BGE requests another rate hike to cover cost of smart meters
Baltimore Gas and Electric Co. is seeking to raise rates — adding about $15 a month to the typical bill for both services — to recover the cost of installing more than 1 million smart meters.
The utility filed its proposal with regulators Friday. It also requested that customers pay more to account for the city’s recent decision to charge BGE more to use its underground conduit system, which carries power lines.
The Maryland Public Service Commission must approve the rate changes, and the regulatory body typically approves far less than the utility seeks.
Still, the potential rate increases come as some customers are growing weary. This is BGE’s fifth request to raise rates in six years.
“This seems to me to be an onerous increase,” said Roger Staiger, a senior instructor at the Johns Hopkins Carey Business School and former managing director of the retail commodity division at Constellation Energy, BGE’s parent, which is now owned by Exelon Corp.
“If you’ve got an average residential customer paying $150 a month, you’ve just slapped on a 10 percent surcharge. That’s going to be difficult for the average customer.”
BGE officials contend that because the cost of electricity and gas has declined in the past few years, along with the price of natural gas, customers’ bills are about the same as they were in 2008, even with the rate hikes.
In addition, power usage has dropped by about 10 percent since 2008, said Mark D. Case, BGE’s vice president of strategy and regulatory affairs.
Case said he doesn’t think customers are fatigued by rate increases.
“If customers’ bills were going up overall, that would be more likely, but the overall bill is going down and customers are using less energy,” he said. “The overall direction of customers’ bills are going down and not up, and smart grid helps with that. Customer satisfaction is at a record high, the reliability has improved.”
The latest proposal would raise the rate of a typical electric customer by 6 percent, or $7.64 a month, and that of the average gas customer by 11 percent, or $7.56 a month.
That’s about the size of all rate increases approved by the PSC in the past six years. Those have increased the average customer’s bill by $7.76 per month for electric service and $7.69 for gas service, or slightly less for customers getting both.
BGE asked the Public Service Commission to determine the size of a surcharge for the increased conduit costs and whether it would be applied only to Baltimore residents or to all BGE customers.
The PSC’s decision is expected in June.
By law, BGE is allowed to recoup what it spends on capital upgrades, but the utility must prove that the outlays were necessary.
The utility said it has largely finished installing 1.7 million smart meters, from which usage data is collected remotely, eliminating the need for meter readers.
When the PSC approved the smart meter plan in 2010, it denied BGE’s request for a monthly surcharge, telling the utility to demonstrate that the system’s benefits were greater than its costs.
BGE spent about $500 million on the smart grid system, which was offset by a $200 million grant from the federal government.
The new smart grid has led to energy and money savings through programs like Energy Savings Days, in which customers reduce their use on days when energy use is expected to be very high and get a bill credit in return, according to BGE. The utility had four Energy Savings Days in 2015.
Utility officials also contend that the smart meter system allows customers to more closely track their usage and thus find ways to cut down.
And the new system allows BGE to be more efficient, they said. For instance, it allows the utility to “ping” meters to determine if they are in service during a storm, cutting down on the need to send out manned service trucks to check for outages.
Earlier this week, BGE reported that more customers than expected were opting out of having smart meters installed, about 4 percent of the total compared to the anticipated 1 percent. Customers who opt out of the smart meters must pay a monthly fee, and they must pay any rate increase the PSC approves.
Dan Ervin, a finance professor at Salisbury University, called smart meters “good investments” because they enable both BGE and customers to be more efficient. He said keeping the legacy analog meter system, which required more than 100 meter readers to maintain, would have been more expensive over the long run.
“In general it’s something that we’re just going to have to accept,” Ervin said.
Others dismissed the supposed benefits of the new smart grid system. Kate Kheel, vice president of Maryland Smart Meter Awareness, a group that opposes meters because members believe they are unhealthy and invasive, said few people really pay attention to Energy Savings Days or other programs.
“I turn my air conditioner down to 62 at night,” Kheel said. “I don’t need a smart meter to tell me to do that.”
Paula Carmody, head of the consumer advocate Office of People’s Counsel, said her office would hire experts to comb through BGE’s proposal and challenge any unnecessary increases.
“It is a very significant rate increase for our customers and our households that have combined gas and electric,” she said. “They are asking for a profit level that’s much higher than we think is reasonable, that will likely be challenged.”
Carmody also said her office would closely examine BGE’s request for a surcharge for the conduit increase.
In September, the city’s Board of Estimates approved more than tripling the rate BGE pays to use the underground conduit system. BGE sued the city last month over the matter, asking a court to ensure that the increase would be only used to upgrade the conduit system and not to balance the city’s budget.
The utility previously said that residential consumers in Baltimore could face a surcharge of $8 a month for the conduit, while commercial electric consumers in the city could face surcharges of $15 to $3,350 a month, depending on their usage.