BGE asks for fourth rate increase in four years

Baltimore Gas and Electric Co. is asking for its fourth rate increase in as many years, one that would raise distribution charges to residents getting both gas and electric service by nearly $15 a month on average.

The utility filed the $185 million request Wednesday with Maryland regulators, who have reduced past requests significantly. BGE said it's in the middle of a multiyear effort to upgrade infrastructure in order to improve service, and it needs to cover its costs.


The company wants permission to raise distribution rates — the charge for moving energy to customers — by $6.57 a month on the average residential electric bill and $8.53 a month on the average residential gas bill. Customers with both services would pay slightly less than the sum of the two charges.

Higher rates, if approved by the Maryland Public Service Commission, would take effect in January. They would come on top of the past three rate increases, which added $6.80 more in distribution charges on the average electric bill and $4.28 more on the average gas bill.


"Are we to come to expect that every year they're going to ask for another $15 from me every month?" asked George Frazier, 67, a semiretired resident of Fells Point in Baltimore who said he has worked to keep his utility expenses down. "It's a lot for the individual to take, especially people that are already maxed out."

BGE — Maryland's largest utility provider with more than 1.2 million electric and 655,000 gas customers — said it does expect to ask for another rate increase from its customers in 2015, probably at midyear. By then, officials think they will have finished the rollout of smart meters — the replacement of old-style analog models — and will want reimbursement for that effort.

Meanwhile, infrastructure work, from utility pole replacement to gas main upgrades, is scheduled to continue. BGE said it has spent $3 billion on its distribution system in the last five years and plans to spend an equal amount in the next five.

"You see cycles sometimes where investment levels crank up," said Mark D. Case, BGE's vice president of strategy and regulatory affairs. "This has been an intense period."

That's true for other utility customers, too. Even as BGE filed its request Wednesday, state regulators approved an increase on Pepco customers — though for substantially less than that utility had asked. It was Pepco's third rate case in three years.

BGE said its added distribution costs have been offset by falling energy costs since 2009.

Maryland utilities can also now request multiyear surcharges to help pay for accelerated work on gas infrastructure and the electric system. BGE got permission to impose both starting in the last several months.

Residential gas customers are paying 37 cents a month for that charge this year, while residential electric customers are paying 7 cents a month.


"We're just in an era of constant rate cases," said Theresa V. Czarski, deputy people's counsel for the Maryland Office of People's Counsel, charged with representing residential utility customers. "Pretty much every company is saying, 'Oh, we've got to do upgrades — which of course makes you wonder, 'What have you been doing all along when you should have been doing this work?'"

Case said BGE has worked steadily on its system but hit "a tipping point" in recent years where more infrastructure needed replacement because of its age.

Service improvements have come with the last five years of investments, he said. Excluding major storms, the number of power outages in BGE's territory last year dropped more than 30 percent compared with the average in the previous three years, while outage duration dropped nearly 60 percent, he said.

The figures don't include the effect of major storms because last year was relatively calm, while the area was buffeted by both the derecho and "Superstorm" Sandy in 2012.

Case also said that decreasing energy costs mean the average residential electric customer is paying $12 less a month for that expense this summer compared with last summer, which would outweigh the electric distribution rate increase BGE wants.

State Sen. James C. Rosapepe, who represents Anne Arundel and Prince George's counties, said he hasn't heard constituents say BGE reliability has improved dramatically in the last few years, but he also hasn't heard as many outage complaints.


He wants state regulators to closely scrutinize BGE's request.

"Is the juice worth the squeeze — will customers save more money from increased reliability than they'll pay in increased rates?" Rosapepe said. "If they do, obviously customers are better off. If they don't, BGE will be better off; the customers will be worse off."

Many states are wrestling with how best to upgrade old gas pipes and other utility infrastructure without overwhelming customers, said Rob Thormeyer, a spokesman for the National Association of Regulatory Utility Commissioners.

"Right now what we're seeing is a big focus on replacement of infrastructure and modernization, and that costs money," he said.

In Maryland, distribution rate cases focus on reimbursement — looking at what utilities have already spent rather than what they plan to shell out. Case said that's why BGE keeps coming back for more on a regular basis as it invests in its system.

The company would like to change that model. Its request to the Public Service Commission includes payments for work it intends to do in 2015 on reliability projects to decrease outages.


"It takes you out of this cycle of having to come in on an annual basis to update rates," Case said.

But Czarski, the deputy people's counsel, said her office has been "fighting off these forward-looking mechanisms for years now." She doesn't want people to pay for infrastructure that isn't in the ground yet.

"It's coming out of customers' pockets before they're ever getting to have any benefit from that money, and the company's earning a return on it," she said. "It's better for it to remain in the customers' pockets."