In January, prices for natural gas and electric utility delivery will be going up for Maryland consumers but not quite as much as previously anticipated.
The state’s utility regulators approved a partial rate increase for Baltimore Gas and Electric Company’s multi-year rate plan. The Maryland Public Service Commission approved a $408 million increase rather than the $602 million increase requested by the utility company.
For customers, that means that during the first year residential electric bills will increase by $4.08 monthly and $10.43 monthly for residential gas customers in 2024– for many users that means bills will go up by $14.51 in the new year. The increases scale down in subsequent years. In the third and final year of the rate increase, electric consumers can expect an increase of 34 cents monthly and gas consumers would see an increase of $2.80 a month in year three. Those calculations are according to the Commission.
The rate increases start on January 1st, 2024 and are solely for the delivery of services. The cost of electric and natural gas, which are handled by other suppliers, are independent of BGE and the jurisdiction of the PSC.
In February, Baltimore Gas and Electric filed a request with the Public Service Commission for a rate increase on charges to customers for the delivery of gas and electric utilities. That increase would have increased rates by an average of 5% a year over the course of three years, totaling an increase of around $31 monthly by the end of that timespan.
At the time of the filing, BGE executives argued that rate increases were necessary for a $2.3 billion investment through 2026 into safety and reliability of the natural gas and electric grid.
BGE, a subsidiary of the Chicago-based Exelon Corporation, serves about 1.3 million electric consumers and 700,000 natural gas customers in Maryland.
The partial rate increase may come as a relief for some of the activist groups and vocal politicians who have been speaking out against BGE’s proposal since February through a series of rallies, demonstrations, and letter-writing campaigns. Among them were the SEIU 99, a healthcare union, and the Maryland branch of the AARP (previously known as the American Association of Retired Persons), who both expressed concerns that the rate increases would be too burdensome for low and fixed-income people.
In a statement explaining the decision, the Commission wrote, “A return on equity (ROE) of 9.5% for BGE’s electric distribution service and 9.45% for BGE’s gas distribution service was supported by the evidence presented in the case.”
BGE needs access to Baltimore City’s underground conduit system, a series of underground wires and terracotta piping that spans hundreds of miles. The wires in that system power traffic lights, street lights, and much of the phone and internet service to the city; that’s all owned by the city. Just before the rate case filing, BGE struck a deal with Baltimore City that would allow them to do $120 million in ‘system improvements’ between 2023-2027 in lieu of paying rent as the utility had done previously. In that deal, BGE also agreed to a $1.5 million yearly occupancy fee.
That sale was met with disapproval from Council President Nick Mosby and City Comptroller Bill Henry who tried to prevent a quorum of the city’s spending board so that the deal could not be negotiated. The deal was eventually approved and is final.
The Commission did approve BGE’s proposed $120 million budget associated with the conduit agreement, however, that is subject to a “future prudence review”. Essentially that means that at the end of the multi-year rate plan, the Commission will review whether the utility’s spending was “prudent and reasonable.” If the utility underspends, they could get that money back in a future rate case and if they overspent, that money could be paid back to consumers with interest.
However, after reviewing the evidence of the case, the Commission could not be sure if the conduit agreement with the city would benefit ratepayers or burden them in the long term.
“The Commission expressed concern that customers may be required to pay back a significant debt that will be put into rate base, with interest, profits, and taxes over the 50-year depreciation period of the improvements with unknowable changes in contract costs during this 50-year time period,” the Commission said in their statement.
The Office of People’s Council, a state watchdog agency tasked with advocating for ratepayers, has previously estimated that the conduit deal, although it initially saves ratepayers money, would eventually cost consumers as much as $860 million over the next 50 years. BGE has called that claim “unfounded.”
“The impact on ratepayers is made more uncertain by the relatively short term of the new conduit agreement—which expires on December 31, 2029. Additionally, the benefits are unclear regarding BGE’s authority under the new agreement to prioritize certain projects in order to benefit electric customers,” said the Commission.
This partial increase is in line with recent moves made by the state’s utility regulators. In 2020, BGE sought a two-year freeze on customers’ rate bases followed by an 8.3% increase in 2023; the commission denied that freeze and granted them a one-year freeze instead to help customers avoid a larger increase in 2023.
In a statement sent to WYPR, the utility wrote, “We are reviewing the details of the order, which appears to represent a balanced and reasonable outcome that will provide many benefits to our customers and the State. Importantly, the order ensures that BGE can continue to provide safe, reliable, and affordable services to our customers, while laying the foundation for the grid of the future.”
