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Below are excerpts from additional comments filed by Maryland Commission’s Staff and RESA in the Commission’s inquiry into the Next Generation Energy Act Requirements for Transmission Connected Energy Storage:

Implementation of PUA § 7-1226(a)(1)(ii): Electricity Supplier Capacity-Credit Purchase Obligations

Md PSC Staff – “PUA § 7-1226(a)(1)(ii) requires each electricity supplier in Maryland to purchase storage capacity credits according to a monthly fixed-price schedule that is proportional to the supplier’s PJM capacity obligation. To support clear and consistent implementation of this requirement, the Commission may wish to build a framework modeled in part on the processes already used under Code of Maryland Regulation (COMAR) 20.61.06 for offshore wind (Offshore Renewable Energy Credit) OREC settlements. Although the substance differs—the offshore wind program deals with renewable energy credits while the NGEA program concerns capacity credits—the underlying administrative steps translate well.”

Staff recommends that the Commission also clarify the contractual and commercial structure supporting these purchase obligations. The statue establishes supplier payment responsibilities but does not fully specify contractual privity, enforcement pathways, or default allocation among selected storage projects, electricity suppliers, electric companies, and any Commission-designated settlement agent. Clarifying which entities are counterparties to payment obligations and which entities are responsible for enforcement and dispute resolution would reduce implementation risk and financing uncertainty.

One helpful step would be to establish standardized monthly settlement protocols. These would include uniform invoicing practices, consistent formatting for billing determinants, and clear expectations regarding the validation of data sources such as PJM settlement reports. Drawing on the offshore wind program, these types of structured procedures help suppliers understand their obligations and reduce the likelihood of disputes. Staff also notes that while the statute specifies a fixed monthly price schedule, it does not indicate whether pricing is project specific or uniform across selected projects, nor whether escalation, indexation, or levelization is permitted. The Commission may wish to clarify these pricing parameters to ensure predictable supplier obligations and consistent settlement treatment.”

Implementation of PUA § 7-1226(a)(1)(iii): Receipt and Escrow of PJM Capacity Market Revenues.

Md PSC Staff – “To ensure accurate tracking of funds, the Commission may wish to build PJM revenue verification procedures that resemble those used for offshore wind OREC escrow accounts. For instance, the escrow administrator could receive settlement data directly from PJM, reconcile expected and actual revenue each month, and provide formal notices to project owners and the Commission whenever revenue is received, or discrepancies arise. These practices would reduce confusion and create a consistent record of revenue movements.

Staff recommends that escrow governance requirements include standardized reporting formats, defined revenue transfer timing requirements, periodic independent audits, and explicit Commission audit and inspection authority. Because PJM settlement timing may not align with retail billing cycles, the Commission may also want to establish rules governing timing differences, carryforward balances, over-collections, and under-collections.

Finally, the Commission may wish to adopt clearly stated expectations for how escrowed funds are released to the electric companies. Drawing from the offshore wind program, the distribution schedule could be monthly or quarterly, with allocations proportional to the suppliers’ capacity-credit purchase obligations within each utility’s service territory. Utilities would then be responsible for issuing line-item credits or refunds so that customers receive the benefit of the storage projects’ market revenues in a way that is transparent and easy to understand. Appropriately structured, this process would ensure that funds flow reliably from the PJM markets back to Maryland consumers.”

“Merely implementing a distribution nonbypassable charge does not, by itself, achieve the goals of fairness and equity with respect to implementing the Act. As explained above, the Act authorizes the utilities to implement a nonbypassable charge to recover their costs of purchasing energy storage credits. At the same time, third-party suppliers are responsible for purchasing energy storage credits. Absent a mechanism to use the funds from the nonbypassable distribution charge to pay for energy storage credits for all customers third-party suppliers recover their energy storage credit costs from their customers. In that scenario, a shopping customer that pays the utility’s nonbypassable distribution charge and its third-party supplier’s surcharge for energy storage credit costs would be paying twice for energy storage credits. That result penalizes shopping customers and would be an unfair and inequitable implementation of the Act.

The Act, however, allows the utilities to purchase energy storage credits on behalf of third-party suppliers, which RESA recommends here. Specifically, § 7-1226(a)(1)(ii) provides that each utility and third-party supplier “shall be responsible for purchasing storage capacity credits . . . .”6 This mandate does not require a third-party supplier to directly purchase the credits; rather, it obligates the third-party supplier to “be responsible for” purchasing the credits, which can be accomplished if third-party suppliers are required to authorize the utility to purchase the necessary credits on its behalf. The utilities would then recover those credit costs, as specified in the Commission’s pricing schedule, from all distribution ratepayers through the nonbypassable distribution charge. RESA recommends that the Commission direct the stakeholders to prepare a template agreement that each third-party supplier must execute in which the third-party supplier authorizes the utility to purchase its energy storage credits. Alternatively, the Commission could direct the utilities to revise their respective supplier coordination tariffs to include this third-party supplier obligation.”

The structure of the NGEA’s funding of transmission-connected energy storage projects may result in some customers paying extra amounts.

Md PSC Staff – “Because electricity supplier is not equivalent to an electric company, there may be some customers that pay more than their responsible share of the costs for transmission-connected energy storage devices. For example, a customer that purchases their electricity commodity from Supplier XYZ would be billed for their share of that supplier’s purchase of energy storage capacity credits. That same customer would then be billed a second time by their electric distribution company for its required purchase of energy storage capacity credits, which are allocated to all distribution customers through “nonbypassable surcharge established by the electric company that is added to the electric company’s base distribution rate or supply rate on customer bills.” Without careful tariff and settlement design, a risk could arise that customer charges are not properly netted or coordinated across supplier and electric company recovery mechanisms, therefore, care should be taken in determining the electric company’s tariffs to prevent any double billing of customers using an electricity supplier.”

“Staff recommends that the Commission direct the electric companies to submit a joint proposal establishing a standardized statewide surcharge framework, as a uniform approach across service territories would promote transparency, and administrative efficiency. That framework should address billing line-item placement, allocation methodology (e.g., volumetric, demand based, or per-customer), treatment of shopping customers, coordination with low-income assistance programs, and reconciliation and true-up procedures.

Staff further recommends limiting recovery to prudent, incremental, program-related costs. Appropriate categories may include program administration; billing and settlement system modifications; escrow administration and financial controls; independent audit and verification costs; and necessary technical or consulting support related to settlement, accreditation, performance verification, and compliance. Utilities should distinguish one-time implementation costs from ongoing operating costs and provide support for any shared system cost allocations. General overhead and non-incremental corporate costs should be excluded.

“Implementation of a Nonbypassable Distribution Charge Ensures Fairness and Equity Between Shopping and Non-Shopping Customers.”

RESA – “[t]he Act authorizes a nonbypassable charge to be applied to the utility’s supply rate or its distribution rate. However, as a threshold issue, a nonbypassable charge cannot be applied to a utility’s supply rate because customers taking their electricity supply service from a third-party supplier do not pay the utility’s supply rate; rather, shopping customers pay their supplier for supply service and avoid, or bypass, the utility’s standard offer service (“SOS”). With customers switching between third-party suppliers and SOS, and from one third-party supplier to another, implementing and tracking a nonbypassable supply charge presents significant inefficiencies and challenges for all stakeholders, including the Commission and its Staff. Thus, a nonbypassable distribution charge, imposed by the utilities upon all customers whether they shop or not, to recover all costs related to the purchase of energy storage credits is the most efficient, simple, and reasonable path forward.

In implementing this provision, the Commission should ensure that any nonbypassable charge added to the utility’s “distribution rate or supply rate” treats shopping and non-shopping customers fairly and equitably and does not result in shopping customers paying twice for energy storage credits or subsidizing non-shopping customers. The most efficient way to accomplish this goal is for the Commission, consistent with the Act, to allocate the energy storage credit purchase obligation to the utilities, enabling them to act as agents for the third-party suppliers for purposes of complying with the Act. The utilities can then implement a nonbypassable distribution charge – imposed upon all customers – to recover their costs. This would be similar to the utilities’ future purchases of offshore wind credits as well as zero-emission credits for new or upgraded nuclear energy generation projects under the Act.”

RESA Recommends that the Commission Allocate Third-Party Suppliers’ Energy Storage Credit Purchase Obligation to the Utilities. – “Merely implementing a distribution nonbypassable charge does not, by itself, achieve the goals of fairness and equity with respect to implementing the Act.  As explained above, the Act authorizes the utilities to implement a nonbypassable charge to recover their costs of purchasing energy storage credits. At the same time, third-party suppliers are responsible for purchasing energy storage credits. Absent a mechanism to use the funds from the nonbypassable distribution charge to pay for energy storage credits for all customers third-party suppliers recover their energy storage credit costs from their customers. In that scenario, a shopping customer that pays the utility’s nonbypassable distribution charge and its third-party supplier’s surcharge for energy storage credit costs would be paying twice for energy storage credits. That result penalizes shopping customers and would be an unfair and inequitable implementation of the Act.”

“The Act, however, allows the utilities to purchase energy storage credits on behalf of third-party suppliers, which RESA recommends here. Specifically, § 7-1226(a)(1)(ii) provides that each utility and third-party supplier “shall be responsible for purchasing storage capacity credits . . . .”6 This mandate does not require a third-party supplier to directly purchase the credits; rather, it obligates the third-party supplier to “be responsible for” purchasing the credits, which can be accomplished if third-party suppliers are required to authorize the utility to purchase the necessary credits on its behalf. The utilities would then recover those credit costs, as specified in the Commission’s pricing schedule, from all distribution ratepayers through the nonbypassable distribution charge. RESA recommends that the Commission direct the stakeholders to prepare a template agreement that each third-party supplier must execute in which the third-party supplier authorizes the utility to purchase its energy storage credits. Alternatively, the Commission could direct the utilities to revise their respective supplier coordination tariffs to include this third-party supplier obligation.”

RESA’s Conclusion – “RESA supports the General Assembly’s commitment to energy storage resources and recommends that the Act be implemented in a manner that treats all customers fairly, equitably, and does not impede retail competition in Maryland. Specifically, RESA recommends that the Commission, in implementing the energy storage program:

1. Require the utilities to implement a nonbypassable distribution charge to recover their costs;
2. Allocate third-party suppliers’ energy storage credit purchase obligations to the utilities; 3. Require third-party suppliers and utilities to describe the Commission-assigned energy storage charge separately from the supply price;
3. Confirm that the references to “capacity obligation” in the Act means the utility’s or third-party supplier’s PLC plus reserve margin, as established by PJM;
4. If the Commission were to require third-party suppliers to make payments for energy storage credits, require that the payments be made annually; and
5. Direct other reasonable and necessary relief as the Commission deems appropriate to ensure the success of the energy storage program.”