OPC asks federal regulators to deny BGE financial incentives to build $634 million of transmission projects driven by Virginia data centers
BALTIMORE – The Federal Energy Regulatory Commission should reject Baltimore Gas and Electric’s request for added financial incentives to build an estimated $634 million worth of transmission projects, the Office of People’s Counsel said last week in a filing with the federal agency.
“BGE’s proposal would have Maryland ratepayers start paying now for its investor profits while the wealthy corporations for which the data centers are being built will not pay anything until years from now when the transmission projects become operational,” said Maryland People’s Counsel David S. Lapp. “Federal regulators should deny BGE’s request or at least allow a process so that we can fully evaluate its impact on Maryland customers.”
BGE’s proposal would add new, immediate cost burdens on Maryland customers related to data centers planned for Northern Virginia, OPC’s filing said. Moreover, BGE competed to win the right to build the projects based on a different cost recovery arrangement—with a lower return for investors—than it is now requesting, OPC noted, raising questions about the fairness of the PJM competition under which BGE was awarded the right to build the projects.
The transmission projects are part of the “2022 Regional Transmission Expansion Plan, Window 3 Project,” developed by PJM, the regional transmission system operator. PJM determined the projects will be needed to address reliability risks caused by rapid data center electric demand in Northern Virginia. The projects are located in BGE’s service territory in central Maryland. They include multiple new 500 kilovolt transmission lines, substations, transformers, and rebuilds. BGE estimated about two years ago that the projects would cost $634 million.
FERC already granted BGE an “abandoned plant” incentive for the projects last year. That incentive entitles BGE to cost recovery of amounts spent even if the projects are never completed. BGE’s current request is for the “construction work in progress,” or CWIP, incentive.
CWIP recovery will enable BGE’s Illinois-based owner, Exelon Corporation, to immediately start earning a profit on project spending prior to completion of the project—earlier than is usually allowed under normal ratemaking policy that requires projects first be “used and useful” before any profits are earned. Mark Christie, recently departed FERC chair, opposed such transmission incentives, calling them “FERC candy.”
Separately, PJM awarded BGE and its owner Exelon new transmission projects related to the eventual retirement of the Brandon Shores power plant near Baltimore. Earlier this year, Exelon doubled the estimated costs of those projects to over $1.5 billion.
Residential customers pay for the costs of these transmission projects, including the financial incentives, through the supply portion of their utility bills. The costs of transmission service across PJM have more than doubled in the last decade.
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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