Update: PSC WILL Defer Capacity Costs; Won't Immediately Include In SOS Rates; Orders Extended, Shifted Cost Recovery

May 29, 2025

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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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In a letter order dated May 29, the Maryland PSC ordered that increased capacity costs for electricity SOS at Baltimore Gas & Electric shall not be reflected in the mass market SOS rates which take effect June 1, 2025, after having ostensibly approved tariff pages on May 28 which would have included the full increase in capacity costs in mass market SOS rates starting June 1, 2025

As noted in ECM's story yesterday, the PSC on May 28 approved a tariff filing which included a non-customary adjustment to the June through September 2025 residential and Type I (hereafter, "mass market") SOS energy rates at BGE due to actual capacity costs for the 2025/26 delivery year being materially higher than the proxy used to set the summer 2025 energy rates back in December 2024 (all references to the June through September 2025 SOS rates in this story are limited to mass market service unless otherwise stated). As more fully explained below, nothing in the PSC's action or letter order from May 28 suggested that such interim adjustment to the summer 2025 SOS energy rates would not immediately reflect the full increase in capacity costs

The events which led to the PSC's May 28 vote and letter order are as follows:

• In December 2024 (approved in January 2025), BGE filed mass market SOS energy rates for the period June through September 2025 under the customary schedule. Typically, these energy rates are not adjusted after approval. A proxy capacity price was used in setting the June through September 2025 SOS energy rates

• On March 14, 2025, BGE filed to update the mass market SOS energy rates for the June through September 2025 period, due to higher capacity costs versus the proxy.

• The PSC at its April 23, 2025 administrative meeting discussed the March 14, 2025 filing and ultimately took the filing under advisement. The PSC from the bench on April 23 issued data requests to BGE concerning the increased capacity costs, including a request for the rates which would result if recovery of the increased capacity costs was limited to certain shoulder months (over either 4 months or 6 months), or if the increased capacity costs were recovered over two years

• While the proposed interim adjustment to the June through September 2025 SOS energy rates was pending, BGE on April 30, 2025, as a result of the spring SOS procurement, filed separately a customary update to the mass market SOS energy rates for the period October 2025 through May 2026, along with updated SOS Admin. Charges, updated transmission rates, and Type II SOS rates for summer 2025. Included in the tariff pages for this update were the revisions to effectuate the still-pending proposed changes for mass market SOS rates for summer 2025 due to higher capacity costs. In other words, the April 30 tariff pages included both the new winter 2025-26 rates, as well as the rates for the June through September 2025 period, and the rates listed for the June through September 2025 period were the proposed revised (higher) rates, not the existing, approved tariff rates from December 2024. This April 30, 2025 tariff filing specifically stated in a narrative section that the tariff reflects changes to the SOS June through September 2025 period to reflect the higher capacity costs, and that the April 30, 2025 tariff filing assumes that the PSC accepts the March 14, 2025 filing which had originally proposed such changes to the June through September 2025 SOS energy rates. "This filing assumes the Commission accepts the Company’s proposed Rider 1 treatment of capacity costs included in Supplement 732 to P.S.C. Md. E-6 in Maillog# 316774," the April 30, 2025 filing stated

• On May 8, 2025, BGE filed an errata to the April 30, 2025 tariff filing related to the proposed new Admin. charges, and which did not alter the previously proposed changes to the June through September 2025 SOS energy rates to reflect the higher capacity costs

• In advance of the May 28 PSC administrative meeting, PSC Staff filed a "buck sheet" regarding BGE's April 30, 2025 filing, which, as explained above, had included customary rate adjustments, but which had also included, in the tariff, changes to the June through September 2025 SOS energy rates to reflect the full recovery of higher capacity costs. In the buck sheet, Staff did not specifically note the inclusion of the changes to the June through September 2025 mass market SOS energy rates. Staff's buck sheet broadly stated, "Staff recommends the Commission accept for filing BGE’s proposed changes to its electric service tariff with an effective date of June 1, 2025," without any proviso from Staff noting that such recommendation was limited to the customary SOS updates, and that the recommendation was not addressing the atypical changes to the June through September 2025 mass market SOS energy rates due to the capacity costs

• At the May 28, 2025 PSC administrative meeting, the PSC considered BGE's April 30, 2025 tariff filing, with such tariff filing including in the tariffed rates the proposed changes to the June through September 2025 SOS energy rates designed to include the full increase in capacity costs in the summer 2025 rates. The PSC's action at the May 28, 2025 meeting was as follows:

-- The April 30, 2025 tariff filing was included as a consent item (#3)

-- The PSC's agenda described the item for consideration under Item #3 as follows: "Baltimore Gas and Electric Company filed, on April 30, 2025, its Revised Tariff pages. The Company Proposes Updates to its Residential, Type I and Type II Standard Offer Generation Market-Priced Service Rates, Administrative Charges and Retail Transmission Rates under Rider 1. Case No. 9056 and 9064 (ML# 318480) Additional information was filed on May 08, 2025. (ML# 318702)". Nothing herein indicated that the PSC was limiting its consideration to only the customary updates, and not all rates included in the tariff filing

-- When called at the meeting, Item #3 was described verbally at the meeting only as follows: "Item Number Three consists of updated tariff pages from Baltimore Gas & Electric Company."

