Dive Brief:
- The Maryland General Assembly passed a wide-ranging bill Monday that lawmakers expect will lower residential electric and gas bills by at least $150 a year.
- The bill cuts utility energy efficiency spending by lowering carbon emissions reduction targets, requires utilities to join the PJM Interconnection, which could end a 0.5% return on equity bonus they receive, and bars utility rates based on “future test years,” among other provisions.
- In part, the bill reflects growing concerns among policymakers about the level of utility spending and how that affects affordability, according to Paul Patterson, a Glenrock Associates equity analyst. “There's a real concern that the level of investments that are being made just may lead to affordability issues, and there's pushback on that,” Patterson told Utility Dive Tuesday.
Dive Insight:
Advocacy group PowerLines on Tuesday said investor-owned electric utilities plan to spend at least $1.4 trillion over the next five years on capital expenditures, up 21% from five-year spending plans outlined a year ago.
Utility bills have increased about 40% since 2021, according to the group. Last year, utilities asked state regulators to approve about $31 billion in rate increases, PowerLines said.
“Most utilities expect high levels of capital spending to continue through 2030, a trend that promises to intensify growing rate pressures,” the group said.
The report comes as utility regulators across the United States appear to be focusing on ways to contain bill increases, according to Patterson.
“There's a concern about whether or not all this investment is going to actually negatively impact customers rates,” Patterson said.
The Michigan Public Service Commission, for example, late last month ordered Consumers Energy in its next rate case to show “a clear link” between its capital investments and reliability improvements and that it assess the cost-effectiveness, affordability and the potential rate impacts of any power outage forecasts, Patterson noted.
Meanwhile, “amid soaring energy prices,” Maryland is providing rate relief, Gov. Wes Moore, a Democrat, said Monday in a statement.
“The bipartisan Utility RELIEF Act is about taking control of the things we can control — pushing every lever to put money back in people's pockets, and holding utility companies accountable,” Moore said.
The bill’s effect on utility prices is expected to be “significant,” according to analysis prepared by the General Assembly’s Department of Legislative Services.
The legislation affects four investor-owned utilities, including Exelon’s Baltimore Gas and Electric, Potomac Electric Power Co. and Delmarva Power & Light, as well as FirstEnergy’s Potomac Edison Co.
Utility rates, finances
The bill provides the state’s utilities with $100 million to fund residential rate relief in 2027.
In provisions directly affecting the utilities, the bill requires the state’s IOUs to participate in the PJM Interconnection, potentially depriving them of a 0.5% extra return on equity granted by the Federal Energy Regulatory Commission for voluntarily joining a regional transmission organization. The move is expected to save ratepayers at least $20 million a year, according to the legislative analysis.
The bill also sets limits on multi-year rate plans, prohibits the Maryland Public Service Commission from using forward test years — a ratemaking process that bases rates on a utility’s expected spending — and sets limits on cost recovery.
“These restrictions are expected to place downward pressure on electricity and gas rates; however, the magnitude of this effect cannot be reliably estimated at this time,” the legislative analysts said.
The bill bars the PSC from approving multi-year rate plans that allow utilities to true up cost or revenue variances that could result in additional charges to customers, according to the legislative analysis.
Also, the legislation bars IOUs from recovering costs related to supervisor compensation that exceeds 110% of the PSC chair’s annual salary payable to the chair of PSC. It further requires utility companies to place “reasonable” cost limits on certain activities it plans to recover in rates, such as “entertainment and events, office and facility renovations, transportation services, staff development activities or events, performance incentives, and other activities outside the scope of the normal course of business operations,” the legislative analysts said.
The bill requires the Maryland PSC to publish an annual utility rate report, starting Jan. 1, 2028, and for utilities to have it on their websites.
Expanded ‘large load’ definition
In a change affecting data centers, the bill changes the state’s definition of “large load customer” by reducing the minimum aggregate monthly demand threshold to 25 MW from 100 MW and lowering the minimum load factor to 75% from 80%.
“By placing high-demand customers under a rate structure designed for large loads, the bill reduces the risk that their power needs drive up electricity rates for retail customers,” the legislative analysts said.
Renewable energy, climate
In a cost savings measure, the bill cuts greenhouse gas emissions reduction targets for electric utilities from 2027 through 2035, with a cut to 1.75% from 2.5% for 2027 through 2029. The reduction lowers how much utilities need to spend on the EmPOWER Maryland, an energy efficiency program.
The bill authorizes people to install one portable solar energy generating system per electric meter of up to 391 W. It prohibits utilities from requiring customers to get their permission to install the portable system or pay a fee for exporting electricity from the system to the grid, according to the analysis. It also establishes that a utility is not liable for any damage caused by a portable solar system.
Under the bill, the Maryland Energy Administration will conduct auctions in 2027 and 2028 to award contracts for utility-scale renewable energy and storage projects in the state, with $100 million in funding available each year.
The bill requires the PSC to develop a replacement program for Maryland’s net metering framework that expands it to 6 GW from 3 GW, but must reduce ratepayer costs. It is unclear how those changes would affect electric rates, according to the legislative analysis.
The bill effectively ends the state's existing net metering program on July 1, 2027, or when the program reaches 3 GW, whichever comes first, according to the analysis.
