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No End In Sight for Rising Electric Rates in Maryland

maryland electric ratesLong-Term Increases in Electricity Prices

Electricity prices are on the rise… again. Over the entire U.S., every geographic region and consumption sector (e.g., residential, commercial, etc.) is experiencing rising prices.  In all, U.S. residential electricity prices increased this year by 3.1%.  That is the highest growth rate since 2008 and is mainly due to higher fuel costs for power generation. Residential prices are projected to increase by 2.4% during 2015.

High Prices in Maryland

Maryland electric rates are 13th highest in the entire country.  And, state prices are increasingly more rapidly.  Over the last four years, rate hikes have moved prices higher.  Over the eight years, prices have increased 43% in Maryland, compared to 24% nationwide.

Utility companies like BGE, Maryland’s largest utility provider, are seeking approval for new rate hikes.  These rate hikes will move prices higher, upwards of $15 a month for customers that use both electricity and natural gas.  Counting the new proposal to increase prices, rate hikes over the last 3-4 years have added $25 per month to the average residential monthly bill.  When will the price increases end?

BGE also projects another rate hike (five rate hikes in five years) in 2015 to cover the cost of replacing older analog meters to smart meters.  This cost will be passed onto consumers.  Future infrastructure improvements are used as rationale to raise prices now – but many opponents argue that this logic isn’t valid.  Prices should only increase when infrastructure improvements and upgrades are actually being made, not planned.

Will New Power Plants Solve the Problem?

There is a shortage of power plants in Maryland.  Major new power generating facilities haven’t been built in Maryland for over a decade.  That’s the primary reason that Maryland imports more electricity than almost any other in the country (42% in 2010).  Importing electricity is most expensive (an expense that gets passed on to consumers), especially into congested, high demand areas like eastern Maryland and the Baltimore-Washington corridor.

So will new planned and proposed power plants solve this problem?  Two large projects may begin construction this year and two more are seeking approval.  But offsetting the benefits of planned new power generation may be the planned closing of other plants in 2018.  Expected closures of out-of-state coal plants could offset local generation gains, given the historic reliance on electricity imports.  The bottom line?   As new plants are brought online, the retirement of coal-fired plants in both Maryland and out-of-state areas may continue the ongoing trend of never-ending rate hikes.

Renewables May Be The Answer

Utility companies have pointed to competition and deregulation to keep prices low.  This hasn’t been in the case, especially in Maryland over the last eight years of 43% increases in prices.  With prices projected to continue to rise over time, often far exceeding inflation rates for other consumer goods, what is the solution for consumers?

Renewable energy sources, like solar and wind power, are the likely solution. Residential consumers with home-based solar power systems receive tax credits and actually revenue from the net excess generation of power.  Solar and wind power sources aren’t reliant on coal or natural gas prices and are much better for the environment and air quality.

Avoiding the negative impacts of long-term increases in energy prices isn’t as hard as you think.  Residential  customers that invest in a solar power system receive incentives to reduce the total cost of ownership:  net metering (utility credits you for power production), feed-in tariffs, solar tax credits, rebates, and solar renewable energy credits.

In addition, commercial building owners can significantly increase property values and decrease operating costs with investments in renewables such as solar — and hedge against ongoing price hikes in energy.