PSC order on new gas system connections avoids hundreds of millions of dollars in rate hikes over ten years, OPC analysis shows
BALTIMORE – The Public Service Commission’s June 13, 2025, order granting the Office of People’s Counsel’s bid to end ratepayer subsidies for connecting new customers to the gas system will save customers of Maryland’s two largest gas utilities an estimated $952 million on their gas bills through 2035, according to an initial OPC analysis.
New customers may still choose to get new gas service under the order, but existing Maryland gas customers of Baltimore Gas and Electric and Washington Gas will no longer have to pay the more than $150 million annually spent on new and larger pipes and other equipment to connect new customers to the gas system, according to OPC’s analysis. The order will prevent rate increases to cover those annual costs—plus the utilities’ profit—and reduce the risk of customers having to pay for pipes and equipment that become obsolete before they are paid for.
OPC's analysis, prepared by Exeter Associates, estimated the impacts of the order on BGE’s and Washington Gas’s spending related to connecting new customers and the resulting reductions in utility revenues—which are collected through customer rates—that would be needed to support that spending. Customers of Maryland’s smaller gas utilities—such as Columbia Gas of Maryland and Chesapeake Utilities—will also see lower future rates because of the new policy.
“The Commission’s order is a huge win for gas customers,” declared Maryland People’s Counsel David S. Lapp. “It helps slow the rapidly escalating rates that are driving up utility bills and causing significant hardship, especially during the cold winter months.”
The OPC analysis estimated the avoided costs to customers of the Commission’s gas connection order compared to continuing business as usual. The analysis finds that BGE customers will avoid rate increases totaling $620 million between 2026 and 2035 due to an estimated $1.05 billion reduction in BGE capital expenditures over the same period. Washington Gas customers will avoid rate increases totaling $332 million between 2026 and 2035 due to an estimated $562.5 million reduction in the utility’s spending over the same period.
The analysis uses data from OPC’s recent February 2025 Gas Spending Report and subtracts the spending related to connecting new customers and system growth to estimate the potential savings that will result from the Commission’s order. The analysis assumes the Commission’s new policy will be in place in 2026, after which customers will start seeing benefits from reduced spending on new customers that would otherwise add to utility rates.
Just one year of BGE’s spending on new gas connections and expansion costs customers 3.8 times more over time than its actual investments, after accounting for the utility’s return including profits, according to the analysis. For Washington Gas, the costs are 4.2 times more. The analysis shows that for BGE’s annual spending for just one year on new business and expansion—$103.5 million planned in 2025—customers will pay $397 million over 60 years, while Washington Gas’s spending in 2025 alone of about $56.25 million will cost its Maryland customers $238 million over 63 years.
Commission policy has long allowed gas utilities to charge existing customers the costs of growing the gas system to serve new customers. The Commission justified that policy of subsidizing new customers based on the assumption that the revenues generated from new customers’ natural gas consumption over future decades will eventually pay for the costs of connecting new customers, while spreading overall system costs among a larger customer base.
For years, OPC has argued in cases before the Commission that the assumption that gas sales will continue to grow is incorrect. The assumption has created the risk that the costs of connecting new customers will be “stranded” as customers leave the gas system and gas use declines. The Commission’s decision is in line with OPC’s arguments and also concludes that even if gas consumption doesn’t drop, the change in policy still sends appropriate price signals to customers.
The Commission’s order doesn’t prevent customers from choosing gas service and should benefit all customers. Existing customers will no longer subsidize—through higher gas delivery rates—the expense of extending the gas system and will avoid stranded cost risks. New customers choosing between gas and electric will have more accurate information about the true costs of that choice, and, consistent with longstanding utility rate-setting principles, costs will be assigned to those who cause them.
Some customers who might otherwise be connected to the gas system may instead heat their homes and water with highly efficient electric appliances and save on their energy bills, especially over the long term. Several studies show that constructing new buildings to be all-electric costs less than building for both electric and gas use. A report prepared for the State in 2022 by the consulting firm E3, for example, found that all-electric new construction is “less expensive considering both equipment and fuel costs than those connecting to [the] gas grid and using fuels for heating.”
As the Commission’s order notes, to the extent that gas connection subsidies encourage greater gas consumption, ending those subsidies also is consistent with the State’s climate goals of reducing dependence on fossil fuels and greenhouse gas emissions.
The Commission issued the gas connection order as part of the “Future of Gas” proceeding that was launched in response to OPC’s 2023 petition seeking near-term priority actions and long-term planning for Maryland’s gas utilities. That petition was spurred by the accelerating and massive gas infrastructure spending of Maryland’s gas utilities—the costs of which are recovered from customers over many decades and which have been driving higher gas rates.
Addressing gas connection policies was one of OPC’s requested near-term priority actions. Other issues OPC flagged as priorities remain outstanding, as well as long-term gas system planning. As the Commission order notes, numerous non-profit and governmental stakeholders have supported OPC’s petition.
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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