Statement from People’s Counsel on the Public Service Commission’s decision to revise new customer gas connection policies
Maryland People’s Counsel David S. Lapp issued the following statement on today’s decision from the Public Service Commission on revisions to gas system connection policies:
We welcome and applaud the Public Service Commission’s decision to end subsidies for the high costs of extending gas lines to new customers.
Subsidizing gas line extensions is neither in the long-term interest of the customer receiving the allowance nor in the interest of existing customers. The subsidies are fundamentally unfair to existing customers, because the costs of providing subsidies to new customers are recovered from all customers over many decades. This puts existing customers at risk of paying for pipes and gas equipment that are abandoned before the utility recovers its costs.
New customers who receive such subsidies also face long-lasting consequences. They are typically locked into the gas system for the life of their appliances—which can average 18 years for gas furnaces and 10-20 years for gas water heaters—or even the life of their building, as the potential need for additional investments may dissuade gas customers from taking advantage of savings available from highly efficient electric technologies and avoiding escalating gas rates and volatile gas supply costs.
The costs of these line extensions are not small and have been growing. In recent years, BGE customers have been paying about $70 million or more for system extensions, with minimal contributions from the new customers being connected.
The hypothetical benefit of line extensions cited by gas companies—that increasing customer sales leads to lower rates for other customers—can still occur from new customer additions even if those new customers do not receive a line-extension subsidy. In fact, the benefit to existing customers is even greater, because the new customers will contribute to overall system costs, but existing customers will not have to subsidize the cost of connecting the new customer.
Maryland joins several other states—such as Colorado, California, Massachusetts, Oregon, Minnesota, and Washington—that have eliminated or are considering proposals to reduce subsidies provided to new customers for extending gas lines.
Importantly, the Commission’s decision today does not prevent customers from choosing gas service; customers can still connect to the gas system. Rather, the decision simply aligns the extension costs with those customers who are driving those new costs.
We look forward to making progress on other issues raised in our 2023 petition for priority actions and long-term gas planning.
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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