BGE Says Customers Receiving 2008 SOS Mitigation Should Fund Refund, Not Explicit as to Recovery Under SOS or Distribution Rates

Baltimore Gas and Electric has proposed that the "new" Type II G/GS customers who received SOS rate mitigation in 2008 should fund any refund to other non-residential customers who paid for the mitigation, but was not explicit on whether such new Type II customers should fund the refund through generation or distribution rates.

As only noted by Matters (see 6/23), RG Steel Sparrows Point, LLC and the Maryland Energy Group have petitioned the Maryland PSC to direct BGE to issue refunds to customers who paid higher distribution rates in 2008 in order to mitigate the Type II generation rates of certain commercial customers who were being transitioned to Type II SOS service from Type I service, as the cutoff for Type I service was lowered.

In May 2008, the PSC capped the generation rate increase for customers transitioning to Type II SOS from Type I SOS at 15%, while financing the mitigation through a distribution surcharge on all non-residential customers. At BGE, the nonbypassable surcharge was $.00137 per kWh, which collected about $7.2 million from customers from June through August 2008. A court later found this mitigation to be unlawful, and the 2008 PSC order has been vacated.

BGE believes that any refund should be funded by the G/GS Customers who received the benefit of the subsidy for the period June 1 through August 31, 2008. "In effect, the G/GS Customers received a loan from all (then) non-residential customers," BGE said.

"BGE would propose that 1) BGE charge the New Type II customers (the G/GS Customers affected by the change in rate class) the $7 million that those customers should have been charged but for the Commission's May 16, 2008 Letter Order and 2) BGE would issue a distribution rate credit to all non-residential customers a commensurate $7 million amount," BGE said.

However, while BGE said that the mitigated G/GS customers should pay the $7 million those customers should have been charged but for the May 2008 order, BGE was not explicit that the $7 million should be collected through SOS rates, as it would have been had the mitigation not been ordered (unlike BGE's clear statement that refunds should be paid to all distribution customers who funded the mitigation).

BGE proposed that the PSC hold further proceedings, "to more appropriately address the complex issues involved in this matter."

Specifically, BGE said that the Commission must identify which customers benefited from the mitigation, and which are owed refunds. "The universe of non-residential customers is obviously not the same as it was during the June 1 – August 31, 2008 rate-effective period, and it may be difficult to track which G/GS Customers benefitted. The burden should not fall on BGE to determine which customers benefitted from, or were harmed by, the Mitigation Charge," BGE said.

"Once the Commission has identified the G/GS Customers as the appropriate party from which the refund is to be provided, the next step is to determine how to collect the amounts to be refunded from those customers," BGE added.

BGE suggested that the $7 million charge be collected over three months, the original time period over which mitigation was applied, with refunds paid over the same period. BGE would be amenable to extending the recovery period from the affected G/GS Customers to six months to a year, provided that BGE be able to issue the credit over a symmetrical period of time.

BGE also said that, to the extent the PSC orders interest to be paid on the refunds, such interest should be funded by the customers benefiting from the mitigation.