Baltimore's energy IQ

Our view: Regulators and Baltimore Gas and Electric find room to compromise on smart meters and customers stand to benefit (we hope)

August 16, 2010

After months of wrangling and regulatory debate, "smart meters" are coming to Baltimore Gas and Electric Co. customers. That much is certain, thanks to the utility's decision today to accept the terms imposed on the program by the Maryland Public Service Commission's recent order.

That's good news for all involved. The Constellation Energy subsidiary stands to reduce its costs considerably. BGE customers are expected to save money on their monthly bills (even those who don't choose to conserve). And the PSC demonstrates prudence in protecting the interests of customers and holding BGE accountable.

Smart meters, to be installed in every business and home between now and 2014, will track energy use and wirelessly transmit that information to a central office. That computerized monitoring, in turn, will allow customers to reduce consumption on peak days, saving perhaps $100 annually. BGE will be able to reduce the cost of meter reading and electricity purchases.

And the resolution means Maryland will retain the $200 million U.S. Department of Energy stimulus grant that will finance a substantial portion of the $500 million start-up costs.

As even the ever-skeptical PSC noted in its order, the intentions of the program are sound and past criticisms should not have been seen as a "no confidence" vote in the technology and its ability to improve customer service and lower energy bills.

BGE officials say this and other softened language in last Friday's PSC action suggest that frosty relations between Constellation and state regulators are thawing. The company is willing to take the gamble that the PSC will allow it an opportunity to recover its costs with a reasonable return and not be, as the PSC described it, "post hoc unfair nickling-and-diming."

But for all the contentiousness that the smart meter decision evoked in recent weeks, it's still not clear what effect the PSC's changes will have. The major sticking point was over how to pay for meters. That will still ultimately be the obligation of ratepayers, but BGE won't be reimbursed for several years, and only as part of the PSC-supervised rate-setting process.

That means that the utility will have to borrow money and rack up a potential $100 million in financing charges. Instead of a monthly charge of 28 cents in the near term, customers may see a much larger tab put on their bills in 2014 or 2015 (perhaps as much as $4, according to one estimate).

Nevertheless, the fee should pale compared to the savings smart meters will bring — at least if BGE's pilot program is any guide. For all the fuss the issue of cost-recovering generated, it could turn out to be little more than a forgotten footnote in the early development of a much-needed smart energy grid.

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