BGE seeks regulatory approval of electric, gas base rate adjustments in Maryland

The revenue deficiencies demonstrated are based on a test year for the 12 months ended July 31, 2019 – adjusted for certain known and measurable changes – and an overall rate of return on investment of 7.25% for BGE’s electric and gas operations, the company said

Exelon‘s (NYSE:EXC) Baltimore Gas and Electric (BGE) on May 24 filed with the Maryland Public Service Commission an application for adjustments to its electric and gas base rates, saying that the company has an electric revenue deficiency of $74m and a gas revenue deficiency of $58.9m.

Electric base rate revenues would increase by $81.1m, which includes $7.1m of Electric Reliability Investment (ERI) initiative revenues currently recovered through the ERI charge on customer bills, while gas base rate revenues would increase by $67.6m, which includes $8.7m of Strategic Infrastructure Development and Enhancement (STRIDE) revenues currently recovered through the STRIDE charge on customer bills.

The company added that as the $7.1m and $8.7m are transfers of the revenue requirement from the ERI and STRIDE recovery mechanisms to electric and gas base rates, the actual revenue impact is less – $74m for electric and $58.9m for gas. The revenue deficiencies demonstrated are based on a test year for the 12 months ended July 31, 2019 – adjusted for certain known and measurable changes – and an overall rate of return on investment of 7.25% for BGE’s electric and gas operations, the company said.

BGE said that it also seeks through the application to begin providing its customers with $114.6m in state income tax benefits resulting from Maryland’s approval of certain tax changes.

If granted in full, the requested rate relief would result in an overall increase of 2.3% in total electric bills and 6.2% in total gas bills, but the impact would vary from rate schedule to rate schedule, as well as from customer to customer. BGE added that the total bill for an average residential customer receiving both electric and gas service from the company is expected to increase by $8.53 per month – or about 5.5% – to a total bill of about $164.85.

According to a May 24 statement, the average residential electric-only customer’s bill would increase by $3.74, while the average residential gas-only customer’s bill would increase by $5.27.

BGE also said in its statement that in 2018, it spent $1.8bn to improve services for customers, including:

  • Completing 37,000 pole inspections
  • Upgrading 15 overhead circuit routes
  • Replacing 80 miles of underground circuits
  • Trimming 2,440 miles of vegetation located along distribution lines
  • Replacing more than 60 miles of gas main
  • Replacing more than 10,000 gas services
  • Inspecting and maintaining about 4,000 miles of gas main

BGE said in its application that it has continued to make significant investments in its electric and gas distribution systems, noting that over the last several years, the company has deployed new equipment and technology to help reduce the frequency and duration of service interruptions. During the past 10 years, the number of electric outages has decreased 22% and outage length has been reduced by 40%, BGE said.

The company said that under the current ratemaking process in Maryland, it does not have the opportunity to earn its authorized return when its investments are outpacing new revenues. Since 2016, BGE’s combined electric and gas distribution rate base has grown annually by more than 7% and cumulatively nearly 20%, the company said, adding that over that same time period, BGE’s compound annual customer growth rate has been less than 1%. However, recognizing the impact its investment has on customer rates, the company has managed its operating expenses to minimize the increases and since 2016, the compound annual growth in BGE’s combined electric and gas distribution operating expenses has been less than 1%, BGE said.

The company said that as a result of the continued investment in its electric and gas distribution systems, it expects during the test year to earn – on an adjusted basis – a return for its electric distribution business that is 23% below the 7.28% return authorized by the commission in another proceeding, as well as 33% below the 7.09% return authorized in another proceeding for the company’s gas distribution business.

BGE said that its present electric and gas base rates are neither just nor reasonable and do not yield a reasonable return on the fair value of BGE’s property devoted to electric delivery or gas service. The requested increases are also needed for the company to continue to provide safe and reliable service to customers, as well as to maintain the company’s financial health, BGE said.

About Corina Rivera-Linares 3063 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.