The Maryland Public Service Commission (PSC) on Monday issued an order denying Baltimore Gas & Electric Co.’s (BGE’s) application to deploy smart meters to all its customers because ratepayers would be saddled with financial and technological risks. The move “deeply disappointed, frustrated, and frankly surprised” the utility, because the smart grid project had received a $200 million federal stimulus grant from the Department of Energy last October—the largest amount awarded to a utility.

BGE had said it would match the DOE’s funds with $250 million of its own financing, adding that the project could ultimately save its customers nearly $2.6 billion. But on Monday, after nearly a year of deliberations, the PSC said BGE’s customers would shoulder too much of the costs, and that the utility would need to contribute more funds to the project.

“The proposal asks BGE’s ratepayers to take significant financial and technological risks and adapt to categorical changes in rate design, all in exchange for savings that are largely indirect, highly contingent and a long way off,” the PSC said in its order.

BGE’s plan was estimated to cost a total of $835 million over the 15-year life of the meters, which the utility was to recover through PSC-approved bill surcharges. The surcharge would start at 38 cents a month for electricity customers and an additional 44 cents for those who also use natural gas. Over the course of the 15-year program, it would rise to an average of $1.24 a month for electricity customers and an additional $1.52 for gas customers.

But in its order, the PSC wrote that customers would begin paying a surcharge to cover the costs of the project long before they would reap any benefits from the new meters, which would have been installed through 2014. According to the Baltimore Sun, the order also objected to a proposal that included mandatory “time-of-use” rates that charge residential customers higher electricity prices at peak times. The PSC ultimately said a future proposal should include an option for ratepayers to opt in or out of time-of-use metering, the newspaper reported.

“We’re shocked that the PSC is jeopardizing the $200 million stimulus grant awarded by the Department of Energy to help pay for the initiative. The decision also jeopardizes Maryland’s ability to meet the O’Malley Administration’s energy efficiency goals under EmPOWER Maryland,” BGE said in a statement.

The PSC said that BGE could resubmit a proposal, but it is not clear whether the utility will revise its application. “At this point, it’s hard to see how we could pursue it with the constraints that the commission has put down,” BGE President Kenneth DeFontes told the Baltimore Sun.

As POWERnews reported, the $3.4 billion in grant awards last October were part of the American Reinvestment and Recovery Act (ARRA). The funds were to be matched by industry for a total public-private investment worth over $8 billion. The 100 awards announced represented the largest group of ARRA awards ever made in a single day and the largest batch of ARRA clean energy grant awards to date.

According to the DOE, the stimulus funds would have decreased BGE’s costs over the initial five-year deployment of a smart meter network and advanced customer control system for its 1.1 million residential customers. The meters were expected to enable dynamic electricity pricing as well as expand the utility’s direct load control program, which would have enhanced grid reliability and reduced congestion.

Sources: BGE, Baltimore Sun, DOE, POWERnews