Electricity Sales in Maryland

Most Maryland residents can obtain electricity from competitive power suppliers at rates that reflect market-based costs. The local utilities are required to offer fixedprice generation service – known as Standard Offer Service (SOS) – while the competitive residential supply market matures. This backstop supply arrangement provides for customers that do not wish to shop, cannot obtain competitive supply, or lose their competitive supplier due to default.

For residential customers, SOS will continue into 2008 in the Delmarva and PEPCO distribution areas, through 2010 for customers in the BGE distribution area, and through 2012 for customers in the Allegheny distribution area.

The costs of electric service are divided into separate generation, transmission, and distribution components, with generation being the largest component of the three. In 2005, generation accounted for 58 percent of residential electricity costs, 73 percent of commercial costs, and 82 percent of industrial costs. Retail customers can select a power supplier based on product (e.g., renewable or green power) or price, and generation prices are set by the competitive market. Distribution and transmission prices, on the other hand, continue to be regulated.

In 2005, the average retail electricity price in Maryland was 7.8 cents per kWh, and Maryland’s electricity users consumed approximately 68.4 billion kWh of electricity.

The Maryland General Assembly passed Senate Bill 1 in June 2006. Key provisions of the legislation include:

• The Maryland PSC is to hold formal hearings on the status of restructuring;
  
• The PSC is authorized to establish rate stabilization mechanisms to mitigate the impacts of potential future price increases;
  
• The PSC is to conduct hearings if a future rate increase will result in rates rising 20 percent (or more) compared to a previous year;
  
• The PSC may allow or require an electric utility to build/acquire/lease and operate certain generating facilities with rates set to recover costs if such an arrangement is found to be to the benefit of ratepayers.

Retail Electric Sales by Customer Group (2005)

Residential Electricity Expenditures as a Percentage of Average Household Income in Maryland

The typical Maryland household spent approximately $1,100 in 2005, or roughly 1.3 percent of its average household income, on electricity supplies. Due to rate caps, consumers spent a smaller proportion of their income on electricity in 2005 than the 1990 to 1999 historical average of 1.6 percent. With the removal of rate caps, a majority of Maryland households will see rate increases in the summer of 2006. If households do not respond to higher prices by conserving energy, consumers may spend 2.0 percent or more of their household income on electricity.

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