Baltimore Gas & Electric Co. customers are expected to save as much as $161 annually when rates begin to plunge this summer to their lowest level since a massive rate hike in 2006.
Maryland ratepayers will enjoy lower electric bills starting in June — extending a downward trend that began last October and is expected to continue through 2012, according to BGE.
The lower rates stem from cheaper prices obtained at a recent electricity supply auction — and reflect a global drop in commodity and energy prices. The state's four largest utilities recently secured rolling contracts that will result in residential bills that are 6 percent to 9 percent less than last year on average, according to a report on the auctions to state regulators that approved the contracts Thursday.
This is "generally very good news," Phillip E. VanderHeyden, director of electricity for the Maryland Public Service Commission, the state's top energy regulator, told the commissioners during the hearing.
Maryland utilities purchase a quarter of their retail electricity supply twice a year in two-year contracts to shield consumers from rapid price spikes. However, under this system, it also takes longer for utility rates to reflect price drops.
"If we're in a downward market trend, customer rates will continue to come down for a period of time," said Mark Case, BGE's senior vice president for regulatory affairs. "If we're in an upward trend, it has a smoothing effect that lowers price shock."
The typical BGE customer with an annual bill of nearly $2,000 would see a decrease of as much as $161.
Electric bills have three components: the commodity cost, or the price of the supply; the delivery charge for bringing it to residences and the transmission price.
The cost of supply will decrease from the current rate of almost 12 cents per kilowatt-hour to 10.6 cents, about an 11 percent decline, Case said. Delivery charges aren't changing, so individual bills are expected to decrease overall about 8.4 percent.
That's the lowest price since 2006, when prices were about 10.9 percent per kwh.
Utility bills have been declining for months. After the auctions in October 2009, bills dropped about 2 percent compared to the previous year, Case said. And rates could continue to fall to less than 8 cents per kilowatt-hour in future years, he said.
"We're very optimistic that we could see another 10 to 15 percent drop in bills above this drop before we're all said and done," he said.
BGE has experienced a public backlash since rate caps that were part of a deregulation plan expired, prompting a 72 percent electricity rate increase. Paula Carmody of the Office of the People's Counsel, which represents consumers before the PSC, remembers the average BGE customer's total annual bill was closer to $1,000 a year in 2005, before rate caps came off.
"This is good news," she said. However, she added: "We can't keep our eye off the fact that the cost of electricity in 2010 is still very expensive for our customers."
Natural gas costs also have been on the decline, resulting in lower heating bills. Wholesale natural gas prices are at their lowest levels in eight years, down close to 70 percent since 2008 due to an abundance of new natural gas supplies as well as decreased demand, Case said.
"Not only does it save natural gas customers money, but it also helps drive down the cost of power generation," he said. And natural gas prices are expected at these levels for a few years, he said.
That's a relief after the highs they hit as recently as two years ago, when it cost $13 on the wholesale market per a million BTUs, or British thermal units — a measurement of how efficiently a fuel provides heat. Now prices are around $4, Case said.
The prices bode well for consumers whether they stick with the traditional providers or shop for alternative retail electric power suppliers, Case said. "They're all headed in the right direction," he said.