Maryland Democrat introduces bill allowing utilities to build energy projects

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

Sen. Kevin Harris is not sure his bill allowing investor-owned utilities to get back in the business of generating power — and using ratepayer dollars to do so — is the answer to high energy prices and constrained demand in the state.

But the Prince George’s County Democrat is sure that something needs to be done.

“We need to have all 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 deep dive, have the discussions and figure out what’s best for our constituents,” said Harris of Senate Bill 954 that he is sponsoring.

The bill, which lays out a pathway 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 hard for the idea, including in TV commercials that aired 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 harmful amid already-high costs. They warn that high infrastructure spending by utilities is part of the reason for the current high rates, and allowing further construction would make matters worse.

Maryland People’s Counsel 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.”

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

In Maryland, the utilities, which control the distribution of power to homes and businesses across the state, are separate from the companies that generate 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 allow investor-owned electric company to construct, acquire, or lease, and operate, its own generating facilities … subject to appropriate cost recovery.”

Harris’ bill is considerably more specific.

The bill directs the PSC to require one or more electric companies to submit plans involving power generation, if it determines that there is a power scarcity, or that an event impacting “price stability” has occurred. The commission then has one year to approve or deny the plans.

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

Valencia McClure, senior vice president of government, 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 generation. She noted that power customers who subscribe to community solar farms receive rebates on their bills.

“We really are focusing on: How can we support our customers during this affordability crisis?” McClure said. “The way to do that is to — if called upon by the state — to be able to build new generation.”

But Lapp said Maryland consumers should not be paying for any increased power generation in the state through their rates, since much of the predicted strain on the regional grid isn’t actually coming from Maryland. It’s largely coming from data centers projected for other states, he said.

“PJM projects that the Maryland Exelon utilities’ power demands decrease — not increase — through 2029.” Lapp wrote. “Aside from some relatively small data center growth in Maryland compared to PJM — growth that existing customers should not be responsible for — the Exelon utilities’ energy demands only go up modestly starting in 2030, at a growth rate much lower than historical growth rates.”

Harris’ bill explicitly states that the electric utilities required or authorized to construct power facilities can recover all of their costs from ratepayers — even if some of those costs are stranded, including if the infrastructure is never built.

“That’s one of the things that we would be discussing further and see what is actually needed and what is not needed,” Harris said.

Lapp argues that the provision is alarming.

“It would give 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 projections of data center energy demands are inflated,” Lapp wrote.

In a statement, BGE spokesperson Nick Alexopulos said the company supports the measure “to make sure a large generation project doesn’t jeopardize the utility’s health or lead to higher debt costs overall, which would adversely impact customers.”

It’s unclear whether the bill will be 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 that we are really trying to hone in on, is whether or not a policy is going to provide long-term savings for the ratepayer,” Ferguson said.

McClure said Exelon estimates that average customer bills would increase about $2 per month for a few years, but those would turn to savings of $5 to $10 a month in the future. The company’s analysis was based on construction of 2,700 megawatts of battery storage and 1,200 megawatts of solar.

Ferguson said that he would “prefer that 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 point where … the market is not generating sufficient domestic generation, whether that has to be some other 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, which can provide energy for the grid when called upon during peak times. Only two projects have been approved to move through the fast-track, under the legislation’s requirements: 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 requirements of the fast-track bill, even though it created a procurement specifically for battery storage.

Constellation has been opposed to Exelon’s push to enter the generation game, arguing that it would crowd out competitive power producers, and that Exelon is ill-suited to enter the generation fray.

“BGE doesn’t need new law to build new generation,” said Constellation spokesman Paul Adams. “BGE wants new law to guarantee a return on any investment, whether or not 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 seems only reasonable that if you aren’t willing to take on any risk, you should take no profit.”