Md. regulators hear arguments in BGE rate case

State regulators are now deep into the details of Baltimore Gas and Electric Co.'s request for higher rates, a case expected to wrap up by the end of the year — 10 months after the last increase went into effect.

The Maryland Public Service Commission is hearing testimony from the utility, opponents and others this week and will take comments from the public in a set of meetings next month.


Some of the feedback suggests rate-case fatigue.

"It is very difficult to face a third rate increase in four years with this case coming less than three months after the last case ended," said John E. Abrahamson, purchasing manager for Columbia-based W.R. Grace & Co., in written testimony on behalf of large energy users. "These cases are very expensive to litigate, and it makes it extremely challenging to budget for our utility rates when they are constantly increasing."


Mark D. Case, BGE's vice president of strategy and regulatory affairs, said the company understands that frustration. He said BGE wants rates that account for expected 2014 spending — rather than the state's long-standing tradition of reimbursing past expenses — and said such a move "would allow us to go longer in between rate cases."

"It's a continuing story of BGE making greater and greater investments to improve the reliability and the safety of the system," Case said. "We've been at this now for a number of years. It has meant that we've needed to come in more frequently than in the past to get recovery for those investments."

When to pay is a debate that's come up before. Consumer advocates argued in BGE's last rate case that the reimbursement lag helps keep a lid on costs by offering BGE more incentive to be efficient, and they contended that the company hadn't proved it was substantially increasing reliability spending.

BGE is asking for higher distribution rates — the charge for moving energy to customers. The company said its request would increase the typical residential electric bill by $3.90 per month and the typical residential gas bill by $1.96 a month. Customers receiving both gas and electric would pay about $5 more, BGE said.


Together with increases for businesses, the request would bring $107 million in additional revenue to the utility in the first year.

The state regulators' staff recommends a substantially lower increase of about $32 million — 70 percent less than BGE's request. The state Office of People's Counsel, charged with representing residential utility customers, recommends slicing the increase still further to $25 million.

In BGE's last rate case, which wrapped up in February, the Public Service Commission reduced the request by about a third.

This time, the base rate isn't the only fighting ground. BGE also is asking for a monthly surcharge on electric bills for five years, a fee officials there say would allow them to pick up the pace of improvements aimed at reducing outages. The surcharge would add about 34 cents a month on typical residential bills in the first year, increasing to 75 cents by the fifth year.

The Maryland Energy Administration said in written testimony that BGE's work plans are "conceptually" consistent with recommendations made by Gov. Martin O'Malley's utility task force after the destructive derecho storm in June 2012. The task force's suggestions included surcharges to improve the electric grid.

Many states have adopted surcharges, BGE's Case said. He said the utility decreased the number of outages by 20 percent between 2010 and 2012, not counting power lapses caused by hurricanes and other severe storms, and expects a further 10 percent reduction with surcharge-funded work.

But consumer advocates have pushed back here and elsewhere, saying such fees receive less regulatory scrutiny than regular rates and are unfair to customers.

"We don't believe surcharges are necessary or appropriate for the utilities to carry out their core responsibilities," said Paula M. Carmody, who heads the Office of People's Counsel, in an email. "Customers should not be required to pay for things that have not happened yet, and the surcharge provides for that."

When the Public Service Commission this summer approved the state's first infrastructure surcharge, for Pepco, both the people's counsel and the AARP appealed to the Baltimore Circuit Court. Consumer advocates are worried about the precedent it sets. It's a sentiment shared by a Public Service Commission member who dissented on the Pepco matter.

Commissioner Harold D. Williams, a former BGE official, compared the surcharge decision to letting a genie out of a bottle.

"I fear it will continue granting the wishes of Maryland utilities for many years," he wrote.

BGE wants another surcharge in addition to the electric infrastructure fee — one on natural gas customers to pay for accelerating gas pipe replacement. That request is separate from the rate case, but regulators are seeking customers' opinions on both cases in a series of meetings next month.


Public hearings on BGE's rate case

All begin at 7 p.m. and also address BGE's separate request for a gas infrastructure surcharge.

•Nov. 4 in the Joint Hearing Room of the Legislative Services Building, 90 State Circle in Annapolis.

•Nov. 5 in the meeting room of the Baltimore County Public Library's Towson Branch, 320 York Road in Towson.

•Nov. 6 in Wohlman Assembly Hall of the War Memorial Building, 101 N. Gay St. in Baltimore.

•Nov. 7 in the Banneker Room of the George Howard Building, 3430 Court House Drive in Ellicott City.

•Nov. 8 in the Town Hall Rotunda, 39 Hickory Ave. in Bel Air.

•Regulators also are taking written comments through Nov. 22, mailed to David J. Collins, executive secretary of the Maryland Public Service Commission, at the William Donald Schaefer Tower, 6 St. Paul St., 16th Floor, Baltimore, Md. 21202. The comments should include a reference to either Case No. 9326, the rate increase request, or Case No. 9331, the gas surcharge request.

Floor, Baltimore, Md. 21202. The comments should include a reference to either Case No. 9326, the rate increase request, or Case No. 9331, the gas surcharge request.

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