Maryland Public Service Commission approves $408 million rate increase for Baltimore Gas and | WBFF-Fox Baltimore

BALTIMORE (WBFF) – In a unanimous decision, the Maryland Public Service Commission has approved a three-year rate increase of nearly $408 million for Baltimore Gas and Electric Company’s Multi-Year Rate Plan (MYP), which covers both gas and electric services . For the first year of the multiyear plan, the Commission authorized the use of federal tax credits to partially offset rate increases for customers in the first year.

According to the commission, in February this year the company requested an increase of $602 million, which it said was necessary to cover further investments in the electricity and gas distribution systems to maintain safe and reliable operations and to ensure system stability increase Given Maryland’s increasing electrification goals.

Specifically, the request sought rate increases of more than $313 million for electricity and just over $289 million for gas, to be implemented over a three-year period beginning January 1, 2024. BGE serves 1.3 million residential electric customers and 700,000 natural gas customers in Baltimore City and portions of 10 adjacent Maryland counties.

The approved rates will result in average bill increases of $4.08 per month for residential electric customers and $10.43 per month for residential gas customers in 2024. These average increases decline significantly in subsequent years, to 34 cents per month for electricity and $2.80 per month for gas in the third year.

The Commission found that a return on equity (ROE) of 9.5% for BGE’s electricity distribution service and 9.45% for BGE’s gas distribution service was supported by the evidence presented in the case. These ROEs are comparable to the returns investors expect from investments of similar risk, are sufficient to ensure confidence in BGE’s financial integrity, and are sufficient to maintain and support BGE’s creditworthiness and required capital to attract.

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Of particular note, the Commission approved BGE’s proposed $120 million budget related to the new conduit agreement the company entered into with Baltimore City, but noted that it was in the voting phase of that tariff case and all future cases would be subject to future precautionary review until the costs are fully recovered.

The Commission noted that current evidence is unclear as to whether the new conduit agreement will benefit ratepayers or impose significant future burdens. The Commission’s technical staff and the Maryland Office of People’s Counsel (OPC) raised numerous issues questioning the prudent nature of the agreement, particularly given that the company entered into a contract that expires before the end of the decade , but costs are expected to be recovered in the next 50 years .

The Commission expressed concern that customers may be required to repay a significant debt, which will be included in the rate basis with interest, gains and taxes over the 50-year depreciation period of the improvements, with the contract costs increasing over that 50-year period cannot be estimated. Seasonal period. Although the new agreement may provide customers with a short-term price reduction (due to the lower annual conduit fees the company pays to the city), long-term customer costs may increase as BGE will make improvements to the conduit under the new agreement to collect additional costs from ratepayers.

The impact on ratepayers is made even 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 to help electric customers.

The Commission will require an ongoing benefit-cost analysis of the ratepayer pass-through agreement to be submitted in each rate case until the costs of the contract are fully recovered, including any new contracts BGE enters into with Baltimore City, compared to the previous cost contract . If it is found that this contractual decision was not cost-effective in the context of future changes to the conduit, the Commission may not recognize any remaining unrecovered contractual costs at that time.

Other important topics covered in this case include:

  • The Commission denied OPC’s request to reject BGE’s projected three-year revenue requirements and terminate the multi-year tariff plan altogether. OPC had argued that the MYP’s results to date show that it does not protect consumers and does not serve the public interest beyond the benefit to utility shareholders. The Commission concluded that switching to a traditional tariff case once proceedings had begun would result in BGEs losing their due process rights and, further, that it would not be appropriate to pursue MYPs in the context of an individual tariff case to terminate the utility company. The Commission will address this issue in the MYP learning process, which is expected to start in 2024.
  • The Commission rejected BGE’s proposed performance incentive mechanisms (PIMs), which would provide the company with rewards or penalties based on the achievement (or failure) of certain targets, finding that the design and cost of the programs undermined the benefit to customers predominated.
  • In August 2023, the Commission granted OPC’s request to remove BGE’s $272 million electrification plan proposal from the current multiyear plan, noting that it would be premature to award a comprehensive new policy proposal in isolation as part of a tariff case check. In addition, the Commission decided that stakeholders should have the opportunity, in a separate file, to propose their own electrification or greenhouse gas reduction plans, going beyond the proposals contained in the UBI tariff case.

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