Projected customer costs for gas infrastructure increase 60 percent since last year, new Office of People’s Counsel analysis shows
BALTIMORE – The projected costs to customers for business-as-usual fossil gas infrastructure spending by the State’s three largest gas utilities from 2024 through 2100 have risen to $206 billion, according to an updated report the Office of People’s Counsel released this week.
“The companies’ latest proposals demonstrate the gas utilities’ commitment to locking in massive investments in their fossil fuel systems as fast as they can despite the near certainty that technology and climate policy will render those investments obsolete,” People’s Counsel David S. Lapp said. “Customers are at great risk.”
Updated OPC projections based on capital investment plans submitted by the State’s three largest gas utilities in proceedings before the Public Service Commission in 2023 show that these companies are on a path to spend $53 billion on gas infrastructure over the next 46 years—a $19 billion increase over projections in OPC’s October 2022 report, On average, from 2024 through 2045, the three companies are projected to spend around $1 billion a year on gas infrastructure investment—about 25 percent of the State’s budgeted capital improvement program for FY2024 ($3.6 billion).
Because customers pay for the infrastructure over many decades, much of that $206 billion in customer costs projected through the end of the century will result from the significant fossil fuel investments from 2024 to 2045—the same period the State has set a goal to reach net-zero emissions.
At the revised pace of investment reflected in the utilities’ proposals, Maryland gas customers will be asked to pay $41.5 billion in delivery rates from 2024 through 2045 to compensate the gas companies for their gas infrastructure spending: a $14.3 billion increase over the $27.2 billion in revenue requirements—the costs paid by customers—expected over the same period based on OPC’s 2022 study. These totals include only utility capital expenditures—not the operational costs, nor the gas itself that gas customers will also pay over this period.
As with its October 2022 report, OPC’s updated analysis uses conservative assumptions that are lower than the compounded annual growth reflected in utility filings in recent years. The three gas utilities each have rate cases and related proceedings addressing their investments in their distribution systems pending before the Public Service Commission. Each utility increases the pace of its proposed gas infrastructure investments, discounting any need to slow or limit those investments in light of increasingly efficient electric appliance technologies and State and federal policies favoring electrification to advance climate policy. OPC’s updated report is based on the utilities’ proposals in these cases:
- Baltimore Gas and Electric’s business-as-usual projected average annual revenue requirement from 2024 to 2100 ($2.19 billion) in the updated projections is 66 percent greater than the amount projected ($1.32 billion) for this same period in the 2022 report. This increase is driven by the significant jump in spending for work that is outside of the programs the utility has historically run to replace its legacy system.
- Washington Gas Light’s updated revenue requirement projections for 2024 through 2100 show that its replacement program costs have increased by 30 percent compared to the 2022 projections. WGL’s greatest change occurs in the 2040s, when the full impact of its replacement investments is reflected, which is a 60 percent increase over OPC’s previous projections. WGL’s new forecasts show that its program to rebuild its legacy system will not be complete until 2043—eight years later than last year’s report showed it would be complete.
- Columbia Gas of Maryland’s updated revenue requirement projections for 2024 through 2100 show the highest percentage increases, as its average revenue requirement from 2024 to 2100 ($102.6 million) is 70 percent greater than the average ($60 million) for this same period in the 2022 study. Previously, Columbia’s replacement investments were anticipated to end in 2026, but Columbia is now proposing to add two new classes of pipes to its program, potentially adding an additional 17 years to its replacement program.
Importantly, these are distribution system-only costs; they do not include the commodity fuel costs that utility customers also pay on their bills. Maryland’s gas utilities generally do not profit from the volume of gas sold. Rather, they profit from capital investments in their fossil fuel distribution systems. Most of those profits leave Maryland—to benefit the investors of their parent companies located outside of Maryland and, in the case of Washington Gas, outside of the U.S.
“Gas utilities are turning a blind eye to the fact that these investments present huge risks to customers,” Lapp said. “If they operated in a competitive market, they would not risk investor funds on a technology that is heading the way of the horse and buggy. They are banking on utility customers—or eventually State taxpayers—to foot the bill.”
The bill impacts of the utility’s capital spending are significant and on top of major rate hikes for gas distribution service over the last ten years. The projections for the monthly winter bill impact of a customer using 160 therms of gas are as follows:
- A BGE customer’s bill grows from an average of $220 in 2021-2023 to $450 by 2035 (a 104 percent increase) and $575 by 2050 (a 160 percent increase).
- A WGL customer’s bill grows from an average of $187 in 2021-2023 to $264 by 2035 (a 41 percent increase) and $329 by 2050 (a 76 percent increase).
- A Columbia Gas customer’s bill grows from an average of $221 in 2021-2023 to $419 by 2035 (a 90 percent increase) and $523 by 2050 (a 137 percent increase).
But the rate impacts will likely be substantially larger as customers electrify their home appliances and depart the gas system. Those customer departures will mean that a shrinking number of remaining gas customers are left to pay for all of the gas company’s fixed costs—including its massive infrastructure spending. That shift of fixed costs to remaining gas customers will mean higher rates for those who are left, which will motivate additional customers to leave the gas system. The bill impact figures above do not account for any customer departures from electrification.
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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