A federal plan aimed at slashing electric prices by deregulating utilities, some warn, could have an unwanted side effect: Making it more difficult to clean up the Chesapeake Bay and reduce chronically high ozone levels in East Coast cities.

At issue is the Federal Energy Regulatory Commission's new "open access" rule requiring public utilities to open their transmission facilities to other power generators. The rule, in effect, promotes competition between utilities as electricity could be sold across the power grid to locations hundreds of miles away.

But critics worry the proposal would result in more electricity being generated by Midwest utilities, which have excess generating capacity and lower operating costs. That would mean more emissions - and more pollution landing in downwind areas, including the Bay watershed and northeastern states.

The state of Maryland, in written comments to FERC, expressed concern that the action could hinder efforts to improve air quality and may have the "potential to harm the Chesapeake Bay and its watersheds."

Likewise, Pennsylvania officials commented that "states in the South and West may increase electrical output at dirty power plants and sell electricity to other parts of the country, making Pennsylvania's air dirtier."

The EPA has raised similar concerns. In May, it asked the White House Council on Environmental Quality to require FERC to develop a plan to address any air pollution problems that result from their action.

The main concern involves the generation of nitrogen oxides. NOx is a major contributor to high summertime ozone levels along the East Coast from Washington, D.C., through Maine. Exposure to high levels of ozone can contribute to respiratory and other health problems in humans.

NOx is also considered to be a major source of pollution to the Bay. Computer models indicate that between 25 percent and 30 percent of the nitrogen entering the Chesapeake was the end result of air pollution landing on its 64,000-square-mile watershed. Some of the highest airborne nitrogen deposition rates in the nation are in the Bay watershed.

Slightly more than a third of the nitrogen landing on the watershed is estimated to stem from power plant emissions. Most of that - about 75 percent - is the result of emissions outside the watershed, primarily from sources in the Midwest, which are upwind.

If those emissions increase, it could make Bay nutrient reduction efforts more difficult. Nitrogen, along with phosphorus, has been targeted by the Bay states for 40 percent reductions by the turn of the century in an effort to improve water quality.

David Festa, deputy director of the Center for Clean Air Policy, said it's estimated that there is enough excess generating capacity in the Midwest to cause at least 100,000 tons of additional NOx emissions each year. Some estimates put the number as high as 400,000 tons, he said, with the greatest excess-generating capacity in the eastern areas of the Midwest closest to the Bay watershed.

By contrast, total NOx emissions for the entire mid-Atlantic region, which includes the Bay watershed, is about 406,000 tons a year, according to figures from FERC.

"There is excess capacity," Festa said, "and it's cheaper than the capacity in the East. So it makes sense."

The center - formed 10 years ago by several state governors and utility executives to address regional issues - along with many East Coast states, the EPA and environmental groups dispute FERC's environmental impact statement, which concluded that open access "poses no threat to the environment and promises substantial economic benefits." As a result, FERC said it didn't need to develop a strategy addressing environmental impacts stemming from the rule.

On average, Midwestern power plants generate about twice as much NOx for each megawatt hour of electricity than power plants in the mid-Atlantic and Northeast, according to the center. That's largely because the Eastern utilities have had more stringent controls placed on them to help control the region's chronic air pollution problems.

Air problems linger, though, because much of their air pollution problems are caused by sources hundreds of miles away - the same as with the Bay watershed.

While Midwestern emissions are expected to be reduced as the EPA implements the Clean Air Act of 1990, they will continue to exceed those in the East - in part because additional emission controls are already planned for the East.

The situation could be worsened under FERC's plan, critics say, because it could result in major shifts in where power is generated - and where pollution falls. East Coast utilities, which have already invested heavily in pollution reduction efforts could, as a matter of economics, find themselves buying cheaper power from dirtier, upwind power plants.

Skeptics of FERC's analysis also say lower prices would likely spur more demand for electricity. Power from nuclear power plants in the East would become less competitive, and their generation capacity could be replaced by coal plants. Likewise, emerging alternative energy technologies will become less competitive. And utility programs that encourage conservation efforts to reduce demand - and thereby a utility's need to build costly power plants - could be scaled back.

The extent of the plan's impact depends largely on how much of the nation's electrical transmission system is upgraded to handle large transfers of power across regions. That upgrade could take several years, though some improvements could begin much sooner.

Because the pollution impacts would not be felt immediately, the EPA has said the open access plan should be put in place, but that FERC develop a strategy to offset any adverse environmental impacts caused by the rule.

In the Eastern half of the United States, emissions from electric power plants are about 3 million tons during the summer ozone season. Those emissions need to be reduced to below 1 million tons to maintain the ozone health standard in the Northeast and Upper Midwest, the EPA estimates.

"Any NOx increases resulting from open access in future years would exacerbate the difficulty of accomplishing the needed reductions," EPA Administrator Carol Browner said in a May 13 letter to the Council on Environmental Quality, the White House office responsible for resolving disputes over federal environmental impact statements.

Browner hopes the troublesome NOx issue can be resolved through the Ozone Transport Assessment Group - an organization that includes the EPA and environmental officials, as well as some industry and environmental representatives, from all 37 states east of the Rocky Mountains.

Next summer, those states must deliver to the EPA "State Implementation Plans" detailing how they will meet the federal government's air quality standards. Most of the states have areas which fail to meet the EPA's air quality standard for ozone, in part because some of the pollution causing their problem is coming from elsewhere.

The idea behind OTAG is for all the states to reach agreements over how air emissions can be controlled in a way that allows all states to develop implementation plans by the deadline.

One possibility is a regional "cap and trade" program in which emissions would be capped at a level significantly lower than those allowed today, and then emission trading would be allowed between generators.

But the outcome of the OTAG process is far from certain. Some states without attainment problems may prove to be reluctant to enact costly controls that affect their industries and power plants to benefit air quality in downwind regions, though the EPA does have the authority to requires states to take such actions.

"The problem with FERC is that it throws another wrinkle into what was already a complex issue," said Frank Courtright, program manager with the Maryland Department of the Environment's Air and Radiation Management Administration and the co-chairman of the Bay Program's Air Quality Coordination Group.

If OTAG and other EPA initiatives fail to comprehensively solve the problem, Browner said in her letter that FERC should have a "backup" strategy in place to offset any NOx emissions that could result from the open access rule. The Council on Environmental Quality is expected to decide in June whether to require FERC to develop such a strategy.