Md. approves BGE rate increase, surcharge

Customers of Baltimore Gas and Electric Co. will start paying more for the delivery of electricity and natural gas after Maryland regulators approved this year's second rate increase Friday and also OK'd a monthly surcharge on electric bills over the protests of consumer advocates.

Maryland's Public Service Commission more than halved the company's request for an increase in the rates paid to maintain and improve its infrastructure. In approving the increase, the commissioners said work remains to be done in the wake of "extreme weather events" that caused widespread, lingering outages.


Two of the five commissioners objected to the surcharge, which is the first levied on BGE customers for reliability-related work. But the other three called it necessary.

"The need for dramatic acceleration in the pace of infrastructure improvement causes us to look for new tools," they wrote.

The higher distribution rates — the charge for moving energy to customers — will amount to an extra $2.13 a month on the average residential electric bill and an additional 73 cents on the average residential gas bill. The increase takes effect immediately.

The surcharge will begin in April for electric customers. On average residential bills, it will add 8 cents a month, increasing annually until it hits 36 cents a month in the fifth and final year.

Paula M. Carmody, head of the Maryland Office of People's Counsel, which represents residential utility customers, noted that these come on the heels of rate increases in February and three years ago.

"This stuff is pancaking," she said.

Though the latest sums are lower than BGE officials asked for, Carmody said, "they did get a substantial amount."

The people's counsel and AARP Maryland appealed the commission's July decision to give a rate increase and surcharge to Pepco, the Washington-area utility. The appeal is pending before the Baltimore City Circuit Court. Both consumer groups said Friday that they would need to review the order before deciding whether to appeal the BGE case as well.

BGE said its more frequent rate requests in the last few years reflect accelerated spending on infrastructure and tree-trimming to improve service.

Mark D. Case, BGE's vice president of strategy and regulatory affairs, said the next case will likely come "within the next year or so" as the utility seeks reimbursement for smart meters.

BGE has argued that the timing isn't bad for rate increases because energy costs — which make up a larger part of customers' bills than distribution charges — are falling. Case said that portion of electric bills will drop 15 percent in June, a savings of about $12 a month for the typical residential customer.

"The commission's positioned us to be able to make greater investments in reliability so customers will see steadily improving service, and at the same time, they're going to be able to enjoy affordable energy bills because … commodity prices are at such low levels," he said.

BGE's distribution rate request had been for $107 million over the first year. The Public Service Commission's staff thought that was far too high and recommended slashing that amount by 70 percent.

Ultimately, the commission ordered a $46 million increase — 57 percent less than the request— to be spread across residential and business customers. The commission reduced the utility's prior rate request by 35 percent.


Commissioners also reduced the amount of BGE's proposed surcharge. BGE had proposed 34 cents a month for the typical residential customer in the first year, rising to 75 cents by the fifth and final year.

The surcharge will pay for what the utility characterized as a more rapid pace of "corrective maintenance" and tree-trimming to reduce outages. Its approval marks the first time the company will be able to collect money for projects before work is completed.

BGE said its request followed a state task force's recommendation for surcharges to strengthen the electric grid in the wake of last year's destructive derecho windstorm.

But the people's counsel argued that BGE had not made the case to collect money for ongoing work when the state's long-standing tradition is to reimburse afterward.

"BGE should not receive additional compensation for simply meeting the reliability standards already set by the Commission and that is all the Company has promised to do," the agency's attorneys wrote in a November filing.

BGE also wants to collect a monthly surcharge on gas customers, which it said it would use to speed up replacement of old pipes, but that case is separate. A decision is expected in January.

Commissioners Harold Williams and Lawrence Brenner dissented on the matter of the electric surcharge. They argued that it unfairly shifted risk from shareholders to customers, requiring payment before the improvements could benefit local people — and before it's known whether the work will actually help.

Despite concerns about storm outages, they added, BGE's surcharge work is aimed at improving day-to-day service rather than bad-weather performance.

State Sen. James C. Rosapepe, a Democrat who represents parts of Anne Arundel and Prince George's counties, said he agreed with the dissenters that a surcharge is a bad idea.

"This gradual deregulation of BGE now through this surcharge is a big step in the wrong direction," he said. "That's not to say we don't need to invest … but this was not the way to do it."