Utility giant's 'keep the lights on' pitch masks a guaranteed 10.4% profit in Maryland

The regional utility BGE is seeking a rate hike that asks for a guaranteed profit margin of 10.4%. One expert suspicious of the request argued that it was a ploy to guarantee investors a high return at a time when many Americans are happy to receive 5%. 

Baltimore Gas and Electric says the proposal is necessary for reliable service. Critics note people across the region are paying higher utility bills.

Here's what to know

Former state Sen. Paul Pinsky, who directed the Maryland Energy Administration from 2023-25, wrote for Maryland Matters that BGE asked regulators to treat investor rewards as though they were part of the company's cost of doing business.

In seeking the guaranteed return for 2027, BGE called the increase "the bare minimum to keep the lights on."

Pinsky stressed that BGE is the region's only gas and electric provider and operates as a regulated utility. Because rates already allow the company to recover the cost of providing service, he argued, profit is a separate question from maintaining the grid or keeping electricity flowing.

The Maryland Public Service Commission has approved annual returns of 9.3% to 9.7% for the last decade, he said.

Critics say the justifications for those profit margins are unconvincing at a time when many customers are struggling with rising bills. Pinsky said regulators were relying on past practice and returns in neighboring states.

More background

Because customers cannot choose another provider, the return that regulators authorize directly affects how much money households must send each month to the utility.

Pinsky contrasted the situations of residents and shareholders, noting the former are not assured gains on their investments, if they have any at all, but that investors in the regulated utility can receive returns built into the rates people pay.

For many families, higher energy bills can strain already tight budgets for food, housing, medicine, and transportation. When more of that money goes toward guaranteed shareholder returns, communities are left with less room to breathe.

BGE's 10.4% request could be a negotiating tactic, Pinsky said, set so that a figure such as 9.4% might appear reasonable.

What can be done?

The authority rests with the PSC, which sets utility rates and decides the level of return BGE is permitted to collect. If regulators determine the request is too high, they can reject it and approve a lower figure.

Because BGE is owned by Exelon and operates without competition in the Baltimore area, Pinsky noted, oversight is one of the few mechanisms available to protect residents from rate increases that exceed the cost of providing service.

Public scrutiny from ratepayers, advocates, officials, and legislators can pressure regulators to justify each increase and ensure affordability is treated as a public priority.

Get TCD's free newsletters for easy tips, smart advice, and a chance to earn $5,000 toward home upgrades. To see more stories like this one, change your Google preferences here.