Regulators should lower BGE’s rates by $43.9 million instead of raising them, OPC tells regulators
BALTIMORE – The Public Service Commission should reject Baltimore Gas and Electric’s request for a $156.1 million increase to its electric distribution rates and instead reduce rates by $43.9 million, the Office of People’s Counsel said in expert testimony filed this week in BGE’s rate case.
“Our experts show that BGE’s large rate increase depends on inflated profit margins, imprudent capital projects, unjustified tax accounting adjustments, and recovery of improper costs,” said Maryland People’s Counsel David S. Lapp. “BGE’s proposed rate increase comes on top of back-to-back multi-year rate hikes, and if approved, BGE’s electric distribution rates would have increased 58 percent since 2020 and 129 percent since Chicago-based Exelon acquired BGE in 2012—significantly outpacing inflation.”
Roughly one quarter of BGE’s proposed rate increase is driven by its request to increase its return on equity (ROE), which largely determines the profit BGE is authorized to earn for its shareholders, from the current level of 9.5 percent to 10.4 percent, one of OPC’s experts explains in testimony. Rather than increase this return, OPC’s expert recommends that the PSC lower BGE’s authorized ROE to 7.3 percent, much closer to the returns earned by competitive firms. OPC’s ROE recommendation would save BGE’s electric customers approximately $82 million, or roughly $110 per customer, each year.
OPC experts also recommend significant reductions to BGE’s claimed “rate base”—the infrastructure investments on which BGE can earn a profit (or “return”). The testimony identifies investments that were unnecessary, premature, or not cost-effective for customers.
Another OPC expert addresses OPC’s previous challenges to BGE’s 2023 agreement with Baltimore City to treat improvements to the City-owned conduit system as if they were capital investments in BGE’s own system. Ruling against OPC’s challenges to the agreement in BGE’s last multi-year rate case, the PSC approved BGE’s request, and OPC is appealing that decision in court. OPC’s expert explains that the agreement increases long-term costs for customers and recommends that the PSC deny approximately $80.5 million in conduit-related costs.
“Customers will pay far more over the long term for BGE’s 2023 deal with the City,” Lapp said. “And after the agreement ends, customers will pay two costs—the 50-year recovery of BGE’s capital costs, plus BGE’s return including profits, and lease payments to the City for BGE’s continuing use of the conduit.”
OPC’s witnesses recommend numerous other reductions and changes to BGE’s proposal, including:
- Reducing costs, such as IT expenditures that primarily benefit BGE’s parent company Exelon, accounting changes that benefit other Exelon operations, and various executive perks and corporate expenses;
- Removing or modifying BGE’s proposals to make sure residential customers pay only their fair share, including expenses associated with “large load” customers such as data centers that residential customers should not be responsible for;
- Denying BGE’s request to increase its fixed monthly residential customer charge from $10 to $11;
- Rejecting BGE’s request for a “storm rider,” which would allow BGE to automatically increase customer rates if storm costs are higher than expected, to preserve the usual PSC oversight of spending and ensure BGE is motivated to control costs; and
- Denying BGE’s request to recover the costs of implementing a prepaid service proposal that would allow BGE to automatically shut off power to participating customers, because the program will increase service termination rates and threaten customer health and safety.
After further rounds of testimony, the PSC will hold evidentiary hearings on BGE’s request beginning November 6, 2026. The PSC will also hold public comment hearings where customers can comment on BGE’s proposal; public hearing information will be posted on the PSC’s website here. The PSC will also accept written public comments submitted at any time before the evidentiary record closes. The PSC’s website provides information on how to submit a comment.
The PSC is expected to issue an order on BGE’s rate request in early 2027, with any approved rate changes reflected in customer bills around the same time.
More information on BGE’s request is available in OPC’s Consumer’s Guide, released at the end of last month. For more information on utility rates and basics, including BGE rates specifically, visit OPC’s website.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers in 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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