Maryland ratepayers will pay $2 billion too much for electricity in the next three years, state regulators claimed Monday. Market rules intended to spur the construction of new power-generation facilities have instead lined the pockets of existing energy companies, regulators said.
Baltimore Gas and Electric ratepayers will overpay $1.068 billion of a total $12 billion in excess rates paid by a 13-state area, PSC Chairman Steven Larsen said in a briefing on the complaint Monday. An 8 percent rate increase for BGE customers went into effect Sunday, and Larsen said excess payments constitute roughly 5 to 10 percent of their monthly bill.
In a complaint filed late Friday, the state?s Public Service Commission joined with utility regulators from nearby states and other groups in asking federal regulators to refund $12 billion in “unjust” rates.
“We believe that [energy supply] auctions were not competitive, they were structurally deficient ? and in some parts billions will be paid by ratepayers for little or no new generation,” Larsen said. “We have to take steps to [encourage] new capacity in the state, but in this case ? we didn?t get what we paid for.”
PJM Interconnection, operator of the regional grid, created a system in 2005 to encourage the construction of new energy capacity through auctions, with power generators in theory using revenue from higher market prices to invest in new capacity.
Because of the time delays in building new generation, PJM established four “bridge” auctions for electricity through May 2011. A report by energy consulting firm Kaye Scholer estimated those auctions resulted in prices 50 percent higher than needed, but with little new generation built into the system.
The complaint filed by the PSC, its counterparts in New Jersey, Pennsylvania and Delaware, and consumer advocates concerns only auctions through May 2011. A recent auction held for the June 2011 to May 2012 time frame resulted in a 37 percent drop in capacity prices and enough new generation to power more than 4 million average homes.
PJM Senior Vice President Andrew Ott at the time said the auction was evidence that PJM?s system was creating new capacity. Constellation Energy Group Vice President Dan Allegretti said that company, parent of BGE, had made capacity-increasing improvements to existing plants rather than build new facilities.
“We?re disappointed,” he said of the PSC complaint. “It takes the market a bit of time to respond, that doesn?t mean it?s broken. I don?t think there?s been a lack of competition.”
