8-13-12: BGE Official Breaks Down Proposed Rate Increase

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Gould breaking down the bill.mp3

Last month BGE requested a gas and electric distribution rate adjustment with the Maryland Public Service Commission--which regulates gas, electric and water companies and sets utility rates.

Bad timing?

BGE announced the company had filed for the future adjustments on July 27, but on July 19 the Maryland Public Service Commission announced it would be looking into BGE's past performance during the June 29 derecho storm.

The PSC scheduled eight hearings to gather public comment on the performance of BGE, Potomac Electric Power Company, The Potomac Edison Company and Southern Maryland Electric Cooperative during the derecho.

During the August 7 hearing on Potomac Electric Power Company, customers  voiced their complaints about Potomac Electric Power Company's service and BGE was the subject of a July 24 hearing that was scheduled due to a Howard County residents' complaint to the PSC about frequent power outages.

BGE did release a storm report wherein the company conducted a self-evaluation of its performance during the derecho. According to the report, 762,781 customers lost power during the derecho and the average length of time customers experienced a service interruption was 37.55 hours. 

Breaking down the numbers 

The increase would affect BGE's more than 1.2 million residential and commercial customers by increasing the rates for residential customers by 6.6 percent and 7.9 percent.

According to a BGE release, the typical residential electric bill would increase by $7.22 per month ($86.64/year) based upon a monthly usage of 800 kilowatt hours per month.

The typical residential gas bill would increase by $4.62 per month ($55.44/year) based upon the median gas usage of 52 therms per month.

While a rate increase may not be welcomed by BGE's customers, Rob Gould, chief communications officer for BGE, says the increase is necessary.

"The electric distribution charge, that us 25-30 percent of the bill and that is what we use to reinvest in the infrastructure. If we're granted a rate adjustment, we'd take the money and put it right back into the system," Gould said. "Reinvest in infrastruture otherwise you're deferring maintenance and the cost will certainly be greater later on."

Better service?

BGE says the rate adjustment would help support $3 billion in investments to the company's gas and electric systems, specifically the replacement of utility poles, overhead lines and pipelines. BGE is also weighing the pros and cons of placing more electric lines underground-also called selective undergrounding-but Gould says the decision does not solely rest in the hands of BGE officials.

"There are costs associated with [selective undergrounding], it's very expensive, but nonetheless it is a topic that is very valuable to discuss, and it's not one that can be done in a vacuum," Gould said. "It has to involve the regulator, the public service commission, the legislative branch and the utilities."

60 percent of BGE's electric lines are currently underground. Gould says selective undergrounding will mitigate some tree-related outages but when a problem occurs with the underground lines, restoration times can be longer than with overhead lines.

BGE says the company has only raised electric distribution rates one time in 20 years, which Douglas Nazarian, the chairman of the Maryland Public Service Commission attests to.

"It's true that before the case we decided in 2010, there hadn't been an electric distribution rate case for BGE since 2003, but there was a gas case in 2005," Nazarian said.

BGE officials say The Maryland Public Service Commission will begin the rate review process soon, but even if the increase is approved, customers would not see a change in their bills until after February of 2013.