Utility bill changes coming because of new cost recovery method for utility-administered efficiency programs
BALTIMORE – Most utility customers in Maryland temporarily will see increased charges on their bills for utility-run energy efficiency programs, as the State transitions to a new way of recovering costs that ultimately will save customers tens of millions of dollars, OPC explained in a fact sheet released today. The changes are the result of decisions by the Public Service Commission related to EmPOWER, the State program to promote energy efficiency and reduce greenhouse gas emissions that is funded through utility rates.
“For years, customers have been paying too much for EmPOWER by paying outsized profits to the utilities—much like a credit card company profits from consumers that carry credit card balances,” said People’s Counsel David Lapp. “It’s an unsound financial practice to pay a regular expense—like your groceries—on a credit card and let the balance grow. Unfortunately, under past Public Service Commission orders, that’s what utility customers have been doing.”
The problem began back in 2008 when the EmPOWER program was started, OPC’s fact sheet explains. To minimize the initial cost burden on customers, the Public Service Commission ordered the utilities to charge about 20 percent of EmPOWER program costs each year to utility customers. The other approximately 80 percent of each year’s program costs was allowed to be deferred to later years, and the utilities earned a “return”—similar to an interest payment—on the unpaid balance. Over time, this arrangement resulted in an unpaid balance that grew to more than $800 million.
The return customers have been paying on the unpaid balance—about 9-10 percent depending on the utility—has increased EmPOWER's overall costs and comprised a substantial part of what customers pay for EmPOWER each month. For example, in 2020, utilities collectively earned about $55 million on the EmPOWER unpaid balance, almost 17 percent of what customers paid in their EmPOWER surcharges.
Under current Commission orders, the unpaid balance will be eliminated through higher surcharges—much like credit card customers must increase their payments to eliminate an accumulated balance. EmPOWER surcharges are expected to be lower after 2026 than they would have been absent this decision, because customers will no longer pay the utility a “return” that includes the utility’s profits.
In the legislative session that just ended, the General Assembly passed a bill (House Bill 864) that will lower the utilities’ returns on the EmPOWER balance—and therefore utility surcharges—and ensure that future EmPOWER costs will not be deferred and paid with “interest.” The bill also gives the Commission additional tools to lower surcharges.
EmPOWER programs provide substantial benefits to Maryland customers, OPC’s fact sheet explains. The programs give residential customers opportunities to save money on their energy bills by offering equipment and product rebates; free or discounted energy efficiency checkups and repairs for the home; equipment upgrades and tune-ups; and energy usage alerts that can help customers better control their bills and save money. EmPOWER programs to date are expected to save Maryland utility customers over $13.6 billion over the lifetime of the equipment, according to the Commission’s most recent report.
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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