BGE seeks electric, gas delivery rate increases

Electricity changes would be offset by other rate cuts

May 07, 2010|By Liz F. Kay and Jamie Smith Hopkins, The Baltimore Sun

Baltimore Gas and Electric Co. is seeking to raise its distribution rates, a move that would add about $22 to electric bills and $48 to gas bills annually for the average residential customer.

The request, which must be approved by state regulators, would be the first increase in 17 years for electricity distribution rates, which make up a portion of utility bills.

But with worldwide commodity prices taking a dive — leading to much lower utility bills overall in the next few years — consumers aren't likely to notice the increase. Electric bills had been projected to drop by $168 on average for the year starting in June, so the distribution rate increase would pare that to $146 for the average customer.

Gas commodity prices are expected to stay stable next winter, at about 67 cents per therm, BGE officials say, so the distribution increase will not be offset by similar savings.

The proposed distribution rate increase comes as mounting fixed costs for area residents have triggered concern — this week Baltimore officials proposed a 9 percent increase in water bills. Fielding E. Huseth, an advocate at the nonprofit consumer group Maryland PIRG, said BGE's request isn't welcome, even if it amounts to few extra dollars a month.

"They're increasing rates, which is tough for customers that have seen 85 percent increases in their utility bills since 1999," he said. "It would be reasonable to request the increase if they were delivering on their promises to help customers … reduce their bills. But since they're not delivering on their promises … we don't see it as a reasonable request."

Distribution rates — what utilities charge to maintain the power delivery system — make up about a quarter of total electric bills. The rest stems from commodity charges for the amount of power consumed.

As a result, the proposed 5 percent delivery rate increase amounts to a 1.3 percent increase in overall residential electric bills. The requested increase on residential gas delivery rates is 5.9 percent.

BGE, the state's largest utility, filed its rate case application with the Maryland Public Service Commission on Friday afternoon. Commissioners will hear testimony from stakeholders and are expected to finish evaluating the request by the end of the year. No increases would take effect until then.

"Historically a utility never gets what it asks for," said Mark D. Case, BGE's senior vice president for regulatory affairs. He added that the company is likely to request more frequent reviews of distribution rates. "We're not going to be able to go 17 years in between rate cases in the future."

"The governor is very proud of the professionalism he's been able to return to the Public Service Commission during this term, and now the PSC has a job to do," said Shaun Adamec, spokesman for Gov. Martin O'Malley. "The governor is confident that the PSC will conduct a thorough and professional review of this application."

The commission declined to comment on BGE's request because the case is pending.

Any increase for electric distribution rates was capped at 5 percent as part of a settlement agreement negotiated by Maryland officials in March 2008.

In approving BGE parent Constellation Energy Group's $4.5 billion nuclear joint venture with Electricite de France, the commission ordered BGE not to apply for a distribution rate increase until January 2010. The company was also barred from applying for another distribution rate increase until October 2011.

BGE estimates that it needs to bring in $110.8 million to offset rising expenses for electricity delivery, and $42.4 million for gas delivery. The utility's property taxes have increased 17 percent in the last decade, and tree-trimming costs have increased 80 percent to $22.7 million. Equipment costs for meters, and for electric wire and cable have increased as well.

"We've had a lot of cost pressures, we've made a lot of investments in the system to maintain a safe and reliable network, and ultimately we've come to the point where we need to seek rate relief," Case said.

The cap on the delivery-rate increase restricts the amount BGE can raise to $46.9 million, but the utility will not compromise on safety or other priorities as a result, he said. There is no cap on the gas distribution rate.

Case said company officials recognize that this is a difficult economic time but that they have worked aggressively to control costs, including cutting the workforce by 15 percent since the last rate case.

The state set a goal in 2008 for utilities — including BGE — to decrease per-person energy consumption 5 percent by 2011 and 10 percent by 2015. BGE isn't on track to meet either goal, Huseth said.

"We think the best way to lower energy bills is through energy-efficiency programs that help individuals affordably retrofit their homes and weatherize their homes so that customers can use less energy in the first place," he said.

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