The Perfect Storm Increasing Energy Bills
by Jamie DeMarco
I really appreciate this article. The original link: https://demarcoadvocacy.substack.com/p/the-perfect-storm-increasing-energy and the author agreed me to share here.
There truly is a perfect storm causing energy bills to increase so much. Broadly speaking, there are three main contributors to this phenomenon and we will go through each of them one by one.
The first reason bills are so high is that distribution costs have been steadily increasing across most of the state for more than a decade. As a reminder, the distribution cost in your energy bill goes to the wires and pipes that bring the electricity or the gas through your neighborhood and to your home. I’ve shared these graphs before but they are worth emphasizing as foundational knowledge about why energy prices are so high. These utility graphs all come from the Office of the People’s Counsel.
The above graph shows BGE’s cost for gas distribution plotted against inflation over time. It is easy to see that energy gas distribution costs started going up much faster than inflation as soon as Exelon acquired BGE, and that was back in 2012, so this is not a new phenomenon, it has been going on for more than a decade. So why are we feeling it so acutely now?
The next graph shows how BGE gas distribution and supply costs have changed over time.
As you can see again, the gas distribution costs starting going up starting in 2012, but this graph shows that this change was being masked because over that same time period the cost of gas was steadily going down. This coincided with the fracking boom which creating a glut of cheap glut of fracked gas sloshing around the economy. Distribution costs were going up at the same time supply costs were going down. If you were someone just paying their bill, it would seem like everything was constant, but beneath the surface there was a sea change taking place.
15 years ago when BGE customers paid their gas bill, two thirds of their bill went to pay for the gas and one third went to pay for the pipes. Today, More two thirds of their gas bill goes to paying for the pipes and one third goes to paying for the gas.
This means that when the supply cost for gas spikes, that spike stacks on top of already high distribution costs. When Russia invaded Ukraine in 2022 and the cost of gas shot up, we were suddenly paying high gas prices on top of already high distribution costs creating overall record high prices. Something similar is happening now as a result of the war with Iran.
Were were boiled like a frog on distribution prices and that locks us into a high baseline for energy, and means we are extremely susceptible to volatile energy supply costs.
It is worth remembering that the distribution side of the bill is entirely within Maryland’s control. The supply side of the bill, which we will get to next, includes lots of variables outside of our control such as fossil fuel prices which can spike because of international geopolitics, but we have no one to blame but ourselves for distribution costs. Exelon has used every trick in the books to get higher rates through the Public Service Commission for more than a decade.
Luckily, in recent years the legislature has been taking some of those tools and tricks away from the utilities, and will talk more about that soon.
So far I have only talked about the BGE gas distribution system, but this same phenomenon, of getting boiled like a frog on ever higher distribution prices and then experiencing supply price shocks is happening on the electric side as well.
As the above graph shows, BGE also started raising their electric distribution rates faster than inflation as soon as they were acquired by Exelon, though to a lesser extent than on the gas side.
Pepco provides an interesting experiment because Exelon acquired them in 2016, four years after the BGE acquisition. Looking at the graph below, we can see that the stark divergence between inflation and rate hikes starts in 2016
This can all be compared with a utility like Potomac Edison which was never acquired by Exelon and, as the graph below clearly shows, has kept it’s distribution rate lower than inflation this entire time. These graphs are all from the Office of the People’s Counsel and I find them extremely helpful.
These graphs from the Office of the People’s Counsel raise the obvious question: Why are Exelon owned utilities seeing such large increases in their distribution rates? The full answer to that question deserves it’s own video. It is important to acknowledge that some of the costs of those increases go to important projects that improve grid reliability and allow for more clean energy, like installing smart meters, an area where non-Exelon owned Potomac Edison lack behind pretty significantly.
The TLDR on why I think we see this trend is that Exelon knows how to leverage every tool at it’s disposal, to use every trick in the book, to raise rates as high as possible. They are, after all, a shareholder company and fiduciary responsibility means that their one and only goal is to maximize value for shareholders.
It is, of course, the job of the Public Service Commission to reign in this profit driven 800 pound gorilla and force it to, as much as possible, serve the public good rather than their private interests.
In 2025 and 2026 the Maryland General Assembly took passed important legislation backing up Chair Kumar Barve and the rest of the Public Service Commission as they work diligently to reverse this trend of ever higher rates. The legislature put a lot of guard rails around the STRIDE which was a major driver of BGE’s overspending on gas distribution. Lawmakers also took away utilities ability to “reconcile” for higher rates, which essentially was a way for them to ask for rate increases in between the previously scheduled rate increases. In that same category, the general assembly enacted a one year ban on multi-year rate making.
However, reigning in utility overspending is difficult to do. For example, nearly two years after The Next Generation Act of 2025 put cost efficiency tests on the STRIDE program, those policies remain large unimplemented as utilities simply ignore the new law and the PSC struggles to bring them to heel.
