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Climate Policy for Maryland’s Gas Utilities: Financial Implications

This OPC report, prepared by the consulting firm Synapse Energy Economics, considers the financial impacts on gas utilities and customers of a gradual shift toward high levels of electrification. Customers already are switching to electricity from gas but the trend will accelerate as Maryland implements its greenhouse gas reduction goals. The report models the progress of Maryland’s electrification and projects greenhouse gas emissions and trends in gas consumption, space heating type and equipment sales. It then uses the projections to analyze the financial implications of Maryland’s climate goals for gas utilities in the State through 2050.

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Petition on long-term gas planning and immediate priority actions

In February, the Office of People's Counsel asked the Maryland Public Service Commission to initiate a proceeding on the planning, practices, and operations of the gas companies. OPC’s request asks the Commission to initiate a two-track proceeding. One track would cover priority actions that the Commission should take in the near term to align current gas operations with the consensus understanding that gas sales will decrease due to technology and State climate policy. The second track would cover long-term system planning, including the future role of gas utilities, the mitigation of potential stranded costs, and the maintenance of reliability and safety as utility revenues decline. OPC’s requests point out that the gas utility planning has not changed even though electric technologies—like electric heat pumps—are outperforming gas technologies and the State’s climate goals require the State to move off of fossil fuels. A Commission proceeding is necessary to ensure gas utility planning and practices are consistent with the public interest, Maryland climate policy, and the statutory requirement that rates utilities charge customers are just and reasonable.

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Pay Close Attention to Your Natural Gas Bill and Your Usage This Winter

This winter, expect to see much higher natural gas prices in Maryland and across the nation, relative to prior recent winter periods. The current rates for the “commodity” portion of the bill—the price of the gas itself, excluding the utility’s cost for delivery—were almost twice as high as they were last winter and almost three times what they were the winter before that. These rates change from month to month, but they will probably stay high, and you should be prepared for very high heating bills this winter.

The Public Service Commission regulates how the utilities buy natural gas and the cost of gas delivery, but it does not regulate wholesale natural gas prices. The utilities pass through to us in our bills the wholesale gas commodity cost. While gas delivery rates generally are increasing as well, commodity prices, not delivery rates, are the primary reason for the recent and projected increases in natural gas prices.

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