Maryland Regulator Establishes Pilot Program to Implement Multi-Year Utility Rate Plans

The Maryland Public Service Commission approved a process allowing an electric or natural gas utility to propose a multi-year rate plan, an alternative rate-setting process that would extend utilities’ approved rates for up to three years, according to a Feb. 4 news release. The order establishes a framework for the first utility that requests for a multi-year plan, serving as the test case of the pilot process. The agency found that multi-year rate plans can provide several benefits including a shorter cost recovery period, more predictable revenue for utilities, increased bill certainty for customers, and lower administrative burden by staggering filings over multiple years.

The agency opened a proceeding in February to examine alternative forms of ratemaking in the light of economic changes, state policy goals, and grid modernization efforts that have impacted utility operations. Until now, the commission has largely utilized a traditional form of ratemaking that considers a past 12-month period as the basis for electric and gas utilities to recover the cost of providing service to customers. Multi-year plans can combine the stability of traditional ratemaking while allowing adjustments that better reflect the changing energy market. The agency said that utilities may also elect to continue to file traditional rate cases instead of a multi-year rate case.

In August, the commission issued a decision to convene a working group tasked with developing a procedure for implementing a multi-year rate plan and explore ways to incorporate performance-based measures into a multi-year plan by identifying specific goals and outcomes. These could include integrating more renewable resources and energy efficiency, encouraging peak demand reductions, facilitating energy storage, supporting grid modernization, and other state policy goals.

The commission is evaluating the use of performance-based metrics in utility rate case proceedings. A stakeholder workgroup is scheduled to provide a report to the commission on performance-based metrics by April 1, 2020.