On Monday the Public Service Commission (PSC) in Maryland finalized its proposed order for a modest rate increase for Southern Maryland Electric Cooperative (SMECO) customers. The good news for SMECO customers is that the decision does not increase rates nearly as much as the utility had originally requested.

aerial view of Chesapeake Beach, Maryland

In September 2015, SMECO had requested a revenue increase of a little over $19 million. If approved by the PSC, that increase would have raised an average residential customer’s bill by 4.45%. However, the most troubling part of the request was the way in which SMECO sought to raise those bills. SMECO proposed to increase the customer charge from $8.60 to $13.44 and decrease the energy charge. The customer charge is what customers are required to pay each month, regardless of how much energy they use. The energy charge is the price that customers pay for every kilowatt-hour they use, which means that customers who manage their energy use through conservation or solar power can see those efforts reflected in lower bills.

By shifting its cost recovery from energy charges to customer charges, SMECO customers would have to pay more money per month regardless of how much power they did or did not buy from the utility. Unfortunately, we’ve seen this type of request from utilities throughout the country that view customer generated solar power as a threat to the status quo. Many electric utilities want customers to pay more each month just for being a customer, and thereby send a price signal to customers that there is not much value in going solar or using less electricity.

The end result of increases to customer charges and decreases to energy charges is that low-usage customers—including low and moderate income customers—pay a larger electricity bill per month, while high usage customers—such as people with mansions—pay a smaller electricity bill per month. This sends the exact opposite of a good price signal to customers; customers who use less electricity should be rewarded for their efforts!

The Maryland, Delaware, and Virginia Solar Energy Industry Association (MDV-SEIA) intervened to oppose the SMECO proposal in the rate case with Vote Solar providing technical assistance. After several months and hundreds of pages of expert testimony from Vote Solar and others, the state (PSC staff and the Office of People’s Council) entered into a settlement agreement with SMECO.

The outcome is reasonable for ratepayers. The settlement allows SMECO to increase revenue by $17.3 million, but it only increases the customer charge by $0.90 per month. In addition, the customer charge cannot be increased for 2.5 years. The end result is that customers savings from energy efficiency and solar will be maintained. We look forward to further participation in Maryland, and helping to facilitate the proliferation of clean, renewable, and safe solar in the Chesapeake Bay State.