Maryland Democrats introduce bill to allow utilities to build energy projects

Sen. Kevin Harris (D-Prince George) speaks with Sen. Brian Feldman (D-Montgomery) on the Senate floor Tuesday. Harris introduced a bill that would allow utility companies to build and operate power generation infrastructure. (Photo by Brian P. Sears/Maryland Matters)

Sen. Kevin Harris isn’t sure his bill allowing investor-owned utilities to get back into the business of generating energy — and using ratepayer dollars to do so — is the answer to high energy prices and limited 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 out there for the state of Maryland. Who knows if it’s the right one, but we won’t know until we really dive deep, discuss and figure out what’s best for our constituents,” said Harris of Senate Bill 954.

The bill, which paves the way for investor-owned electric utilities to use ratepayer dollars to build electricity generation infrastructure in Maryland, has the support of Exelon, owner of Baltimore Gas & Electric, Delmarva Power and Pepco. The Chicago-based utility is campaigning hard for the idea, including TV ads airing in Maryland during the Super Bowl.

But consumer advocates and environmental groups argue that putting additional costs on the backs of customers would be deeply 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 will make matters worse.

Maryland People’s Councilman 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 cheap.”

“Turning over new business to Exelon unnecessarily exposes customers to Exelon utilities’ long record of cost overruns and cost overruns,” Lapp said.

In Maryland, utilities, which control the distribution of electricity to homes and businesses across the state, are separate from the companies that generate electricity and supply it to the grid.

Utilities enjoy monopolies in their service areas 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 of that, often 9% or higher.

Current law technically states that the PSC “may permit an investor-owned electric company to construct, acquire, or lease and operate its own generation facilities … subject to appropriate cost recovery.”

Harris’ bill is very specific.

The bill stipulates that one or more electric companies must submit a plan to produce electricity in case of a power shortage or an incident affecting “price stability”. The commission then has one year to approve or reject the plans.

Harris said his bill, called the Affordable Energy Act, would allow utilities to build only renewable energy projects, but not fossil fuel projects.

Valencia McClure, government senior vice president, regulatory and external affairs for Exelon’s Maryland utilities, said her company wants to focus on operating community solar farms and battery storage infrastructure, not natural gas production. He noted that power customers who subscribe to community solar farms get 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 – as the state calls – to be able to build a new generation.”

But Lapp said Maryland consumers shouldn’t have to pay through their rates for any increased electricity generation in the state, because much of the stress projected on the regional grid doesn’t actually come from Maryland. This is largely coming from projected data centers for other states, he said.

“PJM Projects Maryland Exelon Utilities’ Power Demands to Decline — Not Increase — Through 2029.” Lap wrote. “Except for some relatively small data center growth compared to PJM in Maryland — existing customers should not be responsible — Exelon utilities’ energy demands will grow only modestly beginning in 2030, at growth rates well below historical growth rates.

Harris’ bill clearly states that electric utilities required or authorized to build power facilities can recover from ratepayers all of their costs — even if some of those costs are trapped, even if the infrastructure isn’t built.

“It’s one of those things that we’re going to discuss more and what’s really necessary and what’s not,” Harris said.

Lapp argues that provision is troubling.

“This would give utilities unprecedented statutory protections against building power plants that become unnecessary — a real possibility given the overwhelming evidence suggesting projections of data center energy demands have increased,” Lapp wrote.

In a statement, BGE spokesman Nick Alexopoulos said the company supports the measure to “ensure that large generation projects do not jeopardize the utility’s health or lead to higher borrowing costs overall, which would adversely affect customers.”

It’s unclear whether the bill will be able to move forward: Senate President Bill Ferguson said Tuesday that “there is a level of skepticism that exists throughout the caucus, and throughout the Senate membership” about whether it will reduce ratepayer costs.

“That’s going to be the lens that we’re really trying to hone in on, whether the policy is going to provide long-term savings for ratepayers,” Ferguson said.

McClure said Exelon estimates that average customer bills will increase by $2 per month for a few years, but will translate into savings of $5 to $10 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 prefers “investment risk” to “land with investors”.

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“But there is a question of whether there is a strike price or a point where … the market is not producing enough domestic product, that there has to be some other market intervention to push it,” Ferguson said.

Last year, lawmakers passed the Next Generation Energy Act, which includes a fast-track permitting process for “dispatchable” energy projects, which can provide energy for the grid when called upon during peak times. Under the law’s requirements, only two projects have been approved to move through the fast track: two different concepts for a natural gas plant in Harford County, submitted by Constellation.

Constellation, formerly an Exelon subsidiary, also proposed a battery storage project, but it did not meet the fast-track bill’s requirements even though it created a procurement specifically for battery storage.

Constellation has opposed Exelon’s push to enter the generation game, arguing it would crowd out competing power producers, and that Exelon is unsuited to enter generation Freire.

“BGE doesn’t need new legislation to build new generation,” Constellation spokesman Paul Adams said. “BGE wants new legislation to guarantee a return on any investment, whether that investment is in the best interest of Maryland ratepayers or at minimal cost. Unlike them, Constellation is ready and willing to put our own capital on the line, with no guarantee of profit. It only seems fair that if you’re not going to take any risk, you shouldn’t take any profit.”