People’s Counsel Asks State Regulators to Require Gas Utilities to Plan for Dropping Sales
BALTIMORE – Maryland’s gas utility operations, massive infrastructure spending, and long-term plans conflict with market trends, State climate policy, and the interests of customers, the Office of People’s Counsel told the Maryland Public Service Commission in a petition filed today. To address the conflict, the Commission should promptly initiate proactive, comprehensive regulation to manage the transition to a new age, broadly acknowledged, in which gas will play a far diminished role, said the filing.
“Everyone knows that gas sales will decline substantially in coming years,” said People’s Counsel David S. Lapp. “But gas utilities continue to spend massive amounts on their delivery systems and operate as usual. It’s long past time for the Commission to step in and redirect the gas utility ship before it sinks, taking customers down with it.”
State law requires the Commission to “supervise and regulate” the gas utilities to make sure they operate in the public interest. It further requires that customer rates be “just and reasonable” and that the Commission consider the State’s climate commitments. Yet the Commission has no proceeding to gather information on the impacts of the changes and supervise the necessary transformation of gas utility operations and their long-term planning. Right now, the utilities are on their way to spending tens of billions of dollars to replace and expand their infrastructure. That spending is scheduled to be paid for over 40 or more years—long after sales to Maryland households will decline substantially, or completely, from what they are today.
This business-as-usual approach contradicts the trend—since at least 2010—of customers leaving the gas system in favor of electric technologies. That trend will markedly accelerate as the State’s climate policies demand a broad shift to electricity to replace fossil fuels.
Without immediate actions to require planning for increased use of electricity and declining gas sales, gas customers face massive rate increases, OPC’s petition points out. Gas rates already have been rising because of the utilities’ infrastructure spending, but rate increases will accelerate as more and more customers leave the gas system. And since the utilities’ costs are recovered across gas sales, fewer gas sales means rates have to increase even more for remaining gas customers. Ultimately, the gas utilities could face billions of dollars in “stranded” costs—costs that are unrecoverable through normal business operations—as gas infrastructure becomes obsolete before it’s fully paid for.
OPC’s petition asks the Commission to initiate a two-track proceeding. One track would cover priority actions that the Commission should take in the near term to align current gas operations with the consensus understanding that gas sales will decrease due to technology and State climate policy. The second track would cover long-term system planning, including the future role of gas utilities, the mitigation of potential stranded costs, and the maintenance of reliability and safety as utility revenues decline.
Although Maryland’s greenhouse gas reduction goals rival those of other states, Maryland regulators are behind those other states in holding proceedings for gas utility transition planning, OPC’s petition explains. Those states include several that are close geographic neighbors, such as New Jersey, New York, and Rhode Island, as well as the District of Columbia.
“The fundamental nature of an important utility service is changing,” Lapp said. “The public interest requires the Commission to proactively lead comprehensive industry reform. The Commission—not utility-driven proposals—should set the agenda for the transition and guide a process that is robust, transparent, and inclusive of all stakeholders.”
OPC’s petition follows its release of two reports issued in late 2022: Maryland Gas Utility Spending: Projections and Analysis (Oct. 2022) and Climate Policy for Maryland’s Gas Utilities: Financial Implications (Nov. 2022). More information is available on OPC’s website.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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