BALTIMORE, MD – The Maryland Public Service Commission has made a decisive move, unanimously approving a significant rate increase for Baltimore Gas and Electric Company (BGE). This authorization allows a phased increase totaling nearly $408 million over three years, impacting gas and electric services.
In February, BGE sought a larger hike of $602 million. This proposed increase aimed to support the ongoing upgrades in their electric and gas distribution networks. The company underscored the necessity of these improvements for maintaining reliable service and enhancing resilience, particularly in light of Maryland’s growing electrification goals.
The company’s request specifically detailed increments of over $313 million for electric and approximately $289 million for gas services, spread across three years starting January 1, 2024. BGE’s customer base encompasses 1.3 million residential electric consumers and 700,000 natural gas users across Baltimore City and ten neighboring counties in Maryland.
For the initial year, the average bill increase is projected at $4.08 per month for electric customers and $10.43 monthly for gas subscribers. Notably, these averages are set to decrease in the subsequent years, dropping to just 34 cents for electricity and $2.80 for gas by the third year.
The Commission agreed on a Return on Equity (ROE) of 9.5% and 9.45% for BGE’s electric and gas distribution services, respectively. These rates align with the expected returns on similar risk investments and are sufficient to maintain BGE’s financial stability and attract necessary capital.
A noteworthy element of the Commission’s decision involves the $120 million budget approval for BGE’s new conduit agreement with Baltimore City. However, this budget is subject to future scrutiny and a prudence review at the reconciliation stage of this rate case and subsequent ones until fully recovered.
The Commission raised concerns about the long-term impact of the conduit agreement on ratepayers. Given the short duration of the agreement, set to expire by the end of 2029, and the anticipated 50-year cost recovery period, there are uncertainties about future burdens on customers. The Commission will require BGE to conduct ongoing benefit-cost analyses of the conduit agreement in each rate case until the contract costs are fully recovered.
Additionally, the Commission addressed several other crucial aspects of the case. It denied the Maryland Office of People’s Counsel’s (OPC) request to dismiss BGE’s three-year forecasted revenue requirement and end the multi-year rate plan. The OPC argued that the plan failed to protect consumers and primarily benefited utility shareholders. However, the Commission will revisit this issue in a separate proceeding expected in 2024.
The Commission also rejected BGE’s proposed performance incentive mechanisms (PIMs), citing that their design and costs did not justify customer benefits.
In August 2023, the Commission had already ruled out BGE’s $272 million electrification plan from the current multi-year plan. This decision was based on the premise that it would be premature to consider such a broad policy proposal within a rate case. The Commission emphasized that stakeholders should be able to present their electrification or greenhouse gas reduction plans in a separate docket.
This decision marks a critical juncture for BGE and its customers, balancing the need for infrastructure improvement with the financial implications for the consumer base in Maryland.
