the sales tax revenue that Maryland loses to the Web. Amazon.com and many other Web merchants do not charge sales tax, which means that the GPS unit you buy from Amazon doesn't come with the 6 percent extra you pay on the same product bought at Best Buy.

In 2010 Marylanders bought $3.3 billion in merchandise on the Web and through catalogs that they did not pay sales tax on, which cost the state $198 million in lost revenue, estimates a study published this afternoon by the staff of Comptroller Peter Franchot. All the items are taxable under law, but because out-of-state merchants such as Amazon don't collect a sales tax, it tends not to get paid. (You're supposed to file a "use tax" return on the computer you bought from Dell or the GPS from Amazon, but nobody does. (Oops. Stuart says Dell does collect Md. sales tax -- thanks.))

By 2020, sales tax revenue lost to the Internet and catalogs will be more than $300 million, the comptroller estimates. The money lost last year "is about 5 percent of sales tax revenues, and sales tax is a third of the general fund," says David Roose, director of Maryland's Board of Revenue Estimates. "It's not a small chunk of change."

A Supreme Court decision blocks states from ordering sales tax collection unless a merchant has a physical presence in the state. California and others have tried to get around this -- by trying to designate in-state merchants who sell via Amazon as a taxable "nexus," for example. Colorado has ordered out-of-state merchants to report transactions with Colorado residents, presumably so state revenuers can send out bills. But efforts by states to tax Internet goods haven't produced much result.

Maryland "can take some steps to try to address the issue, but they’re really working around the margins," Roose says. "To resolve the issue finally takes action from Congress.”

Posted by Jay Hancock at 1:27 PM | Permalink | Comments (13)
Categories: Taxes
        

I discuss the October jobs report with WBAL's Bill Vanko.

Posted by Jay Hancock at 12:11 PM | Permalink | Comments (1)
Categories: The Great Recession
        

Sens. Pipkin and Rosepepe are asking the Public Service Commission to make Exelon's proposed purchase of Constellation Energy dependent on a spinoff of Baltimore Gas & Electric, Constellation's subsidiary. Forget it, says Exelon President Chris Crane, which is what everybody expected. Exelon wants BGE's steady cash flow to balance its less predictable unregulated operations.

But it's an interesting thought experiment. How would BGE operating as a separate, publicly traded corporation change the way BGE works?

-- BGE's stock price could languish, as the market would probably get the message that Maryland regulators would never allow anybody to acquire the company.

-- Depending on how the company fared with future rate increases, BGE could end up paying a half-decent dividend yield. Investors would expect most of their return to come from income, not capital gains. But the spinoff would probably hurt existing shareholders.

-- For ratepayers, requiring a spinoff would be less risky than having the state seize BGE through eminent domain, which would require compensation paid to shareholders and lots of debt put on BGE's books.

-- Spinning off BGE doesn't by itself remove Constellation's grip on the regional wholesale power market or solve the larger problem of where Maryland gets its electricity. We need new generation plants not controlled by Constellation, which the senators propose would be built by BGE.

-- Having BGE itself build new power plants might be riskier for ratepayers than having BGE sign a long-term power-purchase deal with independent generation developers. (This is the direction the state is moving in anyway -- very slowly.) After a decade of deregulation, BGE has lost much (all?) of its expertise in plant development.

-- An independent BGE would be safe from financial raids by Exelon or some other deregulated holding company. But it might not be able to borrow money as cheaply as it can when owned by a bigger company.

Posted by Jay Hancock at 6:03 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Lisa Madigan, who obtained a huge settlement against Exelon Corp. a few years ago over alleged manipulation of the wholesale electricy market, has asked federal regulators to block Exelon's attempt to buy Baltimore-based Constellation Energy. The deal could give the combined company power to push up prices in Northern Illinois, she said in a filing with the Federal Energy Regulatory Commission.