Next I want to cover who supply costs are increasing. There are two primary reasons that supply costs are skyrocketing. The first is data center. The graph below shows projected summer peak demand on Maryland’s regional grid, PJM, in the coming years. The PJM related graphs are all from this terrific Inside Climate News article.
As this graph shows, as recently as 2022, demand growth was almost flat, even with all the electrification projected during the Biden era. It’s important to remember that electric appliances are so efficient that they don’t increase summer demand much at all. However, when data centers enter the scene, suddenly the line goes vertical.
Today the grid is projected to experience an 80 gigawatt increase in peak demand in the coming years. That is roughly the equivalent of adding one and half states of California to our grid in the next few years. It’s a truly jaw dropping amount of energy. A recent Monitoring Analytics report found that data centers are costing ratepayers on the PJM grid $23 billion over a 3 year period.
At the same time that data center demand is skyrocketing, PJM has artificially suppressed new supply entering the grid. When new power projects want to connect to the grid they have to go through an interconnection queue. Every grid has an interconnection queue, but PJM’s has long been the slowest and the worst.
As the graph above shows, for many years solar and battery projects had to wait three and a half years in the queue before getting approved. That was the average, but some projects were waiting 5 years for approval, and if you have to wait 5 years before getting approval, you aren’t going to build once you get approval. Just think of everything that has changed in the past 5 years, including higher interest rates, tariffs, and supply chain challenges. You can compare this to Texas where a project can get approval to connect to the grid in under a year.
To PJM’s credit, they decided to reform their queue process so that they can have a faster process of approving projects. In 2023 they closed the queue to do two things: process the existing queue and develop a new interconnection queue process. Hopefully, in the long run, this will result in a lot more energy getting added to the grid, but as of this writing, no facility has been added to the grid through this new interconnection process.
Instead, what this has meant in practice, is a 3 year pause on new projects being able to connect to the grid. The new grid is now open and accepting applicants, but for three years if you wanted to get in the back of the line to start waiting so you could maybe, one day, get built, you couldn’t even do that. Turning off new supply at the same time that demand is spiking will, of course, lead to a price spike. That price spike is depicted in the graph below.
It is important to note that all the PJM states are paying these higher capacity auction prices, even states that export energy, such as Pennsylvania. Some people say that energy prices are high in Maryland because we import 40% of our electricity, but we have imported 40% of our electricity for decades. It is not new and it is not the reason our bills are high. Even if we generated 100% of our own electricity, we would still be paying these higher capacity auction prices because this is a PJM wide problem, not a Maryland problem.
The other false narrative I hear sometime goes like this: Maryland enacted environmental policies, those policies caused coal plants to close, and because they closed our bills are high. That story is wrong on multiple fronts.
First, the coal plants closed because they weren’t economical. Coal plants are closing all over PJM, including in West Virginia, Ohio, Kentucky, and Pennsylvania. They are closing everywhere because their product can’t compete with gas, wind, solar, and batteries. No one has built a new coal plant anywhere in the country since 2013 because it’s a bad, expensive product being pushed out of the market.
Second, even if Maryland had spent a lot of money to subsidize our uneconomical coal plants in order to keep them open, that still wouldn’t have lowered energy bills. The price of the PJM capacity auction is currently at the cap, and even if our coal plants were still operating, we would still be at the cap. We are talking about a few thousand megawatts on a grid that’s already over 150 thousand megawatts and looking to add 80,000 more megawatts. Maryland didn’t cause this problem. PJM caused this problem by suppressing clean energy.
Regardless, both the supply and the delivery portions of our bill have been going up. The result is that energy prices are higher per unit of energy than ever before. On top of that, people have been using more units of energy than ever before because of extreme heat and extreme cold, which is caused by climate change, which is caused by fossil fuels.
We all remember snow-crete, and the week when it never got above freezing. Then, this summer Maryland tragically saw a record number of heat related deaths. These extreme weather events are causing people to use far more units of energy.
In the second half of the video I go over what policies we could use to lower energy bills. The short answer is we can deploy solar, batteries, and wind, reign in utility overspending, pause data center development, and install as many heat pumps as possible. Here are the policies that would further those outcomes:
· Enhance the Renewable Portfolio Standard so it deploys as much wind and solar as possible
· Continue the Public Service Commission procurements of batteries that started under the Next Generation Energy Act of 2025
· Enact the walk up tariffs for distribution batteries I describe here
· Put a moratorium on data centers
· End the STRIDE program
· End Multi-Year Ratemaking
· Lower the rate of return for utilities
· End line extension allowances
· Reject rate case increases at the PSC
· Spend the $72 million Heat Pump Rebate Funds
· Expand EmPOWER and move to a third party administrator
· Deploy heat pumps with a Clean Heat Standard
· Enact a heat pump rate
· Provide service line replacement choice
I hope this has been helpful, and thank you as always for all your work,
Jamie DeMarco