BGE facing challenge on rate plan

April 27, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

The Maryland Office of People's Counsel is preparing to battle Baltimore Gas and Electric Co. over a proposed $30 million annual natural gas rate increase, which the citizens advocate claims would unfairly burden residential customers.

The people's counsel's preliminary opposition to the utility's plan stems from a calculation that BGE's residential customers would bear 90 percent of the annual increase, or $27 million.

"We've identified a number of issues that seem to impact the residential class to a disproportionate degree," said Theresa V. Czarski, assistant people's counsel. "It's a pretty significant rate increase for residential customers."

BGE filed for the overall 7.6 percent gas rate increase with the state's Public Service Commission (PSC), the government body that regulates utilities, on April 21. BGE was last granted a natural gas rate increase in 1993, when the PSC allowed a $1.6 million annual increase.

The utility says the proposed increase -- an average 11.7 percent for residential customers and 4.7 percent for typical commercial customers -- is justified because of its $116 million capital expenditure since 1992 to expand and upgrade the local gas system.

BGE has determined that bills for its 498,000 residential gas customers would increase by an average of $4.74 monthly, according to its proposal. In 1994, BGE generated revenue of $262.7 million from residential customers.

The $8.1 billion utility notes that while the PSC allows BGE a 9.4 percent return on natural gas operations, its yield is only 6.02 percent.

Under the rate increase proposal,the utility's yield would rise to 9.5 percent.

Even with the increase, Baltimore-area gas charges would be significantly lower than those of Philadelphia, Washington and Wilmington, Del., the company says. It also contends gas prices have decreased by $9.34 per month, or 14 percent, for residential customers since 1985.

"We're continually expanding and improving the system, and there are costs incurred by that," said Arthur J. Slusark, a BGE spokesman. "We think it's a fair number when you take all the factors into consideration."

But Ms. Czarski said that while BGE incurs a largely fixed cost for the improvements, the revenue from new customers is recurring. BGE added about 9,500 customers to its 617-square-mile gas territory in 1994 and hopes to augment that figure by 16,000 this year. Also, she said, the BGE proposal fails to take into account depressed gas prices from suppliers.

The group also is objecting to a portion of the BGE plan that calls for a 50 percent increase in monthly residential charge for billing and collections, to $12 per month, as well as a measure that would allow the utility to bypass the normal rate increase process.

Both customer charges are an effort to reflect BGE's actual costs for services and recover a portion of those costs, Mr. Slusark said.

If approved by the PSC, a rate increase is likely to take effect in November. Frank B. Fulton Jr., a PSC spokesman, said the commission will likely schedule a hearing on the matter within two weeks.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.