Maryland Asks Regulators to Cut Utility Fee, Save $20 Million Yearly

Maryland state agencies last week asked federal regulators to strip Exelon and FirstEnergy utility subsidiaries of an extra 0.5% return on equity they earn for being voluntary members of the PJM Interconnection, a move that would save Maryland ratepayers more than $20 million a year. The complaint, filed on July 2 by the Maryland Energy Administration, Maryland Office of People's Counsel, and Maryland Public Service Commission, targets what's called the "RTO adder" — a fee boost transmission owners receive for participating in regional grid operators. The request came about seven weeks after Maryland Gov. Wes Moore signed the Utility RELIEF Act into law, which took effect on July 1 and requires the state's transmission owners to be PJM members.

The complaint affects seven companies operating in Maryland: Exelon's Baltimore Gas and Electric, Delmarva Power and Light, and Potomac Electric Power Co.; FirstEnergy's Potomac Edison Co.; NextEra Energy Transmission MidAtlantic; Transource Maryland; and Valley Link Transmission Maryland. Transmission costs now account for about 15% of a residential customer's bill in Maryland, according to Maryland People's Counsel David Lapp. Jefferies equity analysts said in a client note Monday that the complaint will likely succeed given precedent already set in California and Ohio. Other states requiring RTO participation include California, Connecticut, and Ohio.

Federal courts have confirmed that the RTO adder is only for transmission owners that voluntarily join a regional transmission organization, according to the Maryland complaint. "When incentives cannot induce behavior because the behavior is mandated, the Commission has a longstanding policy that incentives may not be awarded," the state agencies wrote. The RTO adder is part of a range of incentives the Federal Energy Regulatory Commission offers to boost transmission development, but Maryland argues it "significantly increases costs for consumers while providing no commensurate benefit — given Maryland law, respondents are required to remain in or join an RTO."

A similar fight is already playing out in Connecticut, where utilities sued over a state law requiring membership in ISO New England. In that case, the RTO adder increased rates by $17 million across New England in 2024, with Connecticut ratepayers paying nearly $4.5 million of the total. Connecticut utilities asked FERC on July 1 to put the complaint on hold while a federal court considers their lawsuit, which claims the state law violates the U.S. Constitution's takings and contracts clauses. The Edison Electric Institute, a trade group for investor-owned utilities, warned that granting these complaints could create regulatory uncertainty and chill transmission development when it's needed to handle growing electricity demand. States and regulators have increasingly targeted the RTO adder for elimination as they work to keep electricity affordable, setting up a clash between ratepayer savings and utility industry concerns about investment incentives.