Power Generation, Transmission, and Use

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3.2.2 Retail Electric Billing

Customers are billed for each of the three separate functions—generation, transmission, and distribution—although most customers receive just one consolidated electric bill. The PSC sets distribution rates through rate case proceedings. Generation rates are based on either SOS rates or a customers’ contracted rate with a competitive supplier. Transmission rates are set by the FERC and administered by PJM. The local distribution utility is still responsible for directly billing customers with competitive generation and transmission components as direct pass-through components.

Also included in rates are several components referred to as “riders” which are used to recover costs for specific purposes or initiatives, such as energy efficiency costs under EmPOWER Maryland. These riders do not always appear on bills as separate line items but are sometimes rolled into the electric rate or charges. Riders are used to account for costs that are typically variable and can be adjusted periodically (typically quarterly, semiannually, or annually) through proceedings that are less intensive than a full rate case. Figure 3-3 shows a residential BGE bill with some details on billing components.

Figure 3-3 BGE Bill Detail Example

Detailed bill from BGE with meter date, supply, delivery service, taxes and surchagres listed

The BGE customer profiled in Figure 3-3 is on Rate Schedule R, the standard residential service schedule. In this particular month, the customer used 307 kWh of energy and was charged a total of $50.82. The BGE electric supply rate during this billing period was $0.09468 per kWh. The electric supply rate consists of the SOS energy and capacity charges, a PJM transmission charge, and applicable taxes. The largest component of the delivery service charges is BGE’s distribution charge (shown as $11.04 on this sample bill) as approved by the PSC. Delivery charges also include the fixed monthly charge and riders that compensate BGE for the cost of EmPOWER Maryland programs; a Rate Stabilization Plan that insulates BGE from either revenue shortfalls or excess revenue collections only to factors such as weather conditions; miscellaneous credits; and an Electric Reliability Initiative Surcharge used to provide funds to enhance BGE’s electric distribution system. Other elements in the bill include a universal and environmental surcharge designed to pay for certain State programs, and a local franchise tax.

Click to OpenPaying for Power during Storm Outages – Bill Stabilization AdjustmentThe largest component on the bill is the electric supply charge. For BGE, the winter 2016 SOS generation component of the supply charge was $0.08469 per kWh (this does not include taxes, fees, and PJM transmission charges that are also rolled into the total electricity supply charge). Therefore, the electric generation component makes up about $25.97 of this customer’s entire bill, or 51 percent. Distribution charges comprise about 22 percent, while transmission charges only amount to about 6 percent of the total charges. The rest of the charges consist of the customer charge, riders, surcharges, and taxes (about 21 percent). As noted earlier, the utilities contract for energy supply in the wholesale market and, therefore, the electric generation price of $0.08469 per kWh is reflective of the price of energy in the PJM wholesale energy markets at the time the contracts were signed, and includes various mark-ups for the companies that provide the firm energy contracts for two years. For customers who signed with competitive suppliers, the electric supply component would be the energy charge from their supplier, which is collected by BGE and then passed through to the competitive supplier.

Figure 3-4 profiles a residential Pepco customer with a consumption pattern slightly higher than that of the aforementioned BGE customer. Note that Pepco’s Residential Service rate is distinct from BGE’s residential Rate Schedule R, although the rates and charges are similar. The Pepco bill example shows how PJM transmission charges and taxes are rolled into the total electricity supply charge, which is the largest component of the bill.

Figure 3-4 Pepco Bill Detail Example


Paying for Power during Storm Outages

Image of tree fallen on power linesMaryland can experience severe storms that result in power outages for electricity customers.  Power outages are caused by storm-related damage to transmission or distribution infrastructure, often from downed trees or falling branches.

During a power outage, a customer is not using electricity and, therefore, the customer might expect total electricity costs to be lower. However, the Bill Stabilization Adjustment (BSA) mechanism, approved by the PSC in 2007, removes the link between electricity use and utility revenue.  The BSA is an adjustment that will lower rates if a utility is receiving more revenue than the PSC has approved, and will increase rates if the utility is receiving less revenue than the PSC has approved. Prior to the BSA, the traditional rate structure created a disincentive for the utility to encourage customers to conserve energy because that would reduce revenue for the utility.  The BSA was implemented to remove this disincentive. Previously, the more electricity customers used, the more revenue a utility received, but through the BSA, the level of utility revenue is independent of the level of electricity consumption.

An unintended consequence of the BSA was that it also removes a utility’s incentive to restore power quickly after an outage. In January 2012, the PSC issued an order to prevent utilities from using the BSA beginning 24 hours after the commencement of a major storm and continuing until all storm-related sustained interruptions are restored.