Natural gas companies in Maryland should slow their spending on new infrastructure amid the state’s turn away from fossil fuels, the state’s advocate for ratepayers has warned in a filing.
Maryland’s Office of People’s Counsel, which represents residential utility customers in the state, filed its petition Thursday with the Maryland Public Service Commission, which regulates utility operators.
The People’s Counsel warned that ratepayers, particularly low-income residents, could be stuck with the price tag of excessive improvements in the state’s gas infrastructure, unless the commission steps in with regulations.
“Everyone knows that gas sales will decline substantially in coming years,” People’s Counsel David S. Lapp said. “But gas utilities continue to spend massive amounts on their delivery systems and operate as usual. It’s long past time for the Commission to step in and redirect the gas utility ship before it sinks, taking customers down with it.”
The People’s Counsel’s petition warns that utility companies are spending “on an accelerated basis to replace legacy infrastructure with new infrastructure that has a lifetime of 40 years or more.”
In 2022, Baltimore Gas & Electric and Washington Gas spent $78 million and $50 million respectively on “new customer acquisition and system expansion,” according to a recent People’s Counsel report.
But — the petition warns — that spending is inconsistent with the state’s greenhouse gas reduction laws, and with the expectation that gas consumption will decline over time as Maryland embraces electrification.
A report from the Office of People’s Counsel found that gas sales are projected to decline by at least 60% by 2045.
In a statement, Tori Leonard, a spokesperson for the Public Service Commission, said she could not comment on the pending petition. But she said that commission Chairman Jason Stanek “takes issue” with Lapp’s comment in a Friday guest commentary in The Baltimore Sun, specifically a line about the commission “deferring” to utilities.
The Commission “must consider both the financial health of the utilities that provide vital services to Maryland residents while also considering utility impacts on climate change and other important state policies,” Leonard’s statement read. “The Commission has always set its own docket and has never simply ‘deferred’ to utilities.”
Leonard also highlighted the commission’s efforts to address climate change, including by issuing approvals for offshore wind developments off Maryland’s coast, overseeing the EmPOWER Maryland program responsible for switching residents to high-efficiency appliances and by planning for increased electrification.
In a statement, BGE spokesman Richard Yost said the company is still reviewing the People Counsel’s Thursday filing.
BGE supports Maryland’s “ambitious” goal of carbon neutrality by 2045, Yost said, but believes that an “integrated energy system, comprised of gas and electric delivery infrastructure” should be leveraged to get there.
In January, BGE increased rates for consumers, as permitted by the commission. On average, customers were expected to see an increase of $3 per month on gas bills and $3 per month on electric bills, according to BGE’s website. Using tax credits from the federal government, BGE held its rates steady for 2021 and 2022, in light of the pandemic.
A spokesman for Washington Gas, which serves several Maryland counties from Frederick through the Washington suburbs to St. Mary’s, said in a statement that it has added 17,000 new meters in the state over the past 10 years “based on customer demand for natural gas.” That’s alongside $1.2 billion worth of investments, said the company spokesman Andre Francis.
“Washington Gas has and will continue to support Maryland’s climate goals by bringing innovative solutions to our customers and the communities we serve,” the statement read.
Last month, the Public Service Commission fined Washington gas $1 million, saying its responsiveness to customers had lagged following a merger.
Thursday’s People’s Counsel’s petition warns that because the utility companies expect to pay for their costly upgrades to gas infrastructure over an extended period of time, they run the risk of “stranded costs,” which they won’t be able to recover.
With market forces and government action driving down demand for natural gas, the utilities will have fewer customers, likely forcing them to raise rates, the People’s Counsel‘s petition warns. With an increase in rates, even more customers may choose to electrify their homes, or switch out gas appliances for electric alternatives. Because doing so requires upfront costs, wealthier Marylanders will be able to make the switch first, meaning the rate hikes will fall hardest on low and middle-income Marylanders unable to electrify.
The People’s Counsel’s petition is welcome news, said Josh Tulkin, director of the Maryland chapter of the Sierra Club, a national environmental advocacy group that pushes for a “just and equitable transition from dirty fossil fuels,” according to its website.
Tulkin said it’s possible the Public Service Commission could reject the request by the People’s Counsel. As of now, he said, the commission is made up entirely of former Republican Gov. Larry Hogan’s appointees, who have generally proven reluctant to act proactively in accordance with the state’s climate laws, which require the state to be carbon neutral by 2045.
But change is likely coming to the commission with Democratic Gov. Wes Moore in office. Moore has rescinded two of Hogan’s recess appointments to the commission, signaling that he plans to replace them with his own selections. And in June, the term for Stanek, the commission chair, will expire, allowing Moore to appoint a successor and giving him a majority of appointments.
“We don’t have time to lose waiting for the perfect, so we’re excited to see [Office of the People’s Counsel] put this forward, because we need to get the conversation started,” Tulkin said.
The commission has attracted attention from Democratic state legislators in recent years, including after a controversial decision to authorize the C.P. Crane coal power plant to transition to natural gas. In response, in 2021, lawmakers approved an explicit requirement for the commission to consider climate change in its decisions for the power grid.
Meanwhile, the People’s Counsel’s petition calls for the commission to take both short-term and long-term actions.
In the long term, the commission should conduct a comprehensive investigation that ends with rules for how the utility companies operating in Maryland should plan to transition away from gas.
In the short term, the commission should require utility companies to align their procurement with Maryland’s climate change laws, and prevent them from promoting new gas equipment to homeowners. In addition, the commission could require the EmPOWER Maryland program, which is run by the utility companies, to incentivize consumers to switch home appliances to electric.
The Maryland Commission on Climate Change has recommended repeatedly that the program halt rebates for fossil fuel appliances, in order to encourage customers to purchase electric options. Legislation on the subject has been proposed in the General Assembly this year.
The climate commission — which includes representatives from state agencies, local governments, environmental groups and industry groups — also recommended last year that the General Assembly require the Public Service Commission to issue a gas transition plan for utilities, with the expectation of a 60% to 100% decline in gas throughput by 2045.
Under the Climate Solutions Now Act, passed by the General Assembly last year, Maryland is required to reduce its greenhouse gas emissions 60% (from 2006 levels) by 2031, and reach net-zero greenhouse gas emissions by 2045.
Getting there will require the state to power its electric grid with increasing amounts of renewable energy, such as solar and wind. State law requires half of the state’s energy to be from renewable sources by 2030. Controversy has surrounded some sources considered renewable under state law, such as trash incineration.
Last year, gas companies fought against a provision in the Climate Solutions Now Act that would have banned newly constructed buildings in Maryland from using fossil fuels for space and water heating demands. The provision was ultimately removed from the legislation.
Instead, legislators required the Public Service Commission to produce a report on the electric grid’s capacity to handle increased electrification. That is due in September. Legislators also included a requirement that large buildings in Maryland (over 35,000 square feet) begin reducing their carbon footprints, initially by 20% in 2030.