O'Malley electricity panel recommends surcharge for grid upgrades
Detail of an overhanging limb of a sycamore tree trimmed to clear power lines near BGE offices on York Road following the derecho. (October 3, 2012)
A task force the O'Malley administration assembled after the June 29 derecho recommended Wednesday that regulators push utilities to make even more upgrades to the grid more quickly than previously planned, and to tap customers to pay for them as needed. The derecho caused 762,000 outages, some lasting as long as eight days, in the Baltimore area.
But the proposal faces opposition. Consumer advocates criticized any plan that would charge the public for reliability they should expect. And state energy regulators have rejected similar proposals from utilities who have sought special surcharges to pay for major infrastructure improvements three times in the past year.
BGE officials, meanwhile, welcomed the task force's recommendations.
Separately Wednesday, a Baltimore city board voted to charge the utility more for access to underground conduits, a cost BGE said it would pass on to customers.
Any decision to impose a surcharge for grid improvements rests with the Maryland Public Service Commission.
The task force suggested the surcharge to help utilities speed up planned reliability improvements such as tree trimming and burying some power lines. The PSC already has the authority to impose such charges, which could be imposed for as long as the panel sees fit.
O'Malley urged Marylanders to be open to the surcharge and grid investment, given the increased frequency of extreme weather in recent years. "These are all things that all of us pay for together," O'Malley said at a State House news conference. "When our environment changes, we too have to adapt to those changes."
Paula Carmody, the state's people's counsel, said she was pleased to see a focus on reliability but was disappointed to see the surcharge included in the panel's recommendations.
"There's no need, as the commission agreed with us in three separate rate cases, for a separate infrastructure tracker or surcharge in order for these companies to carry out their reliability responsibilities," Carmody said.
Pepco, Delmarva Power and Light and Washington Gas and Light have each asked for similar charges when seeking rate increases before the PSC in the past year, and each has been denied.
"We're not persuaded that this mechanism is necessary or appropriate," commissioners wrote in an order on Pepco's rates issued in July. "We are persuaded that the Company can do the work it needs to do and have a reasonable opportunity to earn its approved return without any nontraditional recovery mechanisms."
Traditionally, the state's utilities tap ratepayers to recover the cost of investment in and maintenance of their systems. When those costs rise, utilities can make their case to the PSC for rate increases.
PSC officials declined to comment on the proposed surcharge because the task force's recommendations were filed as part of a case pending before the commission, reviewing utilities' responses to the derecho.
Other consumer advocates also criticized the idea.
"It's another example of pandering to these wealthy utilities that are already getting a better deal than the average taxpayer," said Jenny Levin, state advocate for Maryland PIRG, a consumer advocacy group.
Del. Dereck Davis, chairman of the Economic Matters Committee, said that while customers want a hardening of the grid, "they basically want the utilities to absorb it." But Davis, a Prince George's County Democrat, said there's "no free lunch" when it comes to improving reliability.
"One way or another, those charges will ultimately be borne by citizens," Davis said.
Del. Steve Schuh, a Republican member of the House panel's utility subcommittee, said the panel favors hardening the electrical system to withstand severe storms, but he warned the effort would be expensive. Passing on those costs might concern many Marylanders, he said.