BGE: Surcharge critical to smart meter plan 

Posted: 8:44 pm Thu, August 5, 2010
By Ben Mook
Daily Record Business Writer

Baltimore Gas & Electric Co. on Thursday defended its plan to pay for its smart grid program with some form of surcharge passed on to customers, and intimated that it might walk away from the project without one.

After rejecting BGE’s first plan in June, the Public Service Commission began two days of hearings about the utility’s revised smart grid plan, which includes installing meters in customers’ homes that transmit usage and outage information along with other data. The PSC’s action threatened a $200 million federal stimulus grant attached to the project. BGE amended its initial plan to allay the PSC’s concerns.

One major change was how BGE plans to recoup costs associated with the $835 million project. Instead of using a surcharge on customers’ bills to recover all of the project’s costs, the company would recover 25 percent of costs through a surcharge and the rest would come later through rate increases that have to be approved by the PSC.

Mark W. Case, BGE’s senior vice president of strategy and regulatory affairs, said the company’s plan would mitigate the cost to customers by delaying the surcharge until 2011, lowering how long the company amortized the assets and using a rate where heavier users would pay more. But, he said, a surcharge was critical to moving forward with the project, which BGE is not obligated to undertake.

“I think we would probably not go forward [without the surcharge],” Case said.

Case said the utility remained a little gun-shy about major capital investments because of prior brushes with the PSC over such things as rate freezes, mergers and other issues.

“We’ve had a little bit of a bull’s eye on our back the last few years,” Case said.

Case said BGE remained committed to the concept of the smart grid, but not at the risk of having to shoulder the lion’s share of the cost.

“Those things are kind of burned into our psyche, and from BGE’s perspective those sorts of events make us concerned about recovering the costs downstream,” he said.

PSC Commissioner Susanne Brogan said the PSC was working with the company to move the smart grid plan forward. She said the commission provided guidance and suggestions in its June order instead of just flatly denying it. And, in return, she said the state and the PSC get branded as being “hostile” by analysts covering BGE and its parent company, Constellation Energy Group.

“We put the order out and what was your response?” Brogan said. “Dumbfounded, shocked, how could they do such a thing?”

“It’s galling to me to read that somehow it’s our fault,” she added. “I posture that the reaction of the company might be leading this hostile regulatory environmental perception.”

The commission planned to convene the second day of hearings on Friday. The Department of Energy has until Sept. 30 to allocate the stimulus grant.