State regulators have asked Baltimore Gas and Electric Co. to justify $152 million in costs the utility is attempting to shift to its customers.

The costs exceeded a state-approved cap for 2023 after BGE said it faced significant supply chain disruptions as well as the highest rates of inflation in 40 years, the company said Monday.

BGE also said it needs to recover an additional $73.3 million for gas service costs, which OPC says would increase winter heating bills for the average residential customer by nearly $10 per month over 22 months. That would be in addition to the approved monthly rate increase of $42 compared to 2020 rates.

The Maryland Public Service Commission, which regulates public utilities, said it is putting BGE’s request on hold until it can show why projects were built and how they serve the public interest. BGE’s request is part of a regulated process to reconcile rates the commission set for 2021 through last year. The Office of People’s Counsel, a state agency that represents utility ratepayers, is challenging BGE’s request in litigation before the commission.

Opponents call program ‘critically flawed’

Maryland PIRG, a consumer watchdog group, remains concerned about the process in which a utility can “reconcile” past expenses. The group argues that the pilot has led to reduced oversight of utilities and no incentive to stay on budget. Consumers then pay for investments plus interest for decades, the group said.

So-called “multiyear rate plans” have been allowed since 2020 through a pilot program.

“They aren’t sticking to a budget, and there’s no predictability in their operational expenses,” said Emily Scarr, a Maryland PIRG senior advisor. “The multiyear rate program is critically flawed. We’re not seeing the benefits we’d hoped as far as predictability in rates and gradual rate increases. If not, then why continue it forward?”

The requested rate hikes would go to “massive” capital spending on projects such as gas pipes, electric wires, computers and trucks, OPC said. The agency said customers generally pay for new capital spending through rates over decades.

“BGE is working diligently to provide the commission and parties with everything they need to complete the 2023 reconciliation proceeding,” Nick Alexopulos, a BGE spokesman said Monday in an email.

The commission reviews BGE’s completed work and variances to the budget BGE submitted for 2021 through 2023 to determine whether money spent on those projects was prudent and reasonable. For 2023, BGE said its costs were higher than what it was authorized to recover from customers.

In an order issued earlier this month, the commission said it lacks sufficient evidence to make a determination.

BGE must prove “its projects were appropriately selected, that they provided value to ratepayers, that good management judgment was exercised in the selection of the materials and methods used to execute the projects, and that the costs–by comparison with alternatives–were justified,” the commission’s order said.

How much is BGE seeking in costs?

BGE is seeking to recover $78.9 million in costs for electric delivery capital projects. OPC said that would cost customers an average of nearly $2 per month over 22 months, on top of an already approved base-rate increase of $9.41 per month, compared with 2020 rates.

BGE had reported under-recovering costs by $18 million in 2021 and by $59 million in 2022. Those imbalances were included in higher customer rates approved for this year through 2026.

BGE’s latest request is part of a so-called “multiyear rate plan” process that also is under review by the commission. and has come under fire from consumer advocates. The process, a method of setting rates that covers multiple years, has been allowed since 2020 through a pilot program. BGE’s first multiyear plan covered 2021 through 2023.

Such plans “incentivize utilities to propose wish lists of projects and then undermine the commission’s review of whether utility project spending is prudent, which is how regulators protect customers from excessive costs and poor utility performance,” People’s Counsel David Lapp said last month in an announcement criticizing BGE’s request.

During an October press conference, a coalition of consumer advocates called on the PSC to do away with the rate-setting method, saying the process has led to excessive rate hikes.

Besides inflation and supply chain problems, BGE said Monday its under-recovery of $152 million last year was driven by increased minor storms and restoration costs.

“BGE’s system improvements have strengthened the electric grid, minimizing outages during some weather events,” BGE said. “The outages that do occur often have extensive damage necessitating expensive repairs.”

Other cost drivers include major storms, which BGE does not budget for because of their unpredictability, cybersecurity investments to protect critical infrastructure from bad actors and improvements to the gas system that exceeded a monthly surcharge paid by customers.

A spokeswoman for the PSC said Monday that no timeline has been set for a commission decision.

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