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BGE Requests Rate Hike to Cover Smart Grid Costs

November 11, 2015 By Cheryl Kaften

Baltimore Gas and Electric (BGE) announced the completion of its five-year smart grid initiative on November 6, which involved upgrading more than 1.7 million electric and gas meters, and activating new customer savings programs. Now, BGE has filed with the Maryland Public Service Commission (PSC) to recover the costs of the upgrade initiative through an adjustment to electric and gas distribution rates (Case No. 9406).

In the testimony and exhibits supporting this application, BGE provides evidentiary support for an increase in its electric distribution revenue requirement of $135.2 million and an increase in its gas distribution revenue requirement of $77.8 million. Of the total $213.0 million increase BGE is seeking, $137.1 million is for the costs of its smart grid rollout. The increases demonstrated are based on a test year for the 12 months ended November 30, 2015, and an overall rate of return on investment of 7.74 percent for electric and 7.69 percent for gas.

BGE deferred recovery of its smart grid investment until the company was able to demonstrate that the system’s benefits were greater than its cost, as required by the PSC when it granted the utility’s request to proceed with the project in 2010. Now that the upgrade is completed, BGE’s filing demonstrates that, for every dollar invested in smart grid, customers are realizing approximately $2.50 in benefits. What’s more, BGE claims, over the next 10 years, the smart grid’s operational and customer benefits are expected to lead to more than $1.5 billion in savings.

The filing also discusses benefits in addition to those quantified, including future capabilities that will improve operations and energy efficiency. “With upgraded meters in place throughout our service area, we have seen the benefits are substantial and sustainable,” said BGE CEO Calvin G. Butler, Jr. “As promised when the project was approved, we would not seek to begin recouping costs through customer rates until we could show that customer benefits exceeded the costs. The energy and cost-savings tools available through smart meters have allowed customers to save significantly on their bills. Our company has also realized operational savings that we have been able to pass on to customers.”

Finally, in this filing, BGE is requesting recovery of the increased fees Baltimore City is assessing all users of the conduit system. BGE’s electric assets in the conduit system include electric cables, switches, transformers, street lighting cable, and communication cable. On September 23, 2015, the Baltimore City Board of Estimates approved an increase that will more than triple the fees for all users of the underground conduit system. BGE is proposing the recovery of conduit fees in a separate customer charge.

Under the proposed adjustment to distribution rates to recover the costs of the smart grid implementation, the average residential electric bill would increase by approximately 6 percent or $7.70 per month. The total average residential natural gas bill would increase by approximately 11 percent or $7.37 per month. A potential customer charge for conduit fees would be in addition to these rate adjustments.

“Even with the proposed adjustments, an average combined gas and electric residential customer’s total monthly bill in 2016 would still be lower than in 2008, due to decreases in electric and gas commodity prices,” BGE claimed.

A decision on the proposed rates is expected from the Maryland Public Service Commission in early June, 2016.

 

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