Legal Bulletins

I have recently been asked repeatedly for my views about the “energy crisis” in Maryland.  I represent companies in the generation space, including renewable, natural gas, coal, oil, and nuclear sources.  I also represent a variety of large energy consumers, including industrial companies and data centers.  Finally, I am one of two business representatives serving on the Maryland Climate Change Commission charged with recommending plans for achieving the state’s statutory climate goals. 

Those positions may provide me with a unique perspective, but the views expressed here are, of course, entirely my own and not representative of the views of any of my clients, the Commission or the firm. 

There are legitimate differences of opinion on the solutions to the crisis, but any discussion should begin with some simple facts about supply and demand.  If we cannot agree on these then it is hard to see how we can agree on a reasonable overall plan. 

Background

Maryland is not the only state that is experiencing rapid growth in electric rates.  Electric rates nationwide have increased at a faster rate than inflation every year since 2022 and are projected to continue to increase rapidly into the future.  However, the largest increases were in the three regions that already had the highest rates: New England, the Pacific and the Mid-Atlantic. 

The increases have definitely attracted the attention of state governments.  “Soaring electric and utility bills nationwide are the new political bellwether for consumers heading into a pivotal 2026