State to decide Monday on BG&E rate boost

December 15, 1990|By Kim Clark

State officials will decide on Monday whether to grant Baltimore Gas & Electric Co. its biggest rate increase in the company's history, balancing the company's desire to boost its earnings against consumer opposition to the proposed 12 percent, or $7.25 per month, increase in residential customers' average bills.

The impending decision by the Maryland Public Service Commission, which will affect bills starting Jan. 1, will conclude the hottest public debate over electric bills in several years and probably will color an even bigger rate case to be decided in 1991.

The decision on BG&E's request to increase rates by $194 million annually also will help determine whether BG&E, traditionally one of the country's financially strongest utilities, continues to weaken.

The annual earnings, which peaked at $303 million in 1988, are expected to sink to $190 million this year, and the company needs a rate increase to improve its stock price and bond ratings, according to Barry Abramson, a utility analyst in New York.

Though those involved in the case say the single most controversial part of the proposal is BG&E's request for approximately $65 million to cover costs associated with the troubled Calvert Cliffs nuclear power plant, consumer representatives and utility officials say Monday's decision will settle many other important and costly questions, including:

* When to start charging customers for the approximately $100 million it will cost annually to run an as-yet-unfinished generator at the Brandon Shores plant in Pasadena. BG&E wants to break precedent and start charging customers for the new plant in January, even though the generator is not expected to start operating until June. Attorneys representing consumers and businesses have argued that it isn't fair to charge customers for a plant that isn't working yet. BG&E has said it would like its money earlier than usual because of its cash crunch.

* Whether to charge customers differently for electricity used in the summer and winter. BG&E has asked for permission to add a 10 percent surcharge whenever a residential customer uses more than 500 kilowatts in a month. BG&E has argued that heavy users of electricity should pay more during the summer because that usage costs the utility more during the peak demand times.

The PSC staff has argued that BG&E not only should maintain flat rates during the summer but also should stop offering a discount to big users in the winter.

* Whether to change the way BG&E's costs are counted -- from the average over a year to the final tally at the end of the year -- thus giving BG&E an extra $24 million a year. The utility has argued that it is fairer to count its costs at the end of the year, but consumer groups say the accounting change is uncalled for and would break a long established precedent.

BG&E's accounting proposal is "financial sleight of hand," said Alan Malester, an attorney representing 27 of Maryland's biggest factories in the case.

* What to do about residential customers who need help paying their utility bills. The PSC staff has recommended that the commission shut down BG&E's little-known Economy Service option, in which customers who place "load limiters" on their house get a discounted rate. BG&E, which earns very little money on the program, has stopped promoting it. Supporters of those with low incomes have asked the commission to keep the unpopular program open at least until an alternative is developed. PSC staff members have said it is not right to force a profit-making utility to subsidize what are essentially social programs.

But it is the Calvert Cliffs portion of the case that is likely to make the most noise Monday, those involved in the case say.

The issue to be decided by the five-member panel is whether BG&E ought to be able to charge ratepayers an extra $44 million for improvements to the troubled nuclear power station in Lusby. Calvert Cliffs has been at least partly shut down since May 1989 and has been criticized several times by the Nuclear Regulatory Commission for lax management procedures.

In addition, BG&E has asked for an extra $21 million to cover interest on the money spent to buy electricity replacing power that would have been produced by the out-of-commission nuclear plant.

Besides accounting for a big chunk of the rate increase, the Calvert Cliffs decisions will affect a case to be decided next year, in which the commission will rule on whether customers or investors ought to pay for the approximately $350 million BG&E has spent replacing Calvert Cliffs' power, said People's Counsel John M. Glynn.

Mr. Glynn, who has recommended that BG&E receive only a token rate increase, has asked the commission to force investors to pay for what he describes as BG&E's mistakes at Calvert Cliffs.

"Given the way the times are, I hate to see the public have to absorb costs of this company's poor management," Mr. Glynn said.

But BG&E spokesman Arthur Slusark said the company needs the increase because the electricity rates haven't kept up with inflation.

"Between 1984 and 1990, rates have increased by 1.5 percent per year, while the Consumer Price Index went up 4 percent," Mr. Slusark said.

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