BG&E gets OK for 6.5% rate increase Homeowners to pay $3.69 a month more

April 24, 1993|By Kim Clark | Kim Clark,Staff Writer

Starting next month, the average homeowner in Maryland will see monthly electricity bills jump $3.69, to $60.22, following approval yesterday of a 6.5 percent rate increase requested by the Baltimore Gas and Electric Co.

Business users, such as office buildings, will have a smaller rate increase, the state's Public Service Commission ruled.

On average, all electricity rates in the state will rise 3.8 percent, adding a total of $86.5 million a year to the coffers of Maryland's largest utility. The rates for natural gas will rise by 1 percent, or 22 cents a month, for an average home.

Yesterday's decision was far below what the company had originally requested but was almost twice the increase that had been proposed by a lawyer representing ratepayers.

BG&E had asked the state for $169.4 million in September, saying its profits were being weakened by increased operating expenses, demands for new capital equipment and the cost related to an accounting change for retirees' health benefits.

In its ruling yesterday, the PSC allowed BG&E:

* $67.3 million -- instead of the requested $106 million -- to cover increased operating expenses and new capital equipment.

* $9.2 million of BG&E'e requested $21.1 million to cover a change in the way it accounts for retirees' health benefits.

* The full $10 million BG&E had asked for to pay property taxes on its new Brandon Shores generator.

* None of the $32.2 million the company wanted to cover depreciation of some costs at its Calvert Cliffs nuclear plant and construction costs at its Perryman generating plant.

In addition, state regulators cut BG&E's allowable profit from a 12.87 percent annual return on equity to 11.75 percent.

BG&E spokesman Arthur J. Slusark declined to comment on the 130-page ruling, saying the company needed more time to study it.

But John Glynn, the people's counsel, who represents consumers in utility matters, said he was disturbed by the high profit level the PSC allowed.

"In a market in which other secure investments are returning 4 to 5 percent, the return to this company, which is a monopoly, is too high," Mr. Glynn said.

Other than the profit level, Mr. Glynn, who had asked the PSC to award the company a total of $46 million, said he "could live with" the ruling.

Both sides have 30 days to appeal.

Leonard Rosenberg, spokesman for the Building Owners and Managers Association of Baltimore, said the smaller rise in commercial rates seemed warranted. He said that for years, BG&E has been making more on its commercial customers than it has on residential or other customers. And the PSC has slowly been trying to equalize the profit levels.

As a part of the ruling, the PSC also ordered BG&E to audit the amount of money from utility customers that it uses to subsidize its appliance stores and service businesses.

State regulations call for competitive enterprises, such as the appliance stores, to be funded separately from energy operations, which are monopolies.

A coalition of appliance store owners and heating contractors had charged that ratepayers were improperly subsidizing BG&E store operations, and that the subsidies were making it hard for regular businesses to compete with the utility.

Larry LeDoyen, owner of North Eastern Heating & Air Conditioning and a member of the coalition, said he was delighted with the PSC's call for an investigation. Right now, he

said, BG&E can underprice appliance and service businesses because ratepayers cover all overhead costs -- from personnel offices to billing services used by the stores.

If he could get someone to pay his overhead costs, Mr. LeDoyen said he could cut prices at least 20 percent.

If the PSC takes no action, Mr. LeDoyen said, his group will ask the state legislature to take steps to ensure the company competes fairly.

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