Post # 35 - BGE’s Smart Meters: Down to the Wire?

BGE’s smart meter problems with the Maryland PSC (see post nos. 25 and 29) are coming to a head. The PSC last week held hearings on BGE’s revised plan, and August 16, 2010 (this Monday) effectively is the date for the PSC’s decision. This is because BGE’s plans are predicated not only on MPSC approval of its cost-recovery mechanisms, but also on a $200 million stimulus grant from the U.S. Department of Energy.

As noted in a recent Special Report by DOE’s inspector general, the 2009 federal stimulus legislation provided DOE with over $36 billion for various environmental programs and initiatives. Approximately $4.5 billion of that was targeted to smart grid projects like BGE’s smart meter program, see here.

The inspector general’s report notes that approximately $32.7 billion of DOE’s stimulus grant funds have been “obligated,” i.e., awarded to projects that are going forward. But the report also notes that, under the terms of the stimulus legislation, the remaining $3.4 billion, including BGE’s $200 million grant, must be obligated by September 30, 2010 – or the grants expire.

While not addressing BGE by name, the report expressly singles out BGE’s situation (emphasis added):

Regulatory approval is needed for a number of previously awarded Recovery Act projects to move forward. As the Department's programs have no control over the outcome of regulatory reviews, it is possible that some obligations could fall through in the coming months, not allowing the Department sufficient time to re-obligate funds. For example, a local public service commission recently denied approval of an application submitted by a Recovery Act recipient to install equipment provided through the Smart Grid Investment Grant Program. OE [DOE’s Office of Electricity Delivery and Energy Reliability] officials stated that while the recipient’s efforts to obtain regulatory approval are ongoing, OE may need to quickly re-obligate $200 million in Recovery Act funds if approval is not received.

Press reports indicate that DOE has agreed to wait until August 16 – this Monday – to decide whether the agency will revoke BGE’s funding and send the money elsewhere. There is no indication where DOE will send the money if the PSC turns down BGE again. Either way, we (and BGE) will have to wait and see. But not for very long, apparently.

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.