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O'Malley electricity panel recommends surcharge for grid upgrades

Baltimore Gas and Electric Co. customers could see a $1 to $2 fee added to their monthly bills under a proposal from Gov. Martin O'Malley to make the electricity grid more reliable.

A task force the O'Malley administration assembled after the June 29 derecho recommended Wednesday that regulators push utilities to make even more upgrades to the grid more quickly than previously planned, and to tap customers to pay for them as needed. The derecho caused 762,000 outages, some lasting as long as eight days, in the Baltimore area.

But the proposal faces opposition. Consumer advocates criticized any plan that would charge the public for reliability they should expect. And state energy regulators have rejected similar proposals from utilities who have sought special surcharges to pay for major infrastructure improvements three times in the past year.

BGE officials, meanwhile, welcomed the task force's recommendations.

Separately Wednesday, a Baltimore city board voted to charge the utility more for access to underground conduits, a cost BGE said it would pass on to customers.

Any decision to impose a surcharge for grid improvements rests with the Maryland Public Service Commission.

The task force suggested the surcharge to help utilities speed up planned reliability improvements such as tree trimming and burying some power lines. The PSC already has the authority to impose such charges, which could be imposed for as long as the panel sees fit.

O'Malley urged Marylanders to be open to the surcharge and grid investment, given the increased frequency of extreme weather in recent years. "These are all things that all of us pay for together," O'Malley said at a State House news conference. "When our environment changes, we too have to adapt to those changes."

Paula Carmody, the state's people's counsel, said she was pleased to see a focus on reliability but was disappointed to see the surcharge included in the panel's recommendations.

"There's no need, as the commission agreed with us in three separate rate cases, for a separate infrastructure tracker or surcharge in order for these companies to carry out their reliability responsibilities," Carmody said.

Pepco, Delmarva Power and Light and Washington Gas and Light have each asked for similar charges when seeking rate increases before the PSC in the past year, and each has been denied.

"We're not persuaded that this mechanism is necessary or appropriate," commissioners wrote in an order on Pepco's rates issued in July. "We are persuaded that the Company can do the work it needs to do and have a reasonable opportunity to earn its approved return without any nontraditional recovery mechanisms."

Traditionally, the state's utilities tap ratepayers to recover the cost of investment in and maintenance of their systems. When those costs rise, utilities can make their case to the PSC for rate increases.

PSC officials declined to comment on the proposed surcharge because the task force's recommendations were filed as part of a case pending before the commission, reviewing utilities' responses to the derecho.

Other consumer advocates also criticized the idea.

"It's another example of pandering to these wealthy utilities that are already getting a better deal than the average taxpayer," said Jenny Levin, state advocate for Maryland PIRG, a consumer advocacy group.

Del. Dereck Davis, chairman of the Economic Matters Committee, said that while customers want a hardening of the grid, "they basically want the utilities to absorb it." But Davis, a Prince George's County Democrat, said there's "no free lunch" when it comes to improving reliability.

"One way or another, those charges will ultimately be borne by citizens," Davis said.

Del. Steve Schuh, a Republican member of the House panel's utility subcommittee, said the panel favors hardening the electrical system to withstand severe storms, but he warned the effort would be expensive. Passing on those costs might concern many Marylanders, he said.

"The governor has raised innumerable taxes and fees over the past few years and many people may be unable to bear any additional increases in their monthly outlays," said Schuh, who represents Anne Arundel County.

Hank Greenberg, senior state director for AARP Maryland, said the surcharge would "turn customers into creditors," but said he trusted in the PSC to weigh the recommendations objectively. "Their independence should not be compromised," Greenberg said. "They see the whole picture."

O'Malley rejected the notion that electricity customers shouldn't have to share in the cost of improving reliability. Administration officials emphasized that the surcharge could only be applied to expedited grid improvements, not everyday reliability.

"Most folks would be willing to pay another dollar or two for a more robust grid in order to avoid having to throw out $14-$18 a month" in spoiled food, O'Malley said. "It would be very easy and popular for me to jump on a box here and say, 'Damn the utilities, it's all their fault.'"

While that might please people, he said, "it won't keep the lights on."

The task force's other recommendations include adopting standards to govern how long utilities have to restore outages after major storms. Current standards apply to all electricity service except during major storm events.

The panel also encouraged a study of future strains on utilities' workforce. While the report found utilities have maintained crew staffing levels and increasingly added contracted crews, it found that the average age of workers is about 50.

The task force included officials from the governor's office, PSC, Maryland Energy Administration, and the state departments of natural resources, information technology and emergency management. Members met eight times over a period of three weeks in August and September and heard from outside industry experts on various reliability issues.

BGE spokesman Rob Gould welcomed the recommendations and said utility officials look forward to working with the O'Malley administration and the PSC on exploring them further. "It's an important and positive step forward in our collective efforts to strengthen the grid," Gould said. "The task force did some very good work in a short period of time."

Separately, Board of Estimates voted Wednesday to raise the rate it charges BGE for access to the conduit system by nearly 3 cents per foot of cable, from 90 cents next year to 92.7 cents.

Kimberly Curry, senior counsel for BGE, spoke out against the increase at the meeting, calling it unnecessary and saying it could end up saddling the utility's customers with slightly higher bills. "We just haven't seen that this rate increase is justified," Curry said.

Gould said the $1.5 million in charges would be passed on to the company's 1.2 million customers. Any rate increase, he added, would need to be approved by the PSC. "We absolutely support the need for increased investment in the conduit system," he said. "We see this as more of an issue of disagreement over the rate charge."

The city's conduit system covers nearly all of Baltimore — except the city's outskirts — and provides the concrete casing that carries wires for electricity, telephone service, fiber optics and street and traffic lights.

Jamie Kendrick, deputy director for administration in the city's transportation department, said much of the rate increase would be spent on improvements to the system on Washington Boulevard, Dundalk Avenue, Charles Street and Broening Highway.

Carmody said the conduit rate hike likely would show up in a future request from BGE to increase rates on costumers. "Once it shows up in a rate case, we'll be looking at it," she said.

Baltimore Sun reporters Michael Dresser and Luke Broadwater contributed to this report.

sdance@baltsun.com

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