Baltimore Gas & Electric Co. won’t increase utility delivery rates in 2021 to mitigate the severe economic impact caused by the coronavirus pandemic, which has led to surging unemployment and a rent and eviction crisis in Maryland and across the country.
The Maryland Public Service Commission, which regulates the state’s utilities, has approved parts of a three-year rate increase, proposed by BGE in May, which would have frozen the so-called delivery rates for two years and then increased them by more than 8% in 2023. But the commission opted instead to ratify a one-year freeze on delivery rates to prevent the larger increase in 2023, meaning customers may see upticks to their gas and electric bills as soon as 2022.
Delivery rates are one part of the utility’s bill, covering the distribution of electricity and natural gas; the other part is the supply rate, covering the cost of the energy, which have been relatively flat for electricity and trending lower for natural gas.
“In order to mitigate the potentially severe economic impacts of approving a rate increase during an unprecedented pandemic, the Commission approved BGE’s plan to accelerate the use of certain tax credits to avoid any increase to customer bills for the first year of BGE’s multi-year rate plan,” said Jason M. Stanek, chairman of the Public Service Commission. “However, the Commission elected not to exhaust those credits to prevent an increase in 2022, because doing so would have led to a larger rate increase in 2023 and beyond.”
The federal tax credits, due to be returned to customers over a 30-year period, will largely be exhausted by 2023.
The utility provider’s revenue will increase starting next year so it can invest in its electric grid and natural gas system. The Baltimore-based subsidiary of energy giant Exelon has been spending hundreds of millions of dollars each year to strengthen its electricity infrastructure and update aged natural gas lines throughout the Baltimore region.
BGE CEO Carim Khouzami said the commission’s decision will enable significant investments in improving the safety and reliability of the region’s natural gas and electric systems, and will support hundreds of energy infrastructure projects, maintenance programs and thousands of jobs.
“Holding bills flat next year and driving economic development and supporting critical infrastructure jobs will greatly assist with Maryland’s economic recovery efforts,” Khouzami said in a statement. “At the same time, the region’s power grid and natural gas system will be stronger for it.”
BGE’s authorized revenue increase for 2021 will be $59.3 million for electric and $53.2 million for gas; $39.2 million for electric and $8.9 million for gas in 2022; and $41.4 million for electric and $11.8 million for gas in 2023.
Tori Leonard, a Public Service Commission spokeswoman, said the resulting net bill impacts will not be known until the commission makes a determination about any offsetting adjustments for 2022 and 2023.
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But customers will not have to pay more out of pocket in 2021, the commission said in a news release. But to provide more transparency into the revenue growth, BGE will add a line item on customer bills and label it “BGE Federal Tax Credit,” per the commission’s decision.
The commission acted wisely, said Maryland People’s Counsel Paula M. Carmody, an independent state advocate who represents home utility customers. But even the reduced revenues will come at a cost for BGE households in future years, said Carmody, who is retiring after the end of the year, as much of the breadth and pace of the work planned is “ill-timed for the current economy.”
“The Commission agreed with [the Office of People’s Counsel] and reduced budgets for several spending programs over the next three years,” Carmody said in an email.
But, she added, her office “had hoped for more significant reductions in the 3-year spending increases, and the cost impacts for customers in future years.”
BGE will receive a rate increase taking effect Jan. 1, but the company’s tax credits will negate any increase in customer bills in 2021. Beginning in 2022, customers may see an increase in their bills, though it is subject to potential offsetting adjustments that will be reviewed by the commission.
The utility provider also announced Thursday a new $15 million relief program offering grants to assist small businesses affected by the pandemic. The money is coming from shareholder funds. Starting next month, eligible businesses located in BGE’s Central Maryland service area can begin applying for BGE Energizing Small Business Grants of up to $20,000 each.
“Now more than ever, job creators need a boost to help lead the recovery from the pandemic’s far-reaching impacts,” Khouzami said in a statement. “Our hope is that the BGE Energizing Small Business Grants will provide much-needed help to hundreds of small businesses in our community, especially historically underrepresented minority and women-owned businesses.”