Constellation and Exelon are both big sellers of electricity, and their marriage raises concerns about "market power" and increased prices in any market in which they operate. The market monitor for the PJM grid, which includes mid-Atlantic states but also northern Illinois, reached an agreement with the companies to limit their ability to push up prices if they merge. Madigan argues that the market monitor's analysis didn't include northern Illinois. From her filing:

".... the Illinois wholesale market is an island in the PJM regional transmission organization. There are limited generation and transmission facilities in the portion of PJM that serves northen Illinois, presenting a market with existing competitive restraints. Constellation is one of the few major suppliers that participates in the Illinois Power Agency power procurement events and that supplies power to the default customers of the Exelon subsidiary, Commonwealth Edison.... [The market monitor's analysis] is incomplete because it does not include a comprehensive review of the effect of the proposed merger on northern Illinois."

Posted by Jay Hancock at 10:13 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

The Public Service Commission hearings on Exelon's bid to buy Constellation Energy and Baltimore Gas & Electric started on Monday. The top draws -- Constellation CEO Mayo Shattuck and Exelon COO Chris Crane -- were also the leadoff act.

The hearings so far have contained no bombshells. But they shed new light on the proposed takeover, showing vividly how multibillion-dollar deals are about personalities and egos as much as about finances. We now know:

-- The merger would eliminate 600 jobs at the combined company, according to Wednesday testimony by Crane. Which jobs would be cut from Exelon and which from Constellation hasn't been decided. The companies have pledged to create jobs on net in Maryland, but that formula includes temporary construction jobs for building new facilities.

-- Offering Shattuck a big title with unspecified responsibilities in the combined company was seen by Exelon as part of the price it had to pay for Constellation. In prepared testimony Crane said that, according to Excelon CEO John Rowe, offering Shattuck the job of executive chairman in the combined company was "imperative" to get the deal done.

-- "Mayo would probably like to be CEO [of the combined company] but knows we will not pay a premium to give my chair away," Rowe told Crane in an email referred to in testimony on Tuesday. "Mayo would like to be 'executive chairman' for an undefined period."

-- Constellation's board asked Shattuck to ask Exelon if he could be CEO of the combined operation. "I said that was not a possibility," Shattuck testified.

-- Rowe and Exelon's board don't seem to have been crazy about the idea of Shattuck as executive chairman. However, Rowe wrote in an email, "with three-quarters of the board in our hands, I do think that the role of executive chairman might be tolerable..."

-- In 2008 when Constellation was veering toward bankruptcy, Constellation officials talked to Exelon about a potential bailout. "It was determined we felt that we might be able to put part of our lines of credit towards, to Constellation to help them through the situation," Crane said in testimony. They also talked about selling Constellation's nuclear plants to Exelon. (The talks came to nothing and Constellation was rescued by MidAmerican Energy and then by EDF Group.)

-- Even PSC Chairman Doug Nazarian, who is no stranger to lengthy examination of utility-company principals by hostile lawyers, seems to have been surprised by how long EDF Group lawyer Martin Flumenbaum grilled Crane and Shattuck. "Were you kidding about having a whole half-day for Mr. Shattuck?" Nazarian asked him late Monday. (He wasn't.)

Posted by Jay Hancock at 7:51 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Yesterday Boulder, Colo., voted to buy its electric utility from Xcel Energy and have the city run it. It's a firm move toward electricity re-regulation -- the kind that has been discussed casually in Montgomery County. It'll be a risky move by Boulder if it follows through. The city will have to sell bonds to buy the utility assets from Xcel, and higher taxes are involved.

The Daily Camera newspaper describes the vote as an effort by the city to reduce its CO2 emissions:

The drive to form a municipal utility grew out of the city's efforts to reduce its greenhouse gas emissions. In 2006, Boulder voters approved a carbon tax to fund programs that would help Boulder meet the Kyoto Protocol, which calls for a 7 percent reduction in greenhouse gas emissions below 1990 levels.

