Regulators should reject BGE’s $152 million addition to previous rate hike, OPC filing says
BALTIMORE – Baltimore Gas & Electric’s request for a rate increase of $152 million in its first multi-year rate plan (MRP)—on top of the $277 million rate hike it has already gained under the MRP—should be rejected, the Office of People’s Counsel told the Public Service Commission this week. BGE has failed to meet its burden of showing its request is prudent, OPC said.
“The magnitude of BGE’s request is shocking,” Maryland People’s Counsel David S. Lapp said. “The request primarily results from BGE’s failure or refusal to manage and contain spending within its control. The company is failing to operate its business with the fiscal stewardship and financial prudence that its customers deserve—and need—to afford their bills.”
In 2023, the last year of its first MRP, the company spent $323 million more on capital infrastructure than it budgeted, OPC’s filing points out. Due to those investments, customers will see higher rates for decades into the future—while BGE earns higher profits. The company also exceeded its operating and maintenance budgets by nearly $66 million.
If the Commission awards BGE the $152 million it is requesting, that sum will be recovered from customers through an increase on their rates starting this year. But BGE’s spending during 2023 will also increase rates in later years, OPC pointed out. And while OPC acknowledges that BGE did incur some significant expenses for storms, higher-than-expected inflation, and supply chain disruptions, it failed to take prudent measures to reduce spending by delaying or reprioritizing projects to lower costs for customers. Instead, BGE initiated entirely new projects and accelerated work planned for subsequent years.
“Companies operating in competitive markets must economize and tighten their belts when faced with rising costs,” Lapp said. “Monopoly utilities, operating within budgets reviewed and approved by the Commission, should do the same.”
BGE carries the burden of showing that its requested rate increases are reasonable, OPC’s filing points out. But even after making additional filings the Public Service Commission required, BGE failed to do so, providing only cursory and inadequate information.
If the Commission approves any increase, OPC’s filing identifies numerous examples of cost overruns that should be rejected. When it approved BGE’s second MRP, OPC’s filing points out, the Commission stated its expectation that BGE would “manage their operations and spending within the limits the Commission has approved” and put BGE on notice that a “[f]ailure to adjust [c]ompany practices when budgets are being exceeded could lead to future disallowances.” Disallowances are appropriate for numerous projects for which BGE is seeking approval, OPC said.
In one example, BGE requests an additional $7.6 million to upgrade distribution lines, on top of its initially projected cost of $10.5 million. BGE provided little support on the need for continuing with the projects rather than delaying them to mitigate rate impacts and provided no information on how reliability would be affected by slowing down the work, OPC’s filing explains.
In another example, for its gas system, the company initially budgeted $5 million for a project, but spent $10.4 million after redeploying workers from projects subject to a Commission stop-work order—related to BGE’s installation of gas service regulators under the company’s Operation Pipeline program. “It appears that the company took the opportunity to maintain its planned rate of capital spending by accelerating spending in one area due to reductions of spending in another,” OPC’s filing observes. “Such program management does not responsibly steward customer dollars and denies customers potential cost savings and rate relief.”
BGE’s rates have been spiraling upward, OPC’s filing observes, but BGE has made no efforts to slow the pace and scope of its capital spending—which serves only to increase rates further and increase BGE’s profits in the long term. If granted, the total cost to customers of BGE’s first MRP will be much greater than what the Commission initially approved—$213.8 million. It is also $128.6 million greater than the approximately $310 million that the company originally requested in 2020, but which the Commission did not accept by approving the lower amount of $213.8 million.
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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