Advocates urge utility regulators to end flawed ratemaking pilot
Labor, consumer, and environmental groups warn that multi-year rate pilot has led to excessive rate hikes for 1.3 million Marylanders using BGE.
A coalition of elected officials, labor, consumer, and climate groups is urging the Maryland Public Service Commission to protect residents from excessive rate hikes by ending the multi-year rate plan pilot program which launched in 2020 (watch video).
According to the Office of the People’s Counsel, since approval of the BGE pilot, BGE’s electric rates have increased by 26% and gas rates have increased by 43%. The proposed $150 million surcharge is on top of a $400 million multi-year rate increase approved by the Commission in 2023.
The PSC is currently requesting feedback on BGE’s Multi-Year Ratemaking pilot program and is holding a hearing on October 15th. Through this pilot, utilities have failed to measurably demonstrate increased spending has been in the best interest of customers and instead passing risk to consumers while reducing utility accountability and transparency, raising alarm bells from the Maryland Office of People’s Counsel and Maryland Energy Administration. Advocates are calling for an end to the pilot to protect customers from ever-increasing monthly utility bills.
Under the pilot, BGE has been able to request approval for rate increases in advance of spending, which is not how rates have been made in the past. This pre-approval reduces important oversight and accountability and has shifted the opportunity to profit to a virtual profit guarantee for the utility.
In December, BGE was granted a $400 million rate increase, and is now asking to add an additional $150 million surcharge to customers’ bills. These numbers only tell a fraction of the story, however, as the long term financial consequences of the pilot are much more dier. Ratepayers will be paying for BGE’s investments, plus interest to the utility, for decades to come.
Thanks to low commodity prices for both gas and electric power in recent years, these hikes in delivery rates have been largely unnoticed. However, what should have been a period of lower bills was lost, and now with high energy capacity costs looming, ratepayers will feel the increase and many will face affordability struggles and risk shutoffs.
Utility regulation might seem complicated, but it’s pretty simple: the more a utility spends on its infrastructure, the larger its opportunity to profit. This creates a powerful incentive for wasteful spending and we rely on our utility regulators to keep a careful watch.
The pilot program has supercharged the incentive for infrastructure spending. And unfortunately, the pilot has removed important tools regulators have to keep wasteful spending in check
The Public Service Commission should end the pilot and return to a ratemaking process that provides better checks and balances on utility spending. We’re counting on the Commission to ensure BGE, and all Maryland utilities provide safe, reliable, and affordable energy to Marylanders.
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