Staff, utilities and advocates debate design and funding of proposed Maryland limited‑income rate mechanism

Staff described a consensus-based design from the PC 59 work group for a limited-income mechanism that would deliver credits to OHEAP-eligible customers. The design ties benefits to OHEAP eligibility and to income tiers; the work group modeled a target energy burden of 6 percent and contemplated a funding mechanism that would collect costs through a small, fixed monthly surcharge assessed to non‑benefiting ratepayers. Parties agreed the utilities should be made whole; they disagreed on allocation and implementation details.

What the staff proposal says

Staff and the work group proposed that eligible customers — as identified by OHEAP — receive an income- and heating‑fuel‑sensitive benefit intended to reduce the household energy burden toward a 6% target. To simplify billing and implementation, the work group recommended benefits be calculated using average usage for each tier, producing a flat credit per tier so the “average” household in that tier receives the intended reduction. The mechanism would be reset annually to account for usage, enrollment and reconciliation; parties recommended a 9–12 month implementation window for utilities to prepare IT systems and tariffs.

Key contested choices

- Flat credit vs. percent-of-bill: Staff and several advocates warned that a percent-of-bill approach can create larger reconciliation volatility in extreme weather years, while utilities and some advocates argued a volumetric (percentage) discount ties the benefit to a household’s actual usage. SMECO and several parties favored a flat bill credit for simplicity and lower IT burden; Exelon/PHI said their IT estimate for implementing a percent-of-bill mechanism was comparable to a flat credit (PHI estimated ~$2.7M ±50% for its systems).

- Cost allocation: The Office of People’s Counsel recommended allocating 75% of program costs to commercial & industrial (C&I) classes and 25% to residential, arguing the approach mirrors Maryland’s electric universal service program and reduces regressivity. Staff and utility witnesses cautioned against a blanket 75/25 split for every utility: staff said outcomes and customer mixes differ across service territories (cooperatives and smaller utilities may face very different per‑customer burdens) and asked that the allocation be examined at the utility level. SMECO and other smaller utilities said residential customers would shoulder most of the burden if C&I bore more of the cost; SMECO recommended an allocation reflecting local customer mix and cost causation.

- Inclusion of supply and distribution: Parties largely agreed utilities should be made whole, but Columbia Gas objected to including supply (commodity) cost in the mechanism, saying supply is outside the utility’s control and would increase program cost volatility. Other utilities and staff said including supply provides a fuller measure of energy burden and is workable with reconciliation.

Costs, IT and implementation

Utilities presented implementation estimates: SMECO estimated a modest IT lift (roughly $50,000) to implement a flat credit; Columbia estimated system programming and implementation costs of about $1.76M and warned its small customer base (about 34,000 customers total, 3,200 OHEAP customers in the prior season) made a statewide program cost‑prohibitive for its ratepayers; PHI/Exelon estimated ~ $2.7M ±50% for implementation of their proposed mechanism (they said the IT cost is comparable for a flat or percent discount in their environment). Stakeholders proposed phasing technical details to allow a policy decision first and a second phase to resolve reconciliation, master-meter treatment, and marketing/outreach.

Outreach, eligibility and energy efficiency linkages

Advocates, DHCD and staff emphasized that many eligible households do not currently participate in OHEAP and urged aggressive outreach (community‑based organizations, 2‑1‑1 and similar networks) and direct referrals from OHEAP to the state’s EMPOWER low‑income weatherization program. DHCD said OHEAP‑approved applicants are referred to EMPOWER via an opt‑out process and that basic home audits are available to qualifying customers; advocates emphasized the split‑incentive problem in master‑metered multifamily housing and urged more building‑level measures to reduce usage and long‑term burden.

Next steps requested at the hearing

Commission staff asked the commission for guidance on non‑consensus items (flat credit vs. percent discount, treatment of supply costs, and the right approach to cost allocation). Several parties requested a phase‑2 working group to resolve IT, monthly reporting cadence and marketing. The commission asked utilities to file written follow‑up on specific implementation questions (data ingestion from OHEAP, coding constraints, timeline and precise IT cost estimates) and set a short timetable for those filings so the commission can provide further direction.

Why it matters

A commission decision will determine how the state spreads the cost of targeted bill relief and how quickly utilities can deliver credits to eligible households. Implementation design choices (flat credit vs. percent of bill, inclusion/exclusion of supply, allocation across customer classes) will determine program cost, reconciliation risk, and whether the benefit targets the lowest‑income households most effectively.

Provenance

Staff presentation and the work‑group report framed the mechanism and the design choices; utilities and advocacy witnesses supplied implementation costs, programmatic concerns, and alternatives. The record includes multiple filings and the work‑group report that led to the PC 59 recommendations.