Sen. Kevin Harris (D-Prince George) speaks with Sen. Brian Feldman (D-Montgomery) on the Senate floor on Tuesday. Harris introduced a bill that would allow utilities to build and operate power generation infrastructure. (Photo Brian P. Sears/Maryland Affairs)
Sen. Kevin Harris is unsure whether his bill to allow investor-owned utilities to get back into the generation business — and use taxpayer dollars to do so — would solve the state’s high energy prices and limited demand.
But Prince George’s County Democrats are convinced something needs to be done.
“We need to provide Maryland with every possible option. Who knows if it’s the right option, but we won’t know until we really dig in, have discussions and figure out what’s best for our constituents,” said Harris, who sponsored Senate Bill 954.
The bill provides a path for investor-owned power companies to use taxpayer dollars to build power generation infrastructure in Maryland and is backed by Exelon, owner of Baltimore Gas & Electric, Delmarva Power and Pepco. The Chicago-based utility has been trying to promote the idea, including in a television ad that aired in Maryland during the Super Bowl.
But consumer advocates and environmental groups argue that imposing additional costs on consumers when costs are already high would be extremely harmful. They warn that high infrastructure spending by utilities is part of the reason for current high rates, and that allowing further construction will make the situation worse.
David Lapp, counsel for the People of Maryland, which represents the state’s utility ratepayers, said in a statement that he believes the “Exelon bill is simply unaffordable.”
“Transferring new business to Exelon unnecessarily exposes customers to Exelon Utilities’ long record of exceeding cost projections and cost overruns,” Lapp said.
The Exelon Building on Baltimore Harbor Point. Exelon is pressing for approval to build and operate power generation in the state, which would upend decades of utility regulation. (Photo by Christine Condon/Maryland Matters)
In Maryland, the utilities that control the distribution of electricity to homes and businesses across the state are separate from the companies that generate electricity and feed it to the grid.
The utilities enjoy monopolies over their services and are regulated by the Public Service Commission, which manages the costs they can pass on to customers. Utilities can be reimbursed for approved infrastructure costs and are guaranteed a profit, typically 9% or higher.
Current law technically states that the PSC “may require or permit an investor-owned electric utility to construct, acquire or lease and operate its own generating facilities…subject to appropriate cost recovery.”
Harris’ bill is much more specific.
The bill directs one or more power companies to submit plans involving power generation if the PSC determines that there is a power shortage or an event occurs that affects “price stability.” The committee has a 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, Exelon’s senior vice president of government, regulatory and external affairs for the Maryland utility, said her company wants to focus on operating community solar farms and battery storage infrastructure rather than natural gas generation. She noted that electricity customers who subscribe to community solar farms can receive rebates on their bills.
“What we’re really focused on is: How do we support our customers during this affordability crisis?” McClure said. “The way to do that is – if the country requires it – to be able to raise a new generation.”
But Rapp said Maryland consumers shouldn’t have to pay for the state’s increased generation through their electric bills because much of the projected stress on regional grids doesn’t actually come from Maryland. That will come mainly from data centers expected to be supplied to other states, he said.
“PJM expects electricity demand from Maryland’s Exelon utility to decrease, not increase, through 2029,” Rapp wrote. “Compared to PJM, except for some relatively minor growth in its Maryland data center (for which existing customers are not responsible), Exelon Utilities’ energy demand will only increase slightly starting in 2030, at a rate well below historical growth rates.”
Harris’ bill makes clear that electric utilities that require or authorize the construction of electric facilities can recover all costs from ratepayers — even if some of those costs are set aside, including if the infrastructure is never built.
“That’s one of the things we’ll discuss further to see what’s really needed and what’s not needed,” Harris said.
Rapp found the provision shocking.
“This would provide utilities with unprecedented statutory protection from the consequences of building unnecessary power plants—a real possibility given the overwhelming evidence that forecasts of data center energy demand are exaggerated,” Rapp wrote.
BGE spokesman Nick Alexopulos said in a statement that the company supports the measure “to ensure that large power generation projects do not jeopardize the health of utilities or cause overall debt costs to rise, adversely affecting customers.”
It’s unclear whether the bill will move forward: Senate President Bill Ferguson said Tuesday that there is “a level of skepticism throughout the caucus and across the Senate that it will reduce taxpayer costs.”
“That’s going to be a lens that we really try to hone in on whether a policy will provide long-term savings to taxpayers,” Ferguson said.
McClure said Exelon estimates that within a few years the average customer’s bill will increase by about $2 per month, but that those costs will translate into monthly savings of $5 to $10 in the future. The company’s analysis is based on 2,700 megawatts of battery storage and 1,200 megawatts of solar construction.
Ferguson said he “prefers that the risk” of the investment “falls on the investor.”
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“But one question is, if there’s a strike price or a point where… the market isn’t generating enough domestic generation, does it have to be driven by other market intervention,” Ferguson said.
Last year, lawmakers passed the Next Generation Energy Act, which includes a fast-track approval process for “dispatchable” energy projects that can provide energy to the grid during peak hours. Only two projects were approved on the fast track, as required by the legislation: two different concepts for a Harford County natural gas plant submitted by Constellation.
Former Exelon subsidiary Constellation also proposed a battery storage project, but it did not meet the requirements of the Fast Track Act, although it created a procurement specifically for battery storage.
Constellation has been opposed to Exelon’s push to enter the power generation game, arguing that it would crowd out competitive power producers and that Exelon is not suitable to enter the power generation competition.
“BGE doesn’t need new laws to build a new generation,” said Constellation spokesman Paul Adams. “BGE wants the new law to guarantee a return on any investment, regardless of whether the investment is in the best interest of Maryland taxpayers or at the lowest cost. Unlike them, Constellation is ready and willing to put our own capital at risk with no guarantee of profit. If you are not willing to take any risk, then you should not profit, it seems reasonable.”
