Gas spending update and long-term gas system planning petition

Gas spending update and long-term gas system planning petition

OPC released an updated gas utility spending report* that provides critical information on current and future business-as-usual spending to maintain and expand the gas delivery system—the pipes, concrete, computers, and other infrastructure that make up the local distribution system. The updated report provides important information about future gas bills in the absence of reversals in current practices. The new data show significantly increased spending plans based on utility proposals pending before the Public Service Commission. The data relied on is publicly available information from utility reports and regulatory filings. While actual utility rates depend on many decisions yet to be made, the report provides numerous data and general projections that reflect business continuing as usual, without significant deviations in State policy, customer behavior, or utility practices.

The gas utility bills that Marylanders pay include two main types of costs: gas delivery or “distribution” costs, which pay for utility infrastructure and operations, and commodity or “supply” costs, which reimburse utilities (or third-party suppliers) for the cost of the gas they deliver. 

Historically, Maryland gas utility customers have paid more for gas supply than for gas delivery. But starting around 2009, large new supplies of “fracked” gas drove gas commodity prices down, and in 2013 Maryland enacted the Strategic Infrastructure Development and Enhancement (“STRIDE”) Act, which gave gas utilities new financial incentives to replace aging gas infrastructure. STRIDE sparked a utility spending spree that has made gas delivery costs more expensive than supply costs—even as commodity costs have begun to rise with increased exports of liquefied natural gas (“LNG”) to international markets. For example, here are BGE’s delivery and commodity costs since 2006:

OPC is concerned about the ongoing increases in infrastructure spending by Maryland’s gas utilities for two reasons. First, they are rapidly driving up customer bills. Second, the utilities are rebuilding their gas infrastructure for a long-term future, even as Maryland’s greenhouse gas reduction targets require widespread building electrification—and a dramatic reduction in the use of gas.

OPC studied gas utility spending in a 2022 report and released an updated gas utility spending report* in November, 2023. This update provides critical information on current and future business-as-usual spending to maintain and expand the gas delivery system—the pipes, concrete, computers, and other infrastructure that make up the local distribution system.  It also provides important projections about future gas bills in the absence of reversals in current practices. The new data show significantly increased spending plans based on utility proposals pending before the Public Service Commission. 

The results of the 2022 report led OPC to petition the Public Service Commission in February, 2023 to institute a process for long-term gas system planning. The Commission subsequently opened a docket (Case No. 9707) to request public comments on the petition and is expected to make a decision on whether to grant the petition at some point in 2024.