But, as Bloomberg notes, the vote also comes after cost-overruns to install smart meters in Boulder. Writing before the votes were counted, Bloomberg said a yes vote for "municipalization" would "effectively" end the smart-grid project, but it sounds like the meters are already installed. Bloomberg:

The referendum comes after Xcel Energy spent more than $44.8 million, exceeding its original budget estimate of $15 million, according to regulatory filings. The initiative is one of the nation's first "smart grid" pilot projects, designed to help customers reduce power use and cut down on greenhouse gas emissions. Xcel raised $950,000 for its campaign to keep the Boulder utility private, compared with $88,500 spent by backers of the referendum, according to city records.

Posted by Jay Hancock at 8:43 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

Some of the testimony by Mayo Shattuck and Chris Crane at the energy-merger hearings has centered around what kind of benefit Exelon should provide Maryland in return for regulators approving its buyout of Constellation Energy, parent of BGE.

Exelon President Chris Crane had favored offering more renewable energy to the state than the 25 megawatts that ended up in the initial offer. But Constellation chief Shattuck believed bill credits are more important to getting approval, my colleague Hanah Cho reports. It's an interesting question. In Gov. Martin O'Malley's first term, bill credits would have been the way to go. He was focused on getting as much back for residential customers as possible.

O'Malley 2.0, however, seems more interested in green energy. He's pushing it in several ways, most visibly with a proposal to build a big offshore wind farm. I'm guessing the Public Service Commission, which is directly charged with approving the buyout, is still more focused on credits. During testimony Crane acted as if it's an either-or proposition: More renewable-based generation would mean lower bill credits. But that's a negotiating position. Don't be surprised if the final package includes a $100 credit for households and a little more -- maybe 40 MW -- of renewable generation capacity.

I don't believe that's enough benefit for what Maryland would give up by selling Constellation, but I don't get to vote. I also believe Maryland needs additional renewable-energy capacity more than it needs another $100 rebate for households. But as I said...

Posted by Jay Hancock at 8:46 PM | Permalink | Comments (1)
Categories: BGE/electricity
        

Few people expected Europe's sovereign debt crisis to be permanently solved by last week's summit. But few people expected that this is what the next problem might look like. Greek Prime Minister Papandreou has called a referendum on the bailout for January. If it fails, we're back to the starting gate. Actually, we'll be way behind the starting gate -- a lot worse off than if the crisis were addressed and solved a year ago.

Tyler Cowen doesn't think that it'll even get held -- that the deal will fall apart beforehand. Even if it passes there will be lots of uncertainty and guessing between now and then. And that uncertainty will lead to more pressure on Italy and Spain. A selection of reactions this morning:


Peter Boockvar:

The decision by Greek PM Papandreou to hold a referendum on the European plan to Save Greece is basically a call to the Greeks of whether they want in or out of the euro more than a vote on the latest bailout plan. The Greeks don’t want more austerity but they want to stay in the euro and that’s why the referendum will likely get a yes vote but we unfortunately have to wait until January for this. A no vote will lead to a collapse of the bailout, a hard default and a complete mess for everyone else. French bank stocks in particular are down 10-15% in response.

Krugman:

Things are falling apart in Europe; the center is not holding. Papandreou is going to hold a referendum; the vote will be no. Italian 10-years at 6.29 at pixel time; that’s a level at which the cost of rolling over the existing debt will force a default, even though Italy has a primary surplus. And with everyone simultaneously pushing for fiscal austerity, a recession seems almost certain, aggravating all of the continent’s problems.

Tyler Cowen:

Make no mistake about it, the decision to hold a “referendum” is a decision to turn down the deal altogether. The referendum will never be held. It is scheduled for January and the current deal, which is not even a worked out deal, won’t be on the table by then. It’s already not on the table. The opposition leader is already opposed to the referendum, there are months more of market volatility to come, the other EU powers will get skittish about the deal, how is the conscientious Slovakia supposed to feel, and how many other factors do I need to cite? And how can the Greeks decide how the referendum will be worded?

This is a way to back out of everything, under the guise of “democracy” and ex post blame the speculators and the rest of Europe.

Posted by Jay Hancock at 10:06 AM | Permalink | Comments (0)
Categories: The Great Recession