Maryland's Regulatory Structure
The energy market is highly regulated, with state, regional, and federal agencies or authorities overseeing many aspects of its operations. These regulators impact the shape and size of the market, as well as the rules governing the market. In Maryland, distribution is regulated separately from generation and transmission. This structure allows consumers to purchase electricity and natural gas from a variety of suppliers (generators), but the delivery of those commodities is provided by regulated utilities.
- The Public Service Commission (PSC) regulates Maryland’s utilities, including natural gas and electric service providers.
- Maryland’s electricity and gas distribution companies are regulated based on a rate of return.
- Maryland enacted customer choice laws, which enables customers to choose their providers.
- The PSC licenses retail electricity suppliers.
- The PSC oversees the EmPOWER Maryland energy efficiency program.
Following are descriptions of the relevant regulatory entities:
The Federal Energy Regulatory Commission
The Federal Energy Regulatory Commission (FERC) is an independent federal agency responsible for regulating interstate transmission of electricity, natural gas, and oil. FERC regulates interstate issues in the electricity and natural gas supply industries. FERC also reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines, as well as licenses for hydro-electric plants.
PJM Interconnection is the regional transmission organization (RTO) that is responsible for the grid’s reliability in our region, and that administers the wholesale electricity market. It started by covering Pennsylvania, New Jersey, and Maryland, but it has now expanded to cover a significant portion of the Mid-Atlantic out to Illinois, as well as Ohio and parts of Kentucky. PJM is regulated by FERC.
PJM is also responsible for managing the wholesale capacity market through the Reliability Pricing Model (RPM). The RPM is a forward looking pricing mechanism that compensates power generators for power they will generate three years in the future. This auction provides financial incentives to build new generation or to run demand response measures to reduce usage in congested areas of the grid (i.e., central Maryland). Demand response actions include signals to industrial, commercial, and residential customers who agree to curtail their use of electricity during periods of high demand. The capacity cost is a component of the consumer’s electricity supply rate. In addition, PJM’s rules on grid reliability determine when and how new utility-scale generation can be connected to the grid. This impacts the costs, profit margins, and timeline for new generation construction.
PJM is a membership organization, composed of generators, electricity suppliers, utilities, transmission owners, and some retail end users.
Maryland Public Service Commission
The Maryland Public Service Commission (PSC) states its mission is to, “…ensure safe, reliable, and economic public utility and transportation service to the citizens of Maryland.” Among the many duties of the PSC, a few are most relevant to the electricity industry:
- The PSC sets electric distribution rates and oversees the utilities’ procurement of Standard Offer Service electricity and natural gas for Maryland ratepayers. Standard Offer Service is the set price that customers pay for the electricity and gas commodity if they do not choose an alternative supplier.
- The PSC oversees the EmPOWER Maryland energy
- efficiency initiative, which is run by the major electric distribution companies.
- The PSC licenses retail electricity suppliers and ensures that they uphold consumer protection standards.
Maryland Office of People’s Counsel (OPC) – OPC is an independent state agency that serves as a residential ratepayer advocate for consumer interests in the regulatory and policy processes for energy, as well as in other utility and public service matters.
Other Government Agencies and Related Entities
Power Plant Research Program (PPRP) – PPRP was established under the Power Plant Siting and Research Act of 1971. This enlightened legislation provided a model—that several other states have adopted—for addressing power plant licensing issues.
The enabling legislation established an Environmental Trust Fund to support PPRP. Funding is provided through an environmental surcharge that is assessed on all electricity used in the state. The surcharge adds between 10¢ and 20¢ per month to the average residential customer’s electric bill.
PPRP is housed within the Maryland Department of Natural Resources and provides a continuing program for study and evaluation of electric generation issues to recommend responsible,
long-term solutions. It functions to ensure that Maryland meets its electricity demands at reasonable costs while protecting the state’s valuable natural resources.
Maryland Energy Administration (MEA) – As part of the Office of the Governor, the mission of MEA is to promote affordable, reliable, clean energy. MEA’s programs and policies are intended to help lower energy bills, fuel the creation of “green collar” jobs, address environmental and climate impacts, and promote energy independence.
The MEA operating budget and programs are funded primarily through the Strategic Energy Investment Fund utilizing revenues from the proceeds from the Regional Greenhouse Gas Initiative (RGGI) auctions. The RGGI is a cooperative effort by nine states, including Maryland, to reduce CO2 emissions from
electricity generating plants.
Maryland Department of the Environment (MDE) – MDE manages the permitting process for environmental regulation and Maryland’s participation in RGGI. MDE administration is largely funded by the General Fund.
Maryland Department of Human Resources (MDHR) – MDHR is the agency that manages the Low Income Home Energy Assistance Program (LIHEAP).
Maryland Clean Energy Center (MCEC) – MCEC is a corporate instrumentality of the state created by the General Assembly with a statute-directed mission to advance clean energy and energy efficiency products, services, and technologies as part of a specific economic development strategy.
MCEC is managed by a board of directors who are appointed by the Governor. MCEC also maintains an advisory council, composed of both public and private stakeholders acting in the energy sector, who help guide the work plan of the organization.
MCEC works directly with industry stakeholders, has certain project financing capabilities, and leverages public investment to help achieve related private-sector goals. The Center has facilitated approximately $50 million dollars of investment through public-private partnerships to assist consumers; as well as municipal, university, school, hospital and not-for-profit entities implement energy improvements on their residences or facilities. MCEC has been funded by grants, loans, and fee proceeds from financial transactions.