A Controversial Ruling Puts Maryland’s Utility Companies In Charge Of Billions in Federal Funds

A recent decision by Maryland’s Public Service Commission (PSC) allowing electric utility companies to access millions of dollars in federal grants without public oversight or input violates the Commission’s regulatory responsibilities, the state agency representing ratepayers said this week in its latest filing. 

The agency added that the decision also could divert funding away from the state’s policy goals, including reducing greenhouse gas emissions through clean energy projects and achieving climate resilience.

The controversy has been brewing since May 5, when the Office of People’s Counsel (OPC), an independent state agency representing Maryland’s utilities customers, filed a petition with the Public Service Commission, which oversees and regulates Maryland utilities.

In the petition, the OPC asked the Commission to direct electric utilities in the state to disclose the plans and projects they planned to submit for grants under the federal Infrastructure Investment and Jobs Act (IIJA). The petition said it is in the public interest that electric companies provide reports to the Commission on any funding they have applied for and explain how they intend to use the funds in relation to the state’s policy goals, as well as any conditions that must be met to obtain the grant. 

Signed into law by the Biden administration on Nov. 15 last year, the Act provided $42.8 billion in federal funds to, among other things, support the development of clean energy systems, over $50 billion for improving grid resilience and another $6.5 billion for energy efficiency projects. The funds are being allocated to state and local governments through various grants.

The infrastructure act “makes substantial grant funding available to the State’s utilities to support system resiliency, promote innovative technologies, and help the State meet its greenhouse gas reduction goals,” said People’s Counsel David Lapp in a statement. 

He added, “Public input and transparency are critical for making sure Maryland utilities use the IIJA’s federal grant opportunities to further the public interest.” Such a proceeding will give the public and state policymakers access to information and an opportunity for input, Lapp said.

On Friday, Adina Kauzlarich, communications manager for Pepco Holdings, released a statement on behalf of Pepco, BGE and Delmarva Power, that said all three Exelon-owned utilities are “taking the necessary steps now to mitigate the effects of climate change as indicated by our own Path to Clean of net zero carbon emissions.”

The federal infrastructure bill, the statement said, “will provide the opportunity for utilities, like BGE, Delmarva Power and Pepco, to request funding that would support a broad array of projects and initiatives that will help mitigate the impacts of climate change and help to further advance clean, safe, reliable and affordable energy service for our customers and communities. We look forward to the opportunity to potentially leverage IIJA funding to help further support the clean energy and climate goals of the communities we serve.”

Earlier, in response to OPC’s petition, five utility companies asked the commission to deny OPC’s request to open the grants process to public input. 

The companies argued that allowing public comments could cause “undue delay and jeopardize their chances to receive awards in what is a highly competitive process.” They proposed instead to provide periodic reports on grant application opportunities and progress. 

In its June 29 ruling on the matter, the Public Service Commission denied OPC’s petition to allow public input and oversight of the federal funds available to the utilities under IIJA, and said the utilities’ proposal to submit periodic reports to the Commission was sufficient. The ruling further said that interested parties could submit their comments on programs and opportunities available to the utilities under IIJA, but did not require the companies to accommodate those suggestions in any way. 

Tori Leonard, the PSC’s communications director, said in a statement that the Commission “recognizes the competitive and time-sensitive nature of the IIJA application process and that disclosure of certain information and undue delays could disadvantage utilities—it is in the best interest of Maryland’s utility customers not to leave this money on the table.”

She added that the Commission encourages the utilities to review and fully consider comments filed in the docket when pursuing IIJA funding, and found that OPC’s recommendation to explicitly solicit written comments  “for actions the Commission should take to facilitate the application, receipt, and deployment of available federal funds” is beyond the scope of the General Assembly’s directive in the Climate Solutions Now Act to “provide assistance and support to electric companies applying for federal funds.”

The PSC’s ruling set off widespread criticism from environmental groups, citizens organizations and state delegates, asking the Public Service Commission to review its decision. 

“The commission cannot leave the decision-making regarding this once-in-a-generation funding opportunity solely to the utilities,” wrote the chairmen of the state legislature’s Economic Matters Committee and Appropriations Committee in a June 29 letter.

The committee chairmen recommended that the Commission consult “low-income advocates, distributed energy suppliers, environmental advocates, state and local agencies, and financing experts” to craft proposals that meet the needs of Maryland’s residents. “The utilities’ proposal to provide after-the-fact reports is fundamentally flawed,” the legislators wrote, and “provides no assurances that the proposals will be designed in a manner that benefits all Marylanders and achieves the State’s policy goals.”

Separately, a group of 14 nonprofit organizations, known as the Climate Partners, filed a joint letter in support of the OPC’s petition, calling the Commission’s ruling “disconcerting at best” and saying it was issued without “due process or consideration of the myriad of stakeholder voices.” 

The organizations said in the letter that IIJA grants must align with Maryland’s climate objectives under the Climate Solutions Now Act, which seeks to reduce statewide greenhouse gas emissions by 60 percent from 2006 levels by 2031 and achieve net-zero statewide greenhouse gas emission by 2045. 

Recently passed by the Maryland General Assembly, the Climate Solutions Now Act requires the Public Service Commission to engage with “utility providers to apply for and access” federal funds in coordination with the state’s Department of Environment and Energy Administration. 

“[I]t is incumbent upon this Commission to ensure that this funding opportunity addresses Maryland’s goals rather than solely addressing the priorities of the utilities,” the letter added. 

On July 27, the Office of People’s Counsel filed a motion for rehearing asking the Commission to reverse its decision. OPC’s motion said the Commission’s June ruling puts the utilities in charge of decisions related to IIJA funding, which undermines OPC’s and other stakeholders’ ability to advocate for better use of federal funds and provide public oversight. 

In a statement, OPC said, “The PSC will fail to meet its responsibility to regulate and supervise the utilities” unless it reverses its June 29 decision and makes sure the state and its utility customers get maximum benefit from the billions of dollars under the federal infrastructure act.

“The Commission’s job is to regulate and supervise the public utilities to make sure their IIJA grant applications are in the public interest and consistent with Maryland’s Climate Solutions Now Act,” said OPC’s David Lapp. “The June order abdicates that responsibility by giving the utilities complete discretion over what IIJA funding to apply for.”

“The Act requires the utilities to report their IIJA funding applications, their purposes, and any conditions,” Lapp said, adding that it further authorizes the commission to “adopt regulations or issue orders” requiring electric utilities to apply for funding “in a timely manner.”

He cautioned that in the absence of any guidelines from the utilities commission on what constitutes a prudent use of federal funds, utilities are encouraged to use public dollars for projects that increase costs for ratepayers. 

“Federal grant money should reduce costs for utility customers, not increase costs,” he said. “Most of Maryland’s utilities are controlled by corporate holding companies with little connection to Maryland and with obligations to shareholders, not to Maryland customers or to Maryland’s policy goals. Without effective regulation, their plans for federal grant money will prioritize those private obligations over the public interest.”

Kim Coble, executive director of the Maryland League of Conservation Voters, said, “The Public Service Commission has the responsibility to ensure that the public’s best interests are taken care of. And for them, and the utilities, to oppose more transparency, more input, more insight from the wider stakeholders on how federal grants can be accessed, used and brought to bear that improves life for Marylanders is really disappointing.” 

Coble said that an unprecedented amount of federal funds is available for the next five years under IIJA, and the impact of these investments will be felt for decades. “This once-in-a-lifetime-opportunity should be used to make real progress on climate change,” she said, adding, “That is why it is all the more important to open up the conversation to maximize the potential for the right kind of investments of public money.”