January 19th, 2024 by WCBC Radio

The Public Service Commission’s order approving Baltimore Gas & Electric Company’s rate increase for 2024-2026 fails to meet legal requirements, is internally inconsistent, and fails to address key customer protection issues, the Office of People’s Counsel said in a filing with the Commission this week. OPC’s Request for Rehearing asks the Commission to modify and clarify its order (Order No. 90948) to correct its errors and inconsistencies. “The order authorizes BGE to spend hundreds of millions of dollars on replacing gas infrastructure without requiring any consideration of cost-effective alternatives, like repairing leaks, or even requiring BGE to prioritize the replacement of its leakiest pipes,” said People’s Counsel David Lapp. “BGE’s failure to consider less costly alternatives when making its investments is unreasonable; consequently, the rates resulting from those investments cannot be just and reasonable, which is what the law requires.”

The Commission’s order also lacks a uniform standard for evaluating BGE’s immense electric and gas capital investments and instead uses different standards that lead to inconsistent outcomes, OPC said. OPC’s legal brief argued that the Commission should approve proposed investments only if it finds them “reasonable and prudent,” but the order does not address this argument and appears to have used a less stringent standard in some instances, leading to higher rate increases for customers.

The Commission’s order approving costs for Operation Pipeline, BGE’s gas infrastructure replacement program, directly contradicts a separate order issued the same day for Washington Gas, OPC’s filing noted. The Washington Gas order explains that “[g]as utilities must consider all cost-effective non-pipeline alternative options available  . . . and not solely pursue infrastructure replacement, in order to prudently justify their system safety and reliability spending in the future.” The BGE order contains no requirement for BGE to consider such alternatives.

Regarding the Baltimore City conduit system, the order approves BGE’s proposed recovery for conduit improvements with no consideration of the applicable legal and accounting principles that protect customers from paying for utility profits without commensurate benefits, OPC’s filing points out. Although the order acknowledges that it “is unclear as to whether [BGE’s proposal] will inure to the benefit of ratepayers or impose significant future burdens,” it nevertheless approves it, disregarding BGE’s burden of showing the reasonableness of its proposal.

Other problems in the order raised in OPC’s filing include:

• The order eliminates the transparency provided by the “STRIDE” surcharge line item on customer bills and instead allows BGE to bury its accelerated cost recovery in its “base” rates.

• The order incorrectly rejects OPC’s argument that the Commission should deny BGE’s multi-year rate plan and treat BGE’s proposal as a standard rate case on the grounds that this would harm BGE’s “due process” rights. In fact, BGE and all other parties to the case received ample notice of that possibility and presented evidence and filed briefs on the issue. Moreover, no party—even BGE—argued that due process was implicated.

“Because of the errors in the Commission’s order, costs are being allowed into rates that BGE has not shown are reasonable and in the public interest,” Lapp said. “We are asking the Commission to correct its errors by granting OPC’s request for rehearing and modifying its order accordingly.”  

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.