Confusion has spurred in Maryland due to an announcement by local utilities that rates would be cut due to the new tax system. In response to the federal tax overhaul that will reduce the corporate tax rate from 35% to 21%, BGE announced in January that they would pass a large amount of the tax savings to their customers by cutting their rates. The rate cuts would result in the average customer savings $2.31 a month on their BGE electric bill. Due to a lack of understanding of where these rate cuts will take place, the announcement has stalled many consumers from shopping for lower competitive Maryland electricity rates.
Getting to the point, BGE’s announcement pertains to their distribution rates that they charge customers for the delivery of power. These charges are regulated by the Maryland Public Service Commission and not associated with the supply price for power that is open to competition. BGE charges a standard offer service for supply service for their customers that do not choose a competitive Maryland electricity supplier. The standard offer service rate is not effected by the tax overhaul.
Though the electricity choice market has matured over the years with both number of suppliers and active customers increasing, there still exists an unawareness of how the market has been structured by many people. For example, the majority of consumers in Maryland still do not fully understand that BGE does not receive a profit for their standard offer service rate for electricity supply. Though Maryland is an electricity choice state, it only allows consumers to shop for supply rates. The distribution charges remain regulated and are charged by local utility companies such as BGE. BGE remains a regulated utility company, meaning that customers cannot leave BGE as a utility customer.
The recent announcement that BGE will reduce their charges due to the new tax overhaul refers to the BGE distribution delivery charges. Therefor the announcement should not deter customers from continuing to shop for competitive BGE electricity rates. Currently competitive electricity rates that are lower than the BGE standard offer supply price do exist giving customers the ability to further lower their electric bills on top of the lower distribution rates that are coming from the tax overhaul. Switching to a competitive supplier will not change the distribution rate a customer pays to BGE. BGE customers will receive the reduction no matter who provides power supply to their home.