Sen. Kevin Harris (D-Prince George’s) speaks with Sen. Brian Feldman (D-Montgomery) on the Senate floor Tuesday. Harris has introduced a bill that could allow utility companies to build and operate electricity generation infrastructure. (Photo by Bryan P. Sears/Maryland Matters)
Sen. Kevin Harris isn’t sure the bill allowing investor-owned utilities to get back into the power generation business — and use ratepayer dollars to do it — is the answer to high energy prices and tight demand in the state.
But the Prince George’s County Democrat is sure something needs to be done.
“We need to have every possible option for the state of Maryland. Who knows if this is the right one, but we won’t know until we do some deep research, have discussions and figure out what’s best for our constituents,” said Harris of Senate Bill 954, which he is sponsoring.
The bill, which establishes a path for investor-owned electric utilities to use ratepayer dollars to build power generation infrastructure in Maryland, has the support of Exelon — owner of Baltimore Gas & Electric, Delmarva Power and Pepco. The Chicago-based utility campaigned hard for the idea, including in TV ads 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 deeply damaging on top of already high costs. They warn that high infrastructure spending by utilities is part of the reason for current high rates, and allowing further construction would make matters worse.
Maryland Assemblyman David Lapp, who is tasked with representing the state’s utility ratepayers, said in a statement that he believes “the Exelon bill is unaffordable.”
“Turning over new business to Exelon unnecessarily exposes customers to Exelon’s long history of utility overruns and cost overruns,” Lapp said.
The Exelon Building in Baltimore’s Harbor Point. Exelon is pushing 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, utilities, which control the distribution of power to homes and businesses across the state, are separate from the companies that generate power and feed it to the grid.
Utilities enjoy a monopoly 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 for approved infrastructure costs and a guaranteed profit on top, often 9% or more.
The 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 generating facilities … subject to adequate cost recovery.”
Harris’ bill is much more specific.
The bill calls for the PSC to require one or more electric companies to submit plans involving power generation if it determines there is a power shortage or an event affecting “price stability” has occurred. The commission then has one year to approve or reject the plans.
Harris said the 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 governance, regulatory and external affairs for Exelon’s Maryland utility, said her company wants to focus on operating community solar farms and battery storage infrastructure, not natural gas generation. She noted that electricity customers who subscribe to community solar farms receive discounts on their bills.
“We’re really focused on: How can we support our customers in this affordability crisis?” McClure said. “The way to do that is – if it’s required by the state – we can build a new generation.”
But Lapp said Maryland consumers shouldn’t have to pay for any increased power generation in the state through their rates because much of the projected pressure on the regional grid doesn’t actually come from Maryland. That comes largely from data centers designed for other states, he said.
“PJM projects Maryland utility Exelon’s power demands to fall — not rise — through 2029.” Lapp wrote. “In addition to relatively small data center growth in Maryland compared to PJM — growth that existing customers should not be responsible for — Exelon’s utility power demands grow 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 taxpayers — even if some of those costs fail, including if the infrastructure is never built.
“That’s one of the things that we would continue to discuss and see what is actually necessary and what is not necessary,” Harris said.
Lapp says the provision is alarming.
“It would give utilities unprecedented legal protection from the consequences of building power plants that turn out to be unnecessary — a real possibility given the vast evidence suggesting that estimates of data center energy demands are inflated,” Lapp wrote.
In a statement, BGE spokesman Nick Alexopulos said the company supports the move “to ensure that a large generation project does not jeopardize the utility’s health or lead to higher debt costs that would negatively impact customers.”
It’s unclear whether the bill will be able to move forward: Senate President Bill Ferguson said Tuesday that “there’s a level of skepticism in the caucus and members of the Senate” about whether it would reduce taxpayer costs.
“That’s going to be the objective that we’re really trying to focus on, is whether or not a policy is going to provide long-term savings to the ratepayer,” Ferguson said.
McClure said Exelon estimates average customer bills would increase by about $2 a month for several years, but that would translate into savings of $5 to $10 a month in the future. The company’s analysis was based on building 2,700 megawatts of battery storage and 1,200 megawatts of solar power.
Ferguson said he would “prefer that the risk” of the investment “landed with the investors”.
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“But there’s a question that if there’s a strike price or a point where … the market isn’t generating enough domestic generation, if that has to be another market intervention to push it,” Ferguson said.
Last year, lawmakers passed the Next Generation Energy Act, which included a fast-track permitting process for “dispatchable” energy projects that can provide power for the grid when needed during peak hours. Only two projects have been approved to go through the fast track as required by the legislation: Two different concepts for a natural gas plant in Harford County, submitted by Constellation.
Constellation, a former Exelon subsidiary, also proposed a battery storage project, but did not meet the requirements of the fast-track bill, although it created a procurement specifically for battery storage.
Constellation opposed Exelon’s push to enter the generation game, arguing that it would eliminate competing power producers and that Exelon is ill-suited to enter the generation fray.
“BGE doesn’t need a new law to build new generation,” said Constellation spokesman Paul Adams. “BGE wants a new law that guarantees a return on any investment, whether or not that 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 on the line with no guarantee of profit. It seems reasonable that if you’re not willing to take any risk, you shouldn’t take any profit.”