May 9, 2006

Customers Begin to Feel BGE Pinch: On ‘Budget Billing,’ Some Households Experience 70% Rise

By Laura Smitherman, The Baltimore Sun

May 9--Carl Palmer has seen his Baltimore Gas and Electric Co. bill jump more than 50 percent recently, to $103 a month. Fearful of further increases, he has put in fluorescent lights to save energy and purchased a new microwave that uses fewer watts. His wife makes a point not to fall asleep with the TV on anymore, he said.

"I'm making out. I don't have to accept any charity yet, and I will be able to handle this increase if it doesn't get to be too big," said the Glen Arm retiree, 73. "I tell you, though, I feel sorry for some of these people. What can you do when you're on a fixed income?"

The Palmers are among thousands of customers on the utility's "budget billing" program - and the first group to feel the pinch of rate increases to be implemented for all customers July 1.

BGE started phasing in the higher rates in March for those on the budget plan, including households on low or fixed incomes. Some customers on the budget plan say their bills are double or triple what they were paying a few months ago.

Utility officials say the earlier increases will lessen the impact of this summer's 72 percent rise for electricity rates. But the move might have backfired as politicians, customers and community activists complain that the city's most vulnerable are also being the first to be hit with the higher bills. Now, with some residents struggling to pay the bills and carrying balances on their accounts, critics say the pinch appears to be more pronounced than anticipated.

'Four-digit bills' "We're seeing a lot of four-digit bills," said Tuere Williams, a community organizer with the Association of Community Organizations for Reform Now, or ACORN, which has been organizing protests against the BGE rate increase. "And all of these people showing up with these crazy bills are on budget billing."

Budget billing is designed to help customers, particularly retirees and other residents on tight budgets, by spreading out seasonal fluctuations in energy costs over a 12-month period. Instead of customers facing higher bills during the peak heating and cooling seasons, the utility estimates the coming year's annual bill and divides it evenly among 12 months.

About 300,000 customers use the voluntary program, nearly one-third of BGE's 1.1 million residential customers. While all of them have seen at least part of the impending rate increases reflected in their bills, about 50,000 saw the biggest increases because their bills for electricity and natural gas are calculated on an annual schedule that covers a longer time frame under the coming rate increases. Those bills climbed as much as 70 percent, said Wayne Harbaugh, BGE's manager for pricing and regulatory services.

Some of the billing increases can be attributed to higher-than-projected gas prices over the winter. BGE set each customer's budget billing amount before Hurricanes Rita and Katrina knocked out gas production in the Gulf Coast and sent prices soaring. The utility, which periodically adjusts each customer's bill under the plan during the year, wasn't able to account for the higher prices on bills until March.

In addition, other factors such as increased energy usage could cause a customer's bill under the plan to jump, Harbaugh said. He said he couldn't explain bills that have risen more than 70 percent without examining them.

"Every customer is going to be different," said Harbaugh, who said his bill under the budget billing plan went up 44 percent, or $90, a month. "There could be a lot of reasons a bill went up."

BGE, and its parent Constellation Energy Group Inc., are implementing electricity rate increases because regulatory rate caps are scheduled to be lifted this summer as part of the state plan to deregulate the industry. The new rates reflect years of rising fuel costs from which Maryland residents had been shielded.

Customers not on budget billing won't see the higher rates until July 1. They are expected to see a 72 percent increase to bring them to current market rates, or if they choose an alternate plan that would defer some of that increase over many months, the initial increase would be about 20 percent.

Those on budget billing haven't seen the full impact of the higher rates yet. They will in September, utility officials say, when the next adjustment goes through. If part of the increase had not been phased in now, Harbaugh said, customers on the budget plan could have seen rates jump around 90 percent.

'Well-intentioned' "It was all well-intentioned," said Robert L. Gould, spokesman for Constellation Energy, BGE's parent company. "We're simply trying to benefit the customer through this program. I think what really confuses is the politics around all of this and people taking to the bully pulpit."

Baltimore Mayor Martin O'Malley has asked the Public Service Commission, the state utility regulator, to intervene and force BGE to refund money he says was illegally billed. The Maryland Office of the People's Counsel, an independent state agency that acts as an advocate for residential utility customers, also asked the commission to prevent the utility from collecting early increases from budget-billing customers.

The commission, in a March order, determined that using budget billing to mitigate potential rising utility costs doesn't violate the law. The commission has sought public comment on other issues, including whether budget billing practices should be changed to help poor and elderly customers.

Gov. Robert L. Ehrlich Jr. asked the utility to reach out to customers and work to alleviate some of the costs until the rate increases are implemented, spokesman Henry Fawell said. BGE officials said they have adjusted billing amounts when asked. The utility used an automated phone system to urge customers to call if they wanted an adjustment, and BGE received thousands of calls.

City Solicitor Ralph S. Tyler said not enough has been done. Customers have come to City Hall with bills that have increased "very drastically," he said.

"I tell them we've had a total breakdown in the regulatory machinery in this state and that their fear and their anger are well-placed," Tyler said.

When the meter man comes by the East Baltimore home of Jeanette and Preston Epperson, they find whatever spare cash they can to pay him. On their most recent bill, with thousands of dollars in past-due amounts and last month's charges increased by budget billing, the total came to $6,386.84.

That's not a misprint.

The retirees say they're trying to pay it off, but the monthly charges have escalated to about $450 recently, nearly half their monthly income of $800 in Social Security payments, they said.

"It's just too much," said Jeanette, 64.


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