Even though the Maryland RPS bill passed in April and was allowed to move forward by Governor Hogan in May, the provisions of the bill do not go in effect until Oct 1, 2019. All energy supply procured before this date is eligible to be grandfathered in with prior RPS standards. During this transition period, energy will be procured under the current RPS rules, but the cost of buying new Renewable Energy Credits (RECs) to comply with the RPS has increased dramatically already due to the expectation of higher REC demand.
For Maryland customers buying their electricity today, RPS costs are about $0.80 / MWh higher than they were in late March. When the new RPS Act goes into effect on October 1, 2019, the RPS costs are estimated to increase another $2.40 / MWh. So, assuming prices don’t change between now and October, and assuming the new RPS rules go into effect, the combined impact to customers will be about $3.20 / MWh. For a small commercial customer using 500 MWhrs/year, this could amount to an increase of $1,600 in their electricity supply charges per year.
It is important to remember that electricity prices in a deregulated market such as Maryland move independently of REC prices and are traded in the retail energy market managed by PJM. PJM is a regional transmission organization (RTO) that coordinates the wholesale and retail electricity markets in all or parts of 13 states and the District of Columbia. The market for electricity will move based on current PJM demand and supply considerations. As RPS costs are based on total MWh used by a customer, the unit increase will impact all customers equally, including Commercial and Industrial (C&I) & Residential; however, the total percent increase will vary based on how much customers pay for their electricity. Customers who have a flat load shape may pay less for their electricity than weather sensitive or peakier customers. For example, a flat load customer paying $50/MWh might see a 6% increase while a peakier customer paying $70/MWh might see a 4.5% increase in their electricity supply charges based on an estimated RPS related cost impact of $3.20 / MWh.
So, as a customer what can you do? Act now – If you have a supply contract that is ending any time between now and 2023, you should start securing your supply before higher prices take effect. Talk to your retail electric supplier or your energy consultant to see what options are available to prepare for the future increase.
