Utility Regulators say BGE hasn’t justified $150 million surcharge

In an extraordinary act, the Maryland Public Service Commission (PSC) determined that Baltimore Gas and Electric Company (BGE) fell so short of meeting  its burden of proof to charge ratepayers $150 million through a surcharge that it paused its proceeding and ordered the company to come back with additional information.

The Commission explains in their order:

“Having reviewed the record developed to date, the Commission notes that in their testimony, the Technical Staff (“Staff”) and the Office of People’s Counsel (“OPC”) both asserted that BGE failed to file testimony demonstrating that its project investments and costs were prudently incurred.”

The first phase of PSC proceedings establishes an evidentiary record. Once the record closes, parties use facts in the record and applicable law to argue over what the PSC should decide. The PSC found the BGE’s presentation of evidence so deficient that it ordered a “do-over.”

BGE is a subsidiary of the Exelon Corporation and Maryland’s largest gas and electric utility. In 2020, the PSC granted BGE a multi-year rate hike through a pilot program and enabled the company to ask for additional money via a yearly reconciliation process. 

Some of the $150 million BGE has requested is to cover increased operating expenses and higher levels of capital spending. This significant increase in spending calls into question the value of the multi-year rate plan, which was promised to provide both the utility and its customers more predictability and gradualism in rate increases. 

It’s the utility’s responsibility to prove that expenses are just and prudent in order to recover them from ratepayers, and the Commission should only authorize any of this additional $150 million surcharge if and when the utility meets its burden of proof. 

“The multi-year rate pilot and reconciliation process have created a powerful incentive for wasteful spending,” explained Maryland PIRG Senior Advisor Emily Scarr. “We appreciate the Commission’s scrutiny of BGE’s increased spending,  encourage them to not authorize any of this additional $150 million surcharge unless the utility meets its burden of proof, and urge them to end the multi-year pilot and return to traditional rate making.”

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 for BGE ratepayers approved by the Commission in 2023. Maryland PIRG, and a coalition of groups, are calling for an end to the pilot to protect customers from ever-increasing monthly utility bills. 

BGE’s request for a $150 million surcharge calls into question the entire premise of multi year rate making in Maryland. BGE’s inability to properly budget spending demonstrates a lack of predictability in operations expenses and a lack of discipline on capital spending which the ratemaking process is supposed to prevent.

We hope the Public Service Commission will end the multi-year rate plan pilot program and return to traditional ratemaking. We’re counting on the Commission to ensure BGE, and all Maryland utilities provide safe, reliable, and affordable energy to Marylanders.