Pushing People into Poverty and Public Health Crisis: Maryland's Recent Energy Cost Increases Could Add Up to an Equity Disaster

One year ago, the Maryland Public Service Commission (PSC) approved a series of multi-year rate increases (PDF) for Baltimore Gas and Electric (BG&E). This month, those increases began to take effect, and now thousands of households throughout Baltimore City and parts of the 10 adjacent Maryland counties BG&E covers will see a 43 percent increase in their gas, and a 21 percent increase in their electricity distribution rates. Gas distribution rates will continue increasing over the next two years, and by 2026 will reflect a 61 percent increase, and electricity rates a 31 percent increase.

These rate increases arrive at a difficult moment for many. BG&E is the largest energy provider in the state; about a fifth of all Maryland households are BG&E customers. Last year, one in four Marylanders reported being unable to pay an energy bill in the last 12 months. In Baltimore County, low-income households spend one-third of their income on energy bills—nearly five times the U.S. average of 6.5 percent.

Households will go without life-sustaining necessities such as food, medicine, and medical care to pay their energy bills. During the winter, unsafe heating sources that are fire hazards—such as space heaters and wood stoves—are used in place of central heating to control costs. During the summer, older adults and young children can get sick and die from the inability to keep cool.

While there is a Low-Income Household Energy Assistance Program to help people afford utility bills, it consistently lacks the funds to help all the households that need it, with an estimated gap of $240 million (PDF) to fully fund bill assistance. The state assistance necessary to bring energy bills below 6 percent of a low-income household's earnings is currently insufficient—only about one in five households in need is now receiving assistance (PDF) with their energy bills.

Not only are assistance programs insufficient, but past policy changes supported by the PSC have ended up resulting in low-income households paying substantially higher prices (PDF) for their gas and electricity than high-income families. This is because Maryland's Electric Customer Choice and Competition Act, which became law in 1999, allows for third-party suppliers to purchase energy wholesale before then selling it to households. Though this policy change was meant to make energy more affordable through competitive pricing, it has had the opposite effect for many, increasing their energy costs while suppliers raise their prices each year. Predatory marketing practices—where variable rate offers expired, and then rose sharply—were used to scam households, resulting in over $1 billion in overpayments since 2014, with disproportionate overpayment by low-income households. Now, the PSC is investigating a record-high number of consumer complaints about questionable supplier practices.

These current rate increases were approved in large part to raise funds for gas infrastructure. And indeed, they are funding, in part, an expansion of gas pipelines into new areas of the state to reach new businesses and households. But extending natural gas pipelines goes against Maryland's own electrification goals (PDF), and would establish new infrastructure that would require further taxpayer support for decades to come. Costs for this new infrastructure would be recovered from customers over decades (PDF), generally more than 35 years. As households and businesses transition heating, cooling, and appliances to electric in order to gain efficiencies, low-income households that cannot afford electrification upgrades will bear disproportionate burden for these improvements.

Investing in an expansion of natural gas to new businesses and households also prolongs exposure to indoor air pollutants that are associated with aggregated asthma symptoms. Again, these harms are felt more by lower-income households, who tend to live in less–energy efficient residences and lack ability to improve energy efficiency. Transitioning to cleaner, safer, and cheaper alternatives would both increase energy efficiencies and protect public health by improving indoor and outdoor air quality. But as it stands, low-income households in Maryland are being given an undue burden, footing far more of their share of the upfront bill for all of our state's infrastructure investments.

The PSC needs to grapple with this fact, and more closely monitor the impacts that distribution rate increases are having on low-income households. And it could go one step further by reversing these increases if, in fact, they are resulting in more and more households being unable to pay their energy bills. While waiting to see the impact of these cost increases on low-income families, the PSC could also place a moratorium on electricity and gas shutoffs, since non-payment can be life-threatening, particularly for children and older adults.

As tax season approaches, the Maryland Energy Administration (MEA) should also consider raising the visibility of Inflation Reduction Act funding for home electrician and appliance rebates, home efficiency rebates, and greenhouse gas reductions (e.g., Solar-for-All program) to ensure more residents and businesses in Maryland can benefit from these programs. The MEA should also increase subsidization of low- and moderate-income subscriptions for community solar programs.

The U.S. Department of Energy has in place a good model for this sort of work, as it is taking key steps to work directly with communities affected by undue energy burdens to better understand how to improve the equity of the energy system. Maryland should follow the DoE's lead, and stop pushing more people into poverty and public health crisis with its conflicting energy policies.

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Joie D. Acosta is a senior behavioral scientist at RAND.