The Maryland Public Service Commission took its first step toward changing the way utility companies such as Baltimore Gas and Electric Co. set rates — a move the regulator said will provide more certainty to customers.
An Aug. 9 order by the commission creates a working group of stakeholders to determine how best to implement what are known as multi-year rate plans. The method would set rates for a maximum of three years into the future. Maryland currently sets rates based on a historical test years, or costs incurred during a recent 12-month period, and allowing companies to get a certain rate of return. Utility companies including BGE and sister companies Potomac Electric Power Co. (Pepco) and Delmarva Power & Light Co. have been pushing for alternative forms of ratemaking. The companies argue the traditional method results in a "regulatory lag" that prevents them from achieving returns on investment allowed by the commission. As a result, the companies end up frequently filing rate requests, something both the companies and customers view unfavorably.