BG&E seeks rate increase PSC likely to act on request by April

September 26, 1992|By Ross Hetrick | Ross Hetrick,Staff Writer

Citing sagging revenues and climbing expenses, Baltimore Gas and Electric Co. asked the Maryland Public Service Commission yesterday to boost electric and gas rates by $169.4 million a year, adding $8.12 to the average customer's monthly bill.

The rate request would increase the company's electric revenues by $163.8 million, or 8.6 percent, and natural gas sales by $5.6 million, or 1.5 percent.

For an average household using 600 kilowatts of electricity and 90 therms of gas each month, the proposed changes would increase the electric bill by $6.79 a month, to $62.95, and the gas bill by $1.33, to $54.75.

A decision on the rate increase is expected by April, according to BG&E and PSC officials.

BG&E received its last base rate increase in December 1990, when the commission approved a $149.6 million boost. That increase came in two parts with rates increased by $76.9 million in December 1990 and another $73 million in 1991.

There have been several fuel adjustment rate increases since 1989 to pay for replacement power for the shutdown Calvert Cliffs Nuclear Power Plant.

However, the fuel adjustment rate has been decreased to about the 1989 level in the past year and a half after Calvert Cliffs came back into service and an additional power plant began operating at Brandon Shores.

The filing is the third-largest rate request by BG&E in 20 years, according to PSC spokesman Frank Fulton.

The major portion of the request is to cover $106 million for higher capital investment and increased operating expenses that resulted from inflation and new regulation, BG&E said.

The company also cited a $10 million expense for property taxes paid on its Brandon Shores Unit 2 power plant in July and $8 million for expenses connected with the proposed expansion of its Perryman generating facility in Harford County.

Two other expenses, totaling $45 million, are for accounting changes that do not involve actual expenditures of cash. These changes involve revamping the BG&E's method for depreciation and implementing a new accounting standard that requires the company to account for post-retirement health benefits before they are actually paid.

The company said it is earning below its authorized 9.94 percent annual rate of return.

The company's earnings have been battered in recent months by a cool summer that has reduced the need for air conditioning and a recession that has cut into business sales.

For the first eight months of the year, BG&E had income of $189.7 million, or $1.21 a share, a 4 percent drop compared with earnings in the same year-earlier period, excluding the effect of an accounting change.

People's Counsel John M. Glynn, the state official who represents ratepayers before the commission, said he would oppose the rate increase as excessive.

"It seems a shame that when so many people are suffering that their electric company can come in and ask for more money," he said.

Mr. Glynn said the cost for the postretirement accounting change has not been finalized and the commission should wait until BG&E has more experience with it.

He also questioned whether the company's rate of return was too high considering the low rates in credit markets. "Their return should be reduced to reflect that," he said.

BG&E's authorized rate of return of 9.94 percent is based on a weighted average of equity plus debt. The return on equity is 12.87 percent. The utility is asking for a reduction in the rate of return to 9.89 percent, while keeping the return on equity at the same level.

While short-term interest rates are low, long-term rates are still high, said BG&E spokesman Arthur Slusark.

"We have to look at the long term," he said, noting that a constant rate of return would provide more rate stability.

Herbert C. Hasselbarth Jr., director of regulatory planning and reporting for BG&E, said the company had tried to delay a base rate request for as long as possible with various cost cutting efforts. The last rate request was in May 1990.

"It's never the right time from the public perception," Mr. Hasselbarth said. "But you reach a point when you have to do something."

He said a large part of the increase is needed to improve the reliability of the system by upgrading power plants, adding new substations and transmission lines and pursuing other capital projects.

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