Home | BaltimoreBrew.com
Business & Developmentby Fern Shen5:01 pmDec 16, 20230

PSC criticized for approving BGE rate hikes and “aggressive spending” on fossil fuel infrastructure

“A disappointment” and “business as usual” the People’s Counsel and other consumer advocates call the Baltimore Gas and Electric Company rate case decision

Above: A BGE truck on a Baltimore street. The utility is owned by the Chicago-based energy giant Exelon. (Fern Shen)

In the end, Baltimore Gas and Electric got most of what it wanted from state regulators.

Even though its original, three-year rate request was trimmed back, the company’s enormous spending on future gas infrastructure was left laregly untouched by the Maryland Public Service Commission – a decision that critics say will lead to decades of steeply rising rates that will hit low-income families and renters hardest.

The PSC’s ruling on Thursday night will result in a series of immediate rate hikes for BGE’s 1.3 million electric and 700,000 gas customers in Baltimore and central Maryland:

• Bills next year will increase by an average of $4.08 a month for electric service and an average of $10.43 a month for gas service.

• In 2025, the average bill will go up another $1.22 a month for electric and another $2.96 a month for gas.

• In 2026, average bills will rise another 34 cents for electric and another $2.80 for gas.

But significantly, the commission also approved more than $1 billion of the $1.4 billion BGE sought for gas pipe replacement and other fossil fuel equipment investments, opening the door for the utility to come back and re-propose $145 million of the spending that was denied this time around.

The company, owned by Chicago-based energy giant Exelon, called Thursday’s ruling a “balanced” decision that will provide “many benefits to customers,” but the Maryland Office of the People’s Counsel begged to differ, saying it is “more detrimental than beneficial to utility customers.”

“Forecasted investments”

“The PCS order largely fails to address the massive and risky fossil fuel investments that BGE has been making at a rate of more than $1.2 million a day,” the ratepayer advocacy office said in a statement released late on Friday.

“These gas system investments are locked in for decades to come and pose significant risks to BGE’s customers, especially less affluent customers who will find it more challenging to electrify to avoid spiraling gas system costs,” Maryland People’s Counsel David S. Lapp stated.

“Unfortunately, business will continue as usual, exposing customers, taxpayers and investors to the risk of stranded costs,” he added.

Lapp said he welcomes language in the decision acknowledging his office’s concerns about the alternative form of ratemaking the regulators approved, which allows BGE “to charge customers for forecasted investments.”

“But that is no consolation for the deleterious impacts on customers of the past three – or next three – years of rate increases,” he asserted.

Longtime Baltimore community activist Ray Kelly and others join Councilman Zeke Cohen to denounce BGE's $602 million rate increase request. (Fern Shen)

Longtime Baltimore activist Ray Kelly joined Councilman Zeke Cohen, attorney Thiru Vignarajah and others last Wednesday who criticized BGE’s plans to expand fossil fuel infrastructure. (Fern Shen)

“Padding their profits”

Groups representing ratepayers, low-income residents and the environment have been denouncing the rate request since it was filed in February, saying it will leave customers stuck with costly gas infrastructure at a time when government policy is moving toward renewable energy and away from fossil fuels.

The decision is “very disappointing,” said one of those advocates, Emily Scarr, director of the public interest advocacy group Maryland PIRG, disputing BGE’s claim that the spending is needed to ensure customer safety and reliability.

“No one’s arguing about the fact that we should be replacing leaky pipes. Our argument is their strategy to do so is not targeted to where the work is needed,” she said.

“Their model is designed in a way that maximizes profits – it’s not cost-effective, and it’s just padding their profits.”

Scarr noted that most of what was shaved from BGE’s customer rate increase came from lowering the rate of return for the company’s investors – from 10.5% to 9.6%.

“On the one hand, that’s good. They should be adjusting interest rates downward to be in line with the level of profits the utility needs,” she said. “On the other hand, it’s a demonstration that the commission didn’t cut what the utilities are wanting to spend money on” and critics have called on them to trim.

A report released last week by the Abell Foundation made the same point, finding that natural gas infrastructure spending already approved by the PSC has had no documented effect on the number of injuries or fatalities in Maryland.

Last plea to the PSC: reject the Baltimore Gas and Electric rate hike (12/14/23)

City Councilman Zeke Cohen, who has been a vocal critic of the BGE rate request, said he was encouraged by the nearly $194 million the PSC trimmed from the company’s original request, saying it was a reaction to public criticism.

“This positive outcome would not have been possible without tireless community organizing from residents, consumer groups, environmental groups and labor,” he said yesterday.

But the southeast Baltimore representative said he remained disappointed that the PSC “declined certain common-sense measures to hold BGE accountable.”

“Much more needs to be done to rein in spending on gas infrastructure,” he said, observing also that BGE “should not be allowed to profit from the city-owned conduit system.”

Conduit Costs Approved

Included in the nearly 300-page rate decision is approval of BGE’s proposed $120 million budget associated with its controversial conduit agreement with Baltimore, which the Office of People’s Counsel has questioned.

BGE is required, as part of the rate decision, to present an ongoing cost-benefit analysis of the conduit agreement any time it seeks a customer rate increase until the costs of the contract are fully recovered.

Lapp slammed the commission for approving the conduit plan despite acknowledging on Thursday that its benefits to ratepayers are “unclear.”

Customers will have to pay a “significant debt” over a 50-year period, but the PSC “fails to analyze any of the conduit costs beyond three years,” Lapp argued.

“BGE should not be rewarded with projected recovery of costs when it chose to stick its head in the sand by not performing any analysis of the impact,” he said. “Telling it to perform that analysis after the fact is unfair to customers who will be required to pay those costs in the meantime.”

Some other aspects of the rate case earned praise from Lapp, including the PSC’s rejection of a $46 million “contingency budget” to pay for future cost overruns.

Describing the fund as “unnecessary and inappropriate,” Lapp said the commission rightly saw through the proposal, calling it a “clever semantic argument.”

Most Popular