MARYLAND-Â Maryland's Public Service Commission has ended a pilot program that let major utilities use multi-year rate plans, citing concerns about customer benefits, regulatory complexity, and how the commission evaluated utility spending.
The commission issued an order ending the multi-year ratemaking pilot after reviewing how the approach worked for participating utilities. The commission said the program largely failed to achieve its intended goals and that utilities did not sufficiently demonstrate customer benefits tied to infrastructure spending.
The Maryland Office of People's Counsel, which represents utility customers, supported the decision.
People's Counsel David S. Lapp said the multi-year rate plans made utility rate cases more complicated and increased the administrative work involved in reviewing them.
Under a multi-year rate plan, utility rates are established using forecasts of future projects and spending rather than relying solely on investments that have already been made and reviewed for their reasonableness.
The commission found that faster recovery of utility costs provided a financial benefit to utilities, but said it was unclear how that translated into a financial benefit for customers.
The commission also found that the rate plans had not advanced key Maryland energy policy goals and created additional complexity compared with traditional rate-setting proceedings.
Another concern involved customer rate predictability. While the plans provided utilities with a more consistent revenue stream, the commission found that customer rates were not similarly predictable.
The pilot began with Baltimore Gas and Electric and was later expanded to include Potomac Electric Power Company and Delmarva Power & Light Company.
BGE and Pepco each sought new three-year multi-year rate plans in 2023. The Office of People's Counsel raised concerns about continuing the approach during those proceedings.
The commission began a formal review of the pilot in 2024. That process included stakeholder comments and a hearing examining whether multi-year ratemaking served the public interest.
The commission's decision ends the current pilot but does not rule out future changes to how utility rates are established.
A provision of Maryland's Utility RELIEF Act requires the commission to submit a report by April 1, 2027, examining whether forecast-based ratemaking, traditional ratemaking or a combination of the two would best protect ratepayers.
A separate commission work group is expected to make its first recommendations by Feb. 1, 2027. A second phase will examine possible changes to create a revised forward-looking multi-year rate framework, with a report due June 30, 2027.
