Maryland consumers will begin paying small monthly fees on electric bills this year to subsidize an ambitious energy-conservation initiative, under plans approved by regulators yesterday.
The plans are part of an initiative championed by Gov. Martin O'Malley to reduce electricity consumed by utility customers at least 10 percent by the end of 2015. Within several months, Baltimore Gas & Electric Co. and other utilities are expected to begin marketing cost-saving measures such as rebates on energy-efficient appliances and "home energy audits" paid for by the new fees.
The surcharges will not be set until spring, said Public Service Commission Chairman Douglas Nazarian, but preliminary estimates range from less than $1 to about $3 per month for residential ratepayers.
Despite the costs, consumer advocates heralded the commission's approval of utility conservation plans as a long-delayed step that could help ratepayers shrink their overall bill, forestall the threats of rolling blackouts and eventually reduce the cost of electricity because of lowered demand.
"If a customer just takes advantage of one or two proposed measures, you'll wipe out any charge," said Theresa V. Czarski, deputy people's counsel, whose office represents the interests of consumers in utility matters. "People who participate in these programs will see immediate benefits, and over the long term that helps bring down the cost of electricity for everyone."
O'Malley heralded the regulatory approval. "The programs approved today will not only help build a more sustainable energy future, but will also provide the opportunity for Maryland ratepayers to save on energy and ultimately lower their bills," the governor said in a statement.
Electricity bills have been a thorn in O'Malley's side since he campaigned in 2006 on the unfulfilled promise of undoing a 72 percent electricity rate increase for 1.2 million customers of BGE, the state's largest utility. The O'Malley administration successfully negotiated a $170 credit for BGE customers in September, but critics were quick to upbraid the governor yesterday for policies that pile on fees at a time of economic hardship.
"I thought one of the claims of this administration ... was they were going to fight higher rates," said Del. Warren E. Miller, a Howard County Republican who sits on the House Economic Matters Committee. "Now what I'm hearing is they're going to issue an order to impose an additional charge, thereby making electricity more expensive."
But Nazarian issued a full-throated endorsement of the plan yesterday, arguing that utilities needed the authority to impose small fees on all customers to stimulate a broad "cultural change" of decreased energy consumption. He said regulators are taking pains to minimize the cost to consumers, noting that the commission in August rejected a more costly BGE proposal that would have been borne almost entirely by residential consumers.
The BGE plan approved yesterday anticipates a $390 million investment in energy conservation through 2015, which the Baltimore-based utility can recover through fees imposed on industrial, business and residential customers. The state's four other electric companies - Pepco, Delmarva Power & Light Co., Allegheny Power and Southern Maryland Electric Cooperative - have 90 days to propose a cost structure for their respective energy conservation programs.
Most of the plans share similar features and are designed to make it less expensive for people to replace inefficient lighting fixtures, upgrade to energy-saving appliances and install thermostats that manage usage during peak demand times.
Nazarian said he was most excited by a BGE "quick home energy check-up" initiative in which a BGE contractor audits a home and suggests energy-saving upgrades. If the homeowner agrees to have BGE install, free of charge, energy-saving devices such as compact fluorescent lightbulbs, the utility will waive the $40 check-up charge.
"We cannot recommend strongly enough that every BGE customer take advantage of this opportunity," regulators wrote in the order issued yesterday. "If you request a quick home energy audit .... you will save more than you will pay in surcharges, even if you do nothing else."
A BGE spokeswoman declined to comment yesterday, saying officials there had not yet reviewed the PSC's order, which was released late in the day.
When all five electric company plans are up and running, the energy-conservation initiatives will represent investment of about $1 billion through 2015, said Malcolm Woolf, director of the Maryland Energy Administration, who called yesterday's actions "the first significant step" toward achieving O'Malley's conservation goals.
Maryland's goal of drastically reducing peak-energy consumption by 2015 is an "ambitious" goal that "no state has yet achieved," Malcolm acknowledged. "But few states have faced the energy challenges that Maryland has," he added.
The conservation requirements were adopted by the General Assembly last year amid rising energy demands that threatened to lead to rolling blackouts. The economic recession has reduced energy consumption, Nazarian said, but over time officials expect Maryland to struggle with rising consumer demand unless a "structural" reduction in consumption is achieved.
Johanna Neumann, state director for the Maryland Public Interest Research Group, a consumer and environmental advocacy organization, applauded yesterday's actions but cautioned that the programs needed to be "administered correctly."
In 2007, Allegheny Power sent unsolicited lightbulbs to Western Maryland customers and then charged their bills for the energy-saving bulbs under a PSC-approved plan. Consumers were outraged, and last year Annapolis politicians demanded that the utility refund its customers, which Allegheny pledged to do.
"While I'm excited that these programs are approved," Neumann said, "there are going to be kinks to work out."
Energy-conservation promotions to be offered by BGE and paid for through new surchages:
* Quick home energy checkups: $40, or free with conservation upgrades.
* Energy-efficient appliances: rebates.
* Compact fluorescent lightbulbs: rebates.
* Free audits of apartment building common areas.
* Financial assistance for ventilation system upgrades to industrial and commercial buildings.