BGE customers would bear unfair costs to extend power plants’ life, opponents argue

When the owner of two fossil-fuel-burning power plants in Anne Arundel County filed surprise plans last year to close them by mid-2025, the operator of the regional electric grid determined they needed to stay open until at least 2028 to ensure a reliable supply of electricity across Maryland.

But a plan submitted by the owner of the Brandon Shores and H.A. Wagner power plants to keep them open would unfairly burden customers of Baltimore Gas and Electric and other state utilities, argue opponents including the state agency representing ratepayers, state utility regulators and at least one of those utilities.

The Office of People’s Counsel, which represents utility customers, said in a federal filing last week that Houston-based Talen Energy Corp.’s proposed cost recovery plan would amount to about $215 million per year. About three-quarters of that would fall to BGE customers, who make up the greatest share of consumers served, with the rest shouldered by customers of Pepco, Southern Maryland Electric Cooperative and others, OPC said.

The payment arrangement could add an estimated $5 a month, above already approved rate increases, to BGE customers’ bills for as long as it takes the regional electric grid operator PJM to build new transmission lines to prevent electric system failures.

The People’s Counsel argues that Talen Energy’s proposal would lead to unjust and unreasonable rates to cover long-ago investments that the plants never expected to recoup. Southern Maryland Electric Cooperative joined the People’s Counsel in the protest before the Federal Energy Regulatory Commission, which must approve Talen’s request. The Maryland Public Service Commission objected in a separate filing.

Talen Energy notified PJM, which serves Maryland, 13 other states and Washington, that it planned to deactivate Wagner and Brandon Shores as of June 1, 2025. Limitations placed on running oil-burning units have made operations at Wagner unsustainable, while plans to convert Brandon Shores from coal to oil-burning did not make economic sense, the owner told PJM.

Plans had been announced more than two years ago to shift those plants from burning coal to mostly burning oil.

But PJM does not expect to complete a nearly $800 million transmission upgrade to make up for the closures of the two plants until 2028. Those plants generate about 2,000 megawatts, a substantial portion of the state’s electric power.

PJM sought what’s known as a “reliability-must-run” arrangement with Talen on the plants, which Susan Buehler, a PJM spokeswoman, described in an email as a “last resort to bridge the gap between the scheduled retirement date of a generating unit and the completion of projects necessary to maintain the reliability of the system.”

David Lapp, Maryland’s people’s counsel, said Talen’s proposal came about largely because of a lack of planning by PJM.

“These plants have been uneconomic for some time, and they’re old … they’re subject to ever-tightening environmental regulations, and so their retirement was foreseeable and should have been planned for,” Lapp said in an interview Monday. “Customers are bearing the consequence of the failure to plan ahead.”

PJM officials countered that Talen had planned to convert Brandon Shores to oil and said they did not become aware of plans to close that plant until last April.

“It is not reasonable to expect PJM to have anticipated the imminent deactivation of the Brandon Shores units when numerous public statements and direct conversations between PJM and Talen all supported the notion that Brandon Shores was on a path to remain online, albeit using a different fuel source,” said Manu Asthana, PJM’s president and CEO, in a December letter to officials with the Maryland chapter of the Sierra Club.

In an April 18 filing with the federal commission, representatives of each of Talen’s power plants outlined terms, conditions and cost-based rates under which the plant operators will agree to continue running units from the June 1, 2025, deactivation date through the end of 2028.

“Continued plant operations are no longer economically feasible, and Talen has satisfied all regulatory requirements to shutter the plants,” the company said in the filing. “But for reliability reasons, PJM maintains that keeping these plants available to run is needed to keep the lights on in Baltimore. … Talen commits to work with the parties to maintain operation of the plants until a reliable alternative can be implemented.”

Talen has been in talks with PJM for nearly a year to resolve concerns about reliability in BGE’s service area. A PJM study more than four years ago showed that the state’s phase-out of coal-fired power plants, including Brandon Shores and H.A. Wagner, would lead to “infrastructure overloads to seven existing transmission facilities in the region,” according to the study prepared for state legislators and cited in Talen’s FERC filing.

“Talen, Brandon Shores, and Wagner should not be asked to [run the plants] without fully recovering all costs, the investments needed to maintain the plants, and a fair return of and on equity,” Talen’s filing says.

Lapp called the proposed $215 million a year payment arrangement “substantially overblown” as some plant costs already had been written down, and said the the plant operator is “trying to resurrect those costs and capture them from captive utility customers.”

Representatives of Talen did not respond to requests for comment.

The People’s Counsel said Talen’s request could encourage other power companies to prematurely retire plants and try to recover costs that were written off long ago as unrecoverable from “captive” utility customers. Lapp’s office also argues that it could take much longer than the next 4 1/2 years to build new transmission lines, potentially making any arrangement with Talen even costlier.

The Maryland Public Service Commission also is objecting to Talen’s proposal, saying it should be rejected because Brandon Shores and Wagner have “not proposed just and reasonable compensation for the proposed … service.”

The commission raised concerns about Talen’s ability to run the Brandon Shores plant because of restrictions in an agreement with the Sierra Club and the need for permit extensions from the state. It said Talen could end up being compensated for three years without any obligation to operate the plants, an outcome that would be “unjust and unreasonable and not in the public interest.”