The PSC did not want to approve BGE's new "dynamic" electricity rate plans that allow prices to rise during the day when power demand peaks and fall when demand is slack. Such real-time pricing plans are essential to prompt customers to shift energy usage to slack times and reduce overall consumption. The PSC ruling was influenced by concern from the American Association of Retired Persons (AARP) and the Office of the People's Counsel, a state consumer advocacy agency, about higher summer energy bills . The PSC noted that it would not approve an advanced meter plan that includes mandatory dynamic or "time of use" electricity rates. BGE proposed to create a customer Web portal that would allow customers to review hourly electricity usage from the previous day over the Internet. The PSC criticized BGE for not including in-home displays to alert people that power prices were rising.
The estimated cost of the meter deployment was to be $486 million, $136 million of which was to be paid from DOE's Smart Grid grants. The Energy Department (DOE) pledged $200 million toward the BG&E program, most of which was targeted for advanced meter installation. It was one DOE's Smart Grid stimulus grant program last year. BGE was prepared to put in $280 million of their shareholders' money into advanced meter introduction. BGE anticipated $2.6 billion in benefits over 15 years, from conservation, lower prices, reduced capital expenditures for new power sources and other sources.
To achieve savings, BGE proposed to offer residential customers a "peak time rebate" from 2 p.m. to 7 p.m. on "critical" days declared by the company during heat waves when power supplies are stressed, and other emergencies called by the region's grid operator. Customers would be notified the evening before and then could earn a rebate, initially $1.25 per kilowatt-hour, if they reduce their power consumption below a predetermined base case amount. BGE also proposed to charge lower rates at all other times.
BGE proposed to recover the costs of the meter rollout as they are incurred through a "tracker" surcharge added to customers' bills, rather than waiting to recover the costs in a traditional rate case proceeding. The PSC singled out BG&E's proposal to recover advance costs of the smart meter deployment through a surcharge on customers, calling it a "no-lose" proposition by the company. The PSC objected to BG&E asking ratepayers:
"to take significant financial and technological risks and adapt to categorical changes in rate designs, all in exchange for savings that are largely indirect, highly contingent and a long way off. BG&E has provided no persuasive reason why its customers should subsidize this program in that manner. Surcharges guarantee dollar-for-dollar recovery of specific costs, diminish the Company's incentive to control those costs," and put those costs outside the commission's reach."The commission noted that the BGE surcharge would raise the average electricity customer's monthly rate by 38 cents beginning in 2010, rising to $3.78 in 2013.
The PSC has approved such surcharges in some limited cases, it drew the line on BG&E's current proposal. (NYT, 6/23/2010)