Case No' 9175

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Case No. 9175

• Comments of Baltimore Gas and Electric Company
• February 26, 2009

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Presentation Summary

• BGEs goal is to assist its customers in every
  possible way, so that arrearages do not mount on
  customers accounts
• BGEs level of high bill inquiries has risen
  significantly this winter
• This winters weather has been significantly
  colder than previous years
• Many customers with electric heat have
  markedly higher usage than last year
• Customers with gas heat are also seeing
  increased usage
• Increased electric and gas commodity costs
• BGE will assist its customers not only during the
  2009 Winter period, but thereafter, to encourage
  customers to keep their bills manageable
  year-round
• By informing customers about energy assistance
• By encouraging conservation and energy efficiency
• BGE seeks a balanced approach to collections and
  terminations that will encourage timely payment
  so that customers bills remain manageable

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• High Bill Inquiry

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Reasons for Higher Bills This Winter

• Extreme weather caused energy usage to rise
  dramatically
• Jan 2009 was 15 colder than normal and 22
  colder than the prior January
• Twice as many hours this winter with temperatures
  below 30 degrees vs. last year
• About 45 of the typical annual bill is spent on
  home heating and cooling
• Water heater accounts for about 13 of the
  typical bill, but in colder weather it takes more
  energy to heat the colder water entering the
  house
• Higher commodity costs (No BGE delivery service
  increase since 1993 for electric and 2005 for
  gas)
• Electric rates up about 12.5 over last winter
• Gas rates up about 5
• Longer billing period - Typically more days in
  billing period during November and December
  holidays billing months vary from 28 - 34 days
  (can mean 10-15 more usage in a given month
  with shorter periods in adjoining months)
• Long December school holiday - Many school
  districts closed for 2 weeks this year in
  December vs. normal 1 week more people at home
• New appliances and electronics Many flat screen
  digital TVs purchased with phase-out of analog TV
  signals
• First bill in new house - 27 of customers
  calling with high bill complaints this winter
  were not at same residence prior year
• Meter tests show BGE meters are accurate

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Meter Tests Show BGE Meters are Accurate

2008 Gas Electric High Bill Meter Test Results

• 2030 Electric Meters Tested
• 1982 or 97.6 accurate
• 46 or 2.3 slow
• 2 or .01 fast

• 45 Gas Meters Tested
• 41 or 91.1 accurate
• 3 or 6.7 slow
• 1 or 2.2 fast

Meters are rarely inaccurate, discrepancies are
minor and it is more likely that usage is
underestimated
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Meter Tests Show BGE Meters Are Accurate (contd)

2009 YTD Gas Electric High Bill Meter Test
Results

• 520 Electric Meters Tested
• 519 or 99.8 accurate
• 1 fast electric

• 40 Gas Meters Tested
• 34 or 85 accurate
• 1 fast gas
• 5 slow gas

Additionally, COMAR contains protections for
customers that limit collections for undercharges
that may occur due to slow meters and requiring
refunds for overcharges that may occur due to
fast meters
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Summary of Demographics for December January
High Bill Complaints vs. Residential Population

• As compared to the general population, residents
  with high bill complaints
• are slightly more likely to be a Rider 5 or
  PeakRewards participant
• are significantly less likely to be on budget
  billing
• are slightly less likely to be in collections
• are significantly less likely to be receiving
  energy assistance (Energy Assistance data
  updated through 2/23/2009)

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Temperature Comparisons

• This winter, BGE experienced
• 24 more hours under 40o
• 101 more hours under 30o
• 83 more hours under 20o

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Summary of Electric Tariff Codes for December
January High Bill Complaints vs. Residential
Population
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Electric Usage Differences between Last Winter
and the Current Winter
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Gas Usage Differences between Last Winter and the
Current Winter
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The Effect of Cold Weather on Heat Pump Loads
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The Effect of Cold Weather on Gas Heating
Customers
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Increased Electric Consumption, Driven by Colder
Weather

• The average daily electric usage on the two
  coldest days in December and January was far
  greater than the average daily usage for the two
  warmer days for those months

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Increased Gas Consumption, Driven by Colder
Weather

• Similarly, the average daily gas usage on the two
  coldest days in December and January far exceeded
  the average daily usage for the two warmer days
  for those months

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Other Impacts
Just One Example So-Called Vampire Electricity
Consumption

• Switch It Off
• Survey by Choice Computer Magazine, May 2008
  (based on 15 cents/kwh)
• Placing equipment in standby/off mode can
  significantly reduce power consumption
• Modern video games can consume as much power as
  several refrigerators
• Many electronics manufacturers are not required
  to reveal energy consumption on energy packaging
  so consumers are left in the dark

Annual Cost
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Strategies to Address High Bill Concerns

• In addition to the standard payment arrangements,
  BGE is offering an expanded Budget Billing option
  customers can sign up now and their current
  bill will be revised to reflect the budget
  billing amount instead of their current balance
• Expanded bge.com to include FAQs regarding high
  energy bills
• To ensure responsiveness, increased high bill
  investigation staff
• Community EXPOs to enroll customers for energy
  assistance are scheduled for Feb. March
• Save Energy/Save Money workshop flyers mailed to
  over 500 neighborhood/community organizations
  throughout the service territory (at these
  workshops, BGE educates customers on low-cost and
  no cost ways of lowering gas and/or electric
  usage in the home including recommended
  thermostat and water heater settings, the
  importance of insulation, use of CFLs)
• Winter Radio spots in February March on energy
  usage
• Educating customers on using energy wisely and
  encouraging customers to closely monitor usage
  during colder months
• Check large appliances for efficiency age of
  the appliance and/or malfunctions impact
  consumption
• Lower thermostat setting even when the
  thermostat is kept at a set temperature, colder
  weather will increase usage just to maintain that
  setting
• Limit hot water use keep setting at 120 degrees
• Keep air vents and radiators uncovered
• Stop air leaks / drafts with proper insulation

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• Minimizing Arrearages and Service Terminations

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Keys to Minimizing Customer Debt

• Customers are encouraged to keep their bills
  manageable and pay in a timely fashion
• Customers should seek energy assistance as soon
  as possible in order to manage arrearages
• EUSP (funded for 2008 at 57.7 million)
• MEAP (funded at 110 million)
• Through energy education
• customers are advised on how they can lower their
  bills by managing their consumption, ensuring
  efficient operation of their heating equipment
  and increasing the energy efficiency of their
  homes
• Consistent collection and termination action by
  the utility throughout the year is necessary so
  that arrearages do not mount
• For limited-income customers, state energy
  assistance funds must be distributed in a timely
  fashion to prevent arrearage debt from growing
• Long-term solutions are needed so that the
  inability to pay energy bills does not become a
  pattern year-after-year

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BGE Helps Customers Manage Bills and Maintain
Service

• By direct contribution
• Fuel Fund
• BGEs stockholders and its customers have made
  significant contributions to the Fuel Fund over
  the years in the form of bill credits, grants and
  administrative support
• Charitable contributions
• By encouraging timely payment through BGEs
  Customer Assistance Maintenance Program (CAMP)
• CAMP provides credits ranging from 5 to 12 a
  month to limited-income customers enrolled in
  USPP, if the customer pays his bill on time
• CAMP provides 1.1 million in bill credits to
  about 12,000 limited-income participants per year
• By offering payment options
• Automated bill extensions upon receipt of
  termination notice
• Bill extender program (extends due date for an
  extra week)
• Due date extension (extends due date upon
  customer request)
• Hospital program (extends due date for
  hospitalized customers)
• Budget Billing
• Special agreements

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BGE Helps Customers Manage Bills and Maintain
Service (contd)

• By energy education outreach and informing
  customers of the availability of energy
  assistance

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BGE Helps Customers Manage Bills and Maintain
Service (contd)

• By actively promoting conservation through energy
  efficiency and weatherization programs because
  the causes of high bills, such as inefficient
  homes or use of inefficient appliances, have to
  be addressed in conjunction with bill payment
• Conservation Home Improvement Program (CHIP)
• CHIP provides for limited-income customers direct
  installation of the following measures water
  heater efficiency retrofits, efficiency rating
  and operation of heating equipment, replacement
  of filters of heating systems, a home energy
  survey, which can lead to the installation of
  additional measures such as air and duct sealing,
  insulation upgrades, gas furnace replacement
• Fast-track Conservation Program
• Discounts on CFLs
• Rebates for energy efficient appliances
• On December 31, 2008, the Commission approved
  BGEs comprehensive energy efficiency and
  conservation proposal the programs offered will
  provide additional opportunities for
  limited-income and non-limited income customers
  to conserve
• Through PeakRewardsSM, customers can save on
  summer energy costs by receiving credits up to
  200 on their bills through the installation of a
  programmable thermostat, or an outside switch
  installed on their heat pump or air conditioner