-- When the item was called, the Office of People's Counsel raised the issue that the changes included in BGE's filed tariff under consideration in Item #3 do involve putting the full capacity costs through to rates starting June 1, 2025. No Commissioner responded specifically to OPC's observation that the tariff under consideration would, starting June 1, revise rates to fully reflect the higher capacity costs (a brief and general discussion, not relating to specific rates or cost recovery, or the tariff, about the flaws in the 2025/26 PJM capacity auction did result). Other than OPC raising the capacity cost issue, there was no discussion from Commissioners about the fact that the tariff filing before the PSC included rates that reflected fully including the capacity cost increase in rates effective June 1, 2025. No Commissioner suggested that, in approving BGE's tariff, the PSC intended to limit approval to the customary updates, and that the PSC was not ruling on the proposed changes to the June through September 2025 SOS mass market energy rates which were reflected in the tariff filing and, ostensibly, would be approved and effective if the filing as a whole was approved

-- In voting on and approving Item #3, Chair Frederick Hoover, moved: "I move we accept the tariff revisions for filing with an effective date of June 1, 2025." All present Commissioners voted "aye", and there was no discussion or statement that approval of BGE's April 30, 2025 tariff filing did not result in the approval of the June through September 2025 SOS mass market energy rates as reflected in the tariff pages. As noted above, the June through September 2025 SOS mass market energy rates included in the April 30, 2025 tariff filing, which was accepted, reflect the full inclusion of higher capacity costs in the June through September 2025 rates

• The PSC's May 28 vote was memorialized in a May 28, 2025 letter order which stated in full:

"The Commission has reviewed the revised tariff pages updating Standard Offer Services Rates, administrative charge and retail transmission rates for Residential, Type I and Type II customers filed on April 30, 2025 by Baltimore Gas and Electric Company. Additional information was filed on May 8, 2025. After considering this matter at the May 28, 2025 Administrative Meeting, the Commission accepted the tariff revisions for filing with an effective date of June 1, 2025."

Note that in accepting BGE's tariff "updating Standard Offer Services Rates," the letter order did not limit this approval to the customary Type II summer 2025 rates (which weren't previously set), nor did the PSC exclude from the "updating Standard Offer Services Rates" the changes to the June through September 2025 mass market SOS energy rates which were originally filed on March 14, 2025, but which were included as changes in the April 30, 2025 filing

As a result of the foregoing, it seemed that the PSC had approved the inclusion of the full capacity costs in the June through September 2025 SOS mass market energy rates, because the tariff filing approved by the PSC had included such revised rates reflecting the higher capacity costs, and the PSC had taken no action, or given any indication, that any action to the contrary would occur.

On May 28, 2025, after the PSC issued its letter order accepting BGE's April 30, 2025 SOS tariff filing, BGE withdrew its original March 14, 2025 tariff filing (that had first proposed the interim summer 2025 SOS rate adjustment due to higher capacity costs). Other than citing the May 28, 2025 letter order, BGE in the withdrawal letter did not explain its reason for the withdrawal, and ECM stresses that ECM does not know BGE's reason for the withdrawal. However, in what is solely ECM's own observation, it seems BGE withdrew the March 14, 2025 filing as moot (since the effect of the original filing, an adjustment to mass market summer 2025 SOS rates to fully reflect higher capacity costs, was achieved through the PSC's May 28 acceptance of BGE's April 30, 2025 tariff which includes higher capacity costs in the summer 2025 mass market SOS energy rates), rather than withdrawing the filing in expectation of a revised treatment of capacity costs (this observation is supported by the PSC's new, subsequent direction to BGE discussed below).

Specifically, in the May 28 withdrawal, BGE said, "In light of the Commission acceptance of Supplement 734 to P.S.C. Md. E-6 through a letter order issued on May 28, 2025 after consideration at its Administrative Meeting on the same day, the Company hereby withdraws Supplement 732 to P.S.C. Md. E-6 previously filed on March 14, 2025 (ML# 316774)."

On May 29, the PSC issued a letter order concerning the original March 14, 2025 filing concerning summer 2025 SOS rates and capacity costs

Notwithstanding the PSC's ostensible approval of revised summer 2025 SOS energy rates which fully reflected capacity costs, as a result of the PSC's acceptance of the April 30, 2025 tariff, the PSC in the May 29 letter order directed that the higher capacity costs for mass market customers shall be recovered over a six-month shoulder period, and not the summer 2025 SOS energy rates

The PSC said, "the Commission selects a six-month period during which the Company [BGE] will recover SOS-related capacity costs."

The PSC's letter order does not explicitly list the six-month period over which the higher capacity costs will be recovered, but rather refers to the prior bench data requests which asked about various periods.

Based on such, it is understood that the PSC is directing BGE to recover the "capacity cost" only in the 6 shoulder months in the fall of 2025 and spring of 2026 -- specifically, in the months of September, October, and November 2025, and March, April, and May 2026. The "capacity cost" will not be included in the summer 2025 SOS energy rates for mass market customers

Again, although not explicit, it is understood that the term "capacity cost" means only incremental capacity costs -- those resulting from a higher-than-proxy capacity price in the 2025/26 auction process -- which were not previously embedded in the summer 2025 SOS energy rates as previously set in December 2024 under the proxy price previously used

"While the Commission would not normally take such action, the Commission finds it in the interest of ratepayers to shift some recovery of supply costs to lower-cost months, in the interest of gradualism and avoidance of rate shock. The Commission finds that the six-month period benefits ratepayers by flattening costs, and avoids increasing bills during peak months," the PSC said

The letter order also stated, "The Commission notes that BGE proposed to withdraw its March 14, 2025 filing in light of the Commission’s decision on May 28, 2025, which approved various SOS rates inclusive of capacity costs. For the reasons stated above, the Commission denies the requested withdrawal and directs the Company to file clean tariff pages reflective of the capacity costs recovered over the six months as discussed with an effective date of June 1, 2025."

The PSC's bench data request envisioning the 6-month shoulder month cost recovery had stated, "Please provide a rate design whereby the capacity cost are recovered only in the 6 shoulder months in the fall of 2025 and spring of 2026. These should span September, October, and November 2025 and March, April, and May 2026".

Neither the data request nor the letter order were expressly explicitly that the future cost recovery would be solely through SOS rates, though the lack of any explicit suggestion that the recovery would be through another mechanism, not SOS, strongly suggests that the intent is that the recovery will only be through SOS rates

Note that, as a result of the selected months in which the PSC ordered the recovery of the higher capacity costs, BGE's SOS rate will change more frequently, including changes in normally fixed periods. Typically, the base SOS rate for mass market customers is fixed June through September, and October through May, with de minimis changes in the SOS Admin. Charge during such periods (which is part of the "Total [SOS] Rate"), along with de minimis changes in the Rider 8 reconciliation factor, which is bypassable but which is not included in the "Total [SOS] Rate"

Putting aside the thrice-annual Admin. charge changes, BGE's mass market SOS rates will now change, due to varying capacity cost treatment, as follows: on June 1, 2025 (customary delivery year start/seasonal change), on September 1, 2025 (add capacity), on October 1, 2025 (customary seasonal change), on December 1, 2025 (remove capacity), and on March 1, 2025 (add capacity).

As noted, these rate swings are expected to be materially greater than the customary admin. charge changes during the otherwise fixed rate SOS periods. Although the exact changes are not known until calculated and filed by BGE, as an example, had the full capacity cost been included in the June 2025 SOS residential (R) energy rate, the cost increase would have been about 1.6 cents per kWh higher than the originally filed SOS rate that had used a proxy price for capacity. While, with the capacity costs phased in over 6 months, the swings may be less than the 1.6 cents, the changes are still expected to be more material than a mill or less, which is the normal variance in the "fixed" SOS periods due to the admin. charge changes

BGE had previously noted in a PSC filing, concerning a 6-month recovery period for the higher capacity costs, as follows:

"[T]his scenario creates a timing mismatch for customers that move between retail supply and SOS as well as customers who move in and/or out of the BGE service territory during this time period."

"In addition, this scenario results in a distorted price comparison between SOS and retail suppliers, which is particularly impactful given the requirement enacted in Senate Bill 1 that retail suppliers cannot offer customers pricing more than the most recent 12- month average SOS rate."

With the PSC excluding the higher capacity costs from the summer mass market SOS rates, the SOS energy rates through Aug. 31, 2025 should be the same as filed in December 2024 (excluding changes to the admin. charge and transmission, which are separate from the "energy rate" component)

However, given the fluid nature of the situation, readers should view the December 2024 SOS energy rates as indicative, and await a formal filing from BGE to implement the PSC's order

For reference only, BGE's SOS energy rates for the summer 2025 period for mass market customers as filed and approved in December 2024 are at this link (note that the admin. charge and transmission charge are outdated in this linked filing)

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