On Monday, the Public Service Commission (PSC), responsible for regulating utility providers, approved $77.2 million of BGE’s proposal for reconciling its 2023 costs after the utility exceeded its approved budget by $152 million.
This ruling will result in an increase of 72 cents in the average electricity bill and $1.95 for gas per month. These rate hikes will take effect in February and will be in place until the end of 2027.
The commission stated that much of BGE’s spending was deemed “not just and reasonable.” It further noted that the request essentially represented a “misuse” of the multi-year rate strategy as well as the reconciliation process.
The regulatory body indicated that the endorsement of the request, which was based on “questionable forecasting accompanied by significant budget overruns,” would unfairly reward the utility for performance that did not encourage better management practices. They expressed a desire for an approach that would promote both utility efficiency and customer benefit.
BGE is required to demonstrate that its increased costs were incurred “prudently” and that it employed “good management judgment.” The PSC remarked that the 2023 request was more than double the approved reconciliation amounts for the previous two years combined.
In defense, BGE attributes its request for reconciliation to inflationary pressures and disruptions in the supply chain.
“BGE acknowledges that energy expenses are a primary concern for our customers; we take this responsibility very seriously,” remarked BGE President and CEO Tamla Olivier.
“While we are grateful for the Commission’s commitment to keeping customer costs low, it is critical for us to ensure the power grid remains both reliable and safe, which necessitates ongoing maintenance efforts,” she added. “Every expenditure is carefully considered with our customers’ costs in our minds. The efforts we have made have enhanced reliability, improved safety, and effectively addressed severe storms — all vital for our customers and the dependability of our systems.”
Concerns About BGE’s Rate Setting and Oversight
The Office of People’s Counsel, which advocates on behalf of residential utility consumers, urged the PSC not to approve any part of the reconciliation request.
“Although we are disappointed that the Commission did not entirely reject the request, we are relieved that it carefully scrutinized and denied a substantial section of BGE’s appeal, utilizing much of the evidence we presented,” noted People’s Counsel David Lapp.
This is the final year BGE will engage in the reconciliation process, where utilities seek retroactive reimbursements through increased rates. The recently passed Next Generation Energy Act will terminate the reconciliation process starting in 2024, although it retains the multi-year rate setting system that aims for future rate increases.
Emily Scarr, a senior advisor at the Maryland PIRG Foundation, a consumer advocacy organization, argued for the complete elimination of the multi-year ratemaking system.
“BGE’s appeal for $152 million exemplifies how this multi-year ratemaking incentivizes utilities to spend excessively, ultimately leading to customer bills rising and service quality diminishing,” she asserted.
Additionally, the PSC is currently investigating allegations of fraud at BGE. Late last year, former employees accused a BGE staff member of falsifying documents and neglecting proper inspections of gas infrastructure, including during 2023. In April, the PSC “identified gaps in BGE’s quality assurance and compliance oversight regarding the inspector involved.” In May, the intervention request by the former employees was approved.
“This is a significant victory for Maryland ratepayers,” commented David Baña, an attorney representing the former employees.
“By nearly halving BGE’s request, the Commission conveyed a clear message that multi-year rate plans are not limitless,” he added, “and that budget excesses will face thorough scrutiny rather than automatic approval.”