BGEs goal is to assist customers in every way
possible to that arrearages do not mount on
customers accounts
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Consistent Collection and Termination Actions Are
Essential to Minimizing Customer Debt

• Restrictions on collections further increase
  uncollectibles, and will adversely affect
  customers
• An inability to collect on customer debt
  increases the utilitys uncollectibles, which in
  turn has to be subsidized by the general body of
  ratepayers
• Extended alternate payment plans only defer the
  customers debt and increase the customers
  monthly obligation because they must pay the
  current expense in addition to the outstanding
  balance
• Historically, the default rate on alternate
  payment plans is 70
• Utility bills are recurring monthly expenses,
  unlike installment financing for consumer
  durables goods such as cars or appliances
• In order to increase the probability of recovery
  on uncollectible debt, BGE accounts remain open
  for a period of seven months after the account is
  closed through voluntary or involuntary
  termination to allow for collection action
• Moratoria on utility terminations further
  compound customer arrearages
• Places customers in further debt during the
  period of the moratorium
• Increases the likelihood that the customer will
  not be able to re-pay debt

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Termination Is a Last Resort, but Necessary to
Minimize Uncollectible Debt

• Consistent termination policies are needed to
  decrease average size of delinquency
• At the time when disconnects were the highest in
  2001, BGEs bad debt expense was lower as
  compared to 2006, when disconnects were at their
  lowest
• Bad debt expense
  Disconnects

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Energy Assistance Must Be Distributed in a Timely
Manner In Order to Minimize Arrearages

• The settlement in Case No. 8919 provides that if
  OHEP notifies a utility (within 14 days of the
  issuance of a termination notice to a customer)
  that a customer has applied for energy
  assistance, the utility will refrain from
  terminating service to that customer for 55 days
  or during the pendency of the OHEP
  application/certification process, whichever is
  shorter
• Energy assistance applications should be
  processed within 55 days, consistent with the
  settlement
• Delays in processing will inconvenience customers
  because during the time the application is being
  processed and the customer is awaiting energy
  assistance, arrearages continue to mount on the
  customers account
• Consistent requests that a utility extend the
  55-day standard is not the proper solution
  because the utility and ultimately, its
  customers, will have to bear the effects of the
  increased arrearages that will result
• The more appropriate remedy is to make sure that
  OHEP has the resources to process applications
  quickly and efficiently
• BGE has consistently argued that systemic changes
  are needed to OHEPs system for processing
  applications
• Overcoming the challenges of processing
  backlogged applications must be addressed now to
  stop this pattern

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Global, Long-term Solutions Are Needed

• Quick, short-term solutions for the post winter
  restriction period in 2009 do not benefit
  customers in the long-run long-term changes are
  needed to ensure that the problems of arrearages
  do not recur year-after-year
• The inability to pay energy bills cannot be
  addressed in isolation by only the utility
  payment difficulties should be addressed globally
• Failure to pay an energy bill is a symptom of a
  customers larger overall financial difficulties,
  which is beyond the utilitys ability to resolve
  alone
• Systemic changes are needed
• Revision of the one-time arrearage retirement
  restriction in the EUSP statute
• Removal of the 1.5M arrearage retirement cap
• Increased EUSP funding
• One Stop Shop (a model to deliver food, energy,
  and housing assistance to limited-income
  customers through a single point of contact)
• Inefficient housing stock contributes to
  increased consumption weatherization and
  conservation can moderate bills over the long-run

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Strategies to Address Customer Arrearages

• Customers are encouraged to pay their bills on
  time, as this is the best way to manage debt
• Customers should seek energy assistance as soon
  as possible
• Energy assistance applications must be quickly
  processed to ensure that funds are transferred to
  a customers account in a timely fashion
• Controlling consumption and conservation are key
  to lowering bills the condition of housing stock
  windows, doors, insulation and the operation
  condition/efficiency of furnace/HVAC compounds
  high energy bills therefore, customers should be
  encouraged to conserve, weatherize their homes,
  and purchase energy efficient appliances
• Global solutions must be pursued now to prevent
  the constant recurrence of insurmountable debt