Why Are My Energy Bills So High?

Maryland utility customers photo of increased pricesIf you call your utility company to ask why heating and cooling your home is so expensive, the default response is that your thermostat is set too high or too low, depending on the season. Blaming energy consumers should not be the default, as that doesn’t tell the full story.

Every electric bill has two parts – supply and distribution. But what do they mean for consumers, and how do they impact your bottom line?

 

Supply

Supply rates are set by a regional entity called PJM Interconnection LLC (PJM). PJM’s Members Committee, which holds significant decision-making power, is 80% comprised of representatives from the industries they regulate.

  • PJM sets rates for the energy supply market, and is charged with ensuring there is enough energy for the regional grid even at maximum load.
  • This means projecting how much energy will be needed during periods where energy is being used to capacity, such as extremely hot or frigidly cold days.
  • PJM does not properly credit supply from renewable energy sources. While large-scale renewable projects could help bring down energy supply costs for consumers, because the PJM does not consider them as part of the energy grid these savings are lost.

Data centers drive up demand — A study conducted by researchers at Cornell University found that spending across the four power grids jumped from $2 billion in 2020 to $34.2 billion in 2025, with data centers responsible for $8.25 billion of energy infrastructure costs last year. Residential users were responsible for just under $3.5 billion, but they were billed more than $16 billion while data centers were billed about $3 billion. Source

Distribution:

Distribution rates are set by a state entity called the Public Service Commission (PSC)

  • PSC members are appointed by the Governor
  • The PSC follows state law to determine what utilities can charge consumers. They do this through regulations and rate cases. A rate case is a legal proceeding, where the company requests the new distribution rates they can charge their customers over the coming year, and defends why they need that rate.
  • You have a voice in this process!

Your utility provider

Utility companies in Maryland are regulated monopolies, and you have very limited choice in selecting a utility provider. Despite being state-regulated monopolies, each company sets its own profit goals for its shareholders.

  • As one example, BGE profits have more than tripled in the past five years, from $147 million in 2010 to $527 million in 2024.
  • Pepco profits were $205 million in 2018, the year after Pepco merged with Exelon, and nearly doubled to $390 million in 2024.
  • In a free market, companies make a return on their investment depending on how well their product does. But regulated utility companies have a guaranteed return on equity (ROE), set by state regulators. That ROE is pure profit – and is paid for by YOUR electric bills.

Electric vs Gas

  • Gas customers are facing a unique financial threat. Because of a 2013 law, the Strategic Infrastructure Development and Enhancement Plan (STRIDE), companies are incentivized to replace gas pipelines.
  • Capital investments, such as laying new gas pipelines, return the greatest profits for utility companies. This creates a perverse incentive for them to build new infrastructure instead of prioritizing safety.
  • Both BG&E’s “Operation Pipeline” and Washington Gas and Electric’s 2026 gasline plans include unnecessary pipeline expansion projects that will drive up rates for gas customers for decades.
  • According to analysis by Maryland PIRG, Maryland gas utilities are expected to spend nearly $8 billion on STRIDE related gas infrastructure projects and charge customers a projected $41.5 billion to pay it back.
  • As more customers switch to electric, those still paying for gas will see their bills increase to pay for those guaranteed profits

Usage

The amount of energy you use also impacts your bill. Weatherization, energy efficiency, electric appliances and heat pumps all create savings by reducing your overall energy consumption. Some important points to keep in mind:

  • Older homes and rental units often have higher energy consumption.
  • Aging appliances and poor insulation can increase the energy burden in older homes.
  • Many landlords do not make energy efficiency investments, despite having resources available to them, as they do not pay or do not notice the rising energy bills facing their tenants.

What Can We Do?

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