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BG&E Rate Hike Solution Reached

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Final resolution: On July 1st, the energy rates will only increase 15% (instead of 72% to market rates) for the remainder of the year and all the members of the Public Service Commission will be fired. Also, Maryland residents will be paying full market rates starting January 1st, 2008 (instead of June 30th, 2008) and the bill that passes has enough votes to override an Erhlich veto.

The plan passed by the state General Assembly for BGE area customers calls for a two-year phase-in of the rate increase, with an initial 15 percent rise in rates next month paired with a 10-year customer repayment plan. There is no opt-out provision for deferring the increase until next June. (news link)

This plan still is a deferment plan because you still need to pay a net charge of $2.19 on your bill until next June (when you are able to opt out) but it’s in your interests to do so. If you had the option to choose, would you choose to take the 72% rate hike now or take only 15% put pay an extra $2.19? You certainly would take the 15%+$2.19 unless your electricity bill was four dollars (that’s about the breakeven point).

Assuming no increase in the $2.19 monthly charge, customers would pay a total of $262.80 in fees over 10 years for the deferral. But they would receive an average of $47 credited to their bills for the next 11 months, worth about $517. Constellation would absorb the difference.

Ultimately, I think the best part of this deal is the firing of all those goons in the PSC. This situation shouldn’t have lasted until the eleventh hour, after over 10% of the customers of BG&E had opted out of a crappy program that only hamstrung low income families into owing more, and hopefully whoever gets on the PSC will handle situations like this better.

via Baltimore Sun.

{ 8 comments, please add your thoughts now! }

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8 Responses to “BG&E Rate Hike Solution Reached”

  1. mapgirl says:

    Oh dear. This seems very confusing. I guess it’s good that rates are deferring because it will allow people more time to save up for the rate hikes. However, with your cost analysis, it looks like in the end, taking the rate hike now ends up costing less over time.

  2. Miller says:

    Does the full 72% rate in January? That’s how I am interrupting “Maryland residents will be paying full market rates starting January 1st, 2008.”

  3. jim says:

    January 2008 is a year and a half away.

  4. Kim L. says:

    They were awfully quick to raise my budget bill amount ( a few months ago) to cover te July increase … I wonder how long it will take them now to lower it!

  5. risk says:

    jim, have you signed up for the washingtond GE service to get the 10% off discount? I planned to and was about to act since time is running out…

    now this final plan is very tricky in that it does not address the enter and exist problem….

    say I switch to wash GE, i.e., no defer in rate increase, one year later, I want to go back to BGE and I will be stuck with the repayment charge. I will then pay for nothing. of course that’s not something I want, which means, I have to stick with wash GE for almost 10 more years?

    or if wash GE’s promotion offer does not expire for another 6 months, say I switch to wash GE when the market rate kicks in for BGE. I get the deferral (not paying market rate for the 6 months), no repay (switch out =?= move out) for the years I’m in wash GE and discount?
    mmmmm, that sounds too good to be true

    what’s your take

  6. jim says:

    risk – I did sign up to the WGE plan and I assume I’m still getting 10% the new 15% bumped up rate, I wonder if I’ll have to pay the finance fee.

    BG&E market rates won’t kick in until Jan 2008, in six months it’ll only be Jan 2007…as for waiting, I don’t know when this offer will expire so that’s a decision you’ll have to make. Perhaps they will offer this same deal in six months or even a year later? Either way I’m already signed up (when I thought July 1st would mean 72% hikes) so I’m saved this decision.

    If I were in your shoes, I’d take 10% off the 15% now, a bird in the hand is worth two in the bush. I’d also turn up the thermostat and go easy on the AC. 🙂

  7. risk says:

    jim, look like we interpret this thing a little different.

    I think if you go with WGE, you get 10% off from the market price (aka 72% hike price, so you will shed out 172%*90% = 154.8%), not the new bump up rate 15% (you imply 115% *90% = 1.035%), which means, to get 10% off, you have no deferrals between now and the market rate kicks in. In any case you want to switch back to BGE after the market rate kicks in, you get stuck with repayment of the deferrals that you never enjoy.

  8. risk says:

    jim, I just called WGE, the CSR told me the 10% off is off from the market price (aka 72% hike price)… She also told me that given the new solution, WGE could let the customer switch back to BGE, aka break the one-year contract, without penalty. I probably will check with WGE late 2008 🙂

    call WGE for further confirmation

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