Senator Kevin Harris (D-Prince George’s) speaks with Senator Brian Feldman (D-Montgomery) on the Senate floor Tuesday. Harris introduced a bill that could allow utility companies to build and operate power generation infrastructure. (Photo Bryan P. Sears/Maryland Matters)
Sen. Kevin Harris isn’t sure his bill to allow investor-owned utilities to get back into the business of generating power — and using ratepayer dollars to do it — is the answer to high energy prices and constrained demand in the state.
But the Prince George’s County Democrat is sure something needs to be done.
“We need to have all the possible options out there for the state of Maryland. Who knows if this is the right one, but we won’t know until we actually do the next day in depth, have the discussions and find out what is best for our constituents,” said Harris of the Senate Bill 954 that is sponsoring.
The bill, which would establish a path for investor-owned electric utilities to use ratepayer dollars to build power generation infrastructure in Maryland, has the support of Exelon — the owner of Baltimore Gas & Electric, Delmarva Power and Pepco. The Chicago-based utility has been campaigning heavily for the idea, including in TV commercials that aired in Maryland during the Super Bowl.
But consumer advocates and environmental groups argue that placing additional costs on the backs of customers would be highly damaging amid already high costs. They warn that high infrastructure spending by utilities is part of the reason for current high rates, and that allowing more construction would make things worse.
Maryland Attorney General David Lapp, who is tasked with representing utility ratepayers in the state, said in a statement that he believes “the Exelon bill is anything but affordable.”
“Awarding new business to Exelon unnecessarily exposes customers to Exelon’s long track record of utilities exceeding cost projections and cost overruns,” Lapp said.
The Exelon Building at Baltimore’s Harbor Point. Exelon is pushing for approval to build and operate a power plant in the state, upending decades of utility regulation. (Photo by Christine Condon/Maryland Matters)
In Maryland, the utilities, which control the distribution of power to homes and businesses across the state, are separate from the companies that generate the power and supply it to the grid.
The utilities enjoy monopolies in their service territories and are regulated by the Public Service Commission, which presides over the costs they can pass on to customers. Utilities receive reimbursement of approved infrastructure costs, and a guaranteed profit on top of that, often 9% or higher.
Current law technically states that the PSC “may require or permit the investor-owned electric company to construct, acquire, or lease, and operate, its own generation facilities … subject to appropriate cost recovery.”
Harris’s account is considerably more specific.
The bill directs the PSC to require one or more electricity companies to submit plans involving energy generation, if it determines that there is a shortage of energy, or that an event affecting “price stability” has occurred. The commission then has one year to approve or reject the plans.
Harris said his bill, called the Affordable Energy Act, would only allow utilities to build renewable energy projects, but not fossil fuel projects.
Valencia McClure, senior vice president of government, regulatory and external affairs for Exelon utilities of Maryland, said her company wants to focus on operating community solar farms and battery storage infrastructure, not natural gas generation. She noted that energy customers who subscribe to community solar farms receive discounts on their bills.
“We’re really focusing on: How can we support our customers during this affordability crisis?” McClure said. “The way to do this is to – if requested by the state – to be able to build a new generation.”
But Lapp said Maryland consumers shouldn’t be paying for any added power generation in the state through their rates, since much of the projected pressure on the regional grid isn’t actually coming from Maryland. It largely comes from data centers projected to other states, he said.
“PJM projects that Maryland Exelon utilities’ power demands will decrease — not increase — through 2029.” Lapp wrote. “Except for some relatively small data center growth in Maryland compared to PJM – growth that existing customers should not be responsible for – Exelon utilities’ energy demands will rise only modestly through 2030, at a much lower growth rate than historical growth rates.”
Harris’ bill explicitly states that electric utilities required or authorized to build power facilities can recover all of their costs from ratepayers — even if some of those costs are lost, including if the infrastructure is never built.
“This is one of the things that we will be discussing more and seeing what is actually necessary and what is not necessary,” Harris said.
Lapp argues that the provision is alarming.
“It gives utilities unprecedented statutory protection from the consequences of building power plants that turn out to be unnecessary — a real possibility given the vast evidence suggesting that data center energy demand projections are inflated,” Lapp wrote.
In a statement, BGE spokesman Nick Alexopulos said the company supports the measure “to ensure that a large generation project does not jeopardize the health of the utility or lead to higher debt costs in general, which would have a negative impact on customers.”
It is unclear whether the bill is able to advance: Senate President Bill Ferguson said Tuesday that “there is a level of skepticism that exists across the caucus, and across the Senate membership” about whether it will reduce ratepayer costs.
“That’s going to be the lens we’re trying to focus on, is whether a policy is going to provide long-term savings for the ratepayer or not,” Ferguson said.
McClure said Exelon estimates average customer bills will increase about $2 a month for a few years, but those will turn into savings of $5 to $10 a month in the future. The company’s analysis was based on the construction of 2,700 megawatts of battery storage and 1,200 megawatts of solar.
Ferguson said that he would “prefer that the risk” of investment “land with investors.”
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“But there is a question that if there is a strike price or a point where … the market is not generating enough domestic generation, whether that should be some other market intervention to push it,” Ferguson said.
Last year, lawmakers passed the Next Generation Energy Act, which included a fast permitting process for “dispatchable” energy projects, which can provide power to the grid on demand during peak times. Only two projects have been approved to move through the fast-track, under the requirements of the legislation: Two different concepts for a natural gas plant in Harford County, submitted by Constellation.
Constellation, formerly a subsidiary of Exelon, also proposed a battery storage project, but did not meet the requirements of the fast-track bill, even though it created a procurement specifically for battery storage.
Constellation was opposed to Exelon’s push to enter the generation game, arguing that it would expose competitive power producers, and that Exelon is not suited to enter the generation fray.
“BGE does not need a new law to build a new generation,” said Constellation spokesman Paul Adams. “BGE wants a new law to guarantee a return on any investment, whether that investment is in the best interests of Maryland ratepayers or at the lowest cost. Unlike them, Constellation is ready and willing to put our own capital on the line, with no guarantee of profit. It only seems reasonable that if you’re not willing to take any risk, you shouldn’t take any profit.”