Monday, July 12, 2010

Post # 29 - BGE Redux?

Today, after initially expressing reservations about going forward, Baltimore Gas & Electric reapplied for Maryland Public Service Commission approval of its smart meter installation project.

Last month, the MPSC shook up the smart grid world by denying BGE's request
to install smart meters for each of the company’s 1.2 million customers. See Post # 25. Estimated to cost $835 million, BGE had secured $200 million from the U.S. Department of Energy in a "stimulus" grant. For the balance, BGE looked to its retail customers, whom it estimated would receive $2.6 billion in energy saving benefits over the 15-year life of the project.

But the MPSC threw a monkey wrench into the works. As noted in Post #25, the commission was not ruling on the desirability of smart meters or the smart grid per se. Rather, the MPSC questioned whether BGE's ratepayers would actually see benefits from this project commensurate with the utility's proposal to recover approximately $635 million of smart meter installation costs through a consumer rate surcharge. In addition, the MPSC was concerned with BGE's proposal for a mandatory “Smart Energy Pricing” schedule for all residential customers that would vary electric rates during the peak months of June through September based on the time of day and time of week. The MPSC invited BGE to submit a new proposal.

With the $200 million grant from DOE set to expire at the end of this month -- DOE has indicated it would shift the grant to other uses if the BGE project appears stalled -- BGE submitted a new application on July 12, 2010. The new filing makes two major changes. First, BGE now proposes to recover only 25 percent of the project costs through the surcharge. For the remaining 75 percent, BGE will seek cost recovery through traditional rate recovery mechanisms -- effectively, litigating cost recovery on a continuing, incremental basis over the life of the project. In addition, time-of-use rates no longer would be mandatory -- customers instead would choose whether to go the dynamic pricing route. For more on BGE's new filing, see here, here, and here.

The question remains -- even with these concessions, will the MPSC conclude that BGE's customers will receive commensurate value? And, in the end, how will that value be determined?

Stay tuned.

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