Customers of Baltimore Gas and Electric Co. will see their rates for delivery of both gas and electricity increase over the next three years by an average of more than 3% a year under a plan approved late Thursday by state regulators.
The rate increase authorized by a unanimous decision by the Maryland Public Service Commission will boost the average customers monthly bill by about $21.83 after three years.
The rates take effect Jan. 1.
BGE said late Thursday it is reviewing the details of the order.
The decision “appears to represent a balanced and reasonable outcome that will provide many benefits to our customers and the state,” said Nick Alexopulos, a BGE spokesman, in an email. “The order ensures that BGE can continue to provide safe, reliable, and affordable services to our customers, while laying the foundation for the grid of the future.”
The higher rates will translate into just under a $408 million increase over the three years in both electric and gas service revenue for the utility’s capital expenses. For the first year of the three year plan, the commission approved use of federal tax credits to partially offset rate increases to customers.
The utility, which serves 1.3 million residential electric customers and 700,000 natural gas customers in Baltimore and parts of 10 adjacent counties, had applied for an increase of $602 million over three years, saying it needed that amount to invest in its distribution systems and meet the state’s electrification goals. That would have resulted in the delivery portion of customers bills increasing by an average of 5% a year, boosting the average customers’ monthly bill by about $31.07 after three years.
Under the approved plan, bills next year will increase an average of $4.08 a month for electric service and an average of $10.43 a month for gas service. The average bill will go up another $1.22 a month for electric and an $2.96 a month for gas in 2025, then another 34 cents for electric and $2.80 for gas in 2026.
The commission found that BGE required a return on equity of 9.5% for its electric service and 9.45% for its gas service, returns that are comparable to those investors expect to earn on investments of similar risk. Such returns are adequate, the commission found, to maintain BGE’s credit and attract capital.
The commission also approved BGE’s proposed budget of $120 million associated with the utility’s controversial conduit agreement with Baltimore city. But the commission said BGE must present an ongoing benefit cost analysis of the conduit agreement for ratepayers in every rate case until the costs of the contract are fully recovered.
It is unclear, the commission said, whether the conduit agreement will benefit ratepayers or impose significant burdens in the future.
Both technical staff at the commission and the Maryland Office of People’s Counsel had questioned the agreement considering that BGE entered into a contract that expires before the end of the decade but will recover costs over the next 50 years.
The commission said it was concerned that customers may be required to pay back a significant debt that would be put into the rate base. Although rates may be reduced in the short term because of the lower annual conduit fees that BGE will pay the city, customer costs may rise long term as the utility makes improvements to the conduit.
In August, the commission had ordered BGE to remove a controversial $272 million electrification plan from its delivery rates proposal. BGE’s initial proposal would have allowed the utility to invest not only in improving the electric grid and natural gas system but also in electrification programs to promote electric vehicle use and building efficiency.
Those programs would have included new incentives such as electrification rebates for home and water heating. The commission had found that BGE’s plan might conflict with a pending Maryland Department of the Environment plan to reduce statewide greenhouse gas emissions.
This story will be updated.
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BGE gas and electric delivery rates to rise more than 3% each of the next three years - Baltimore Sun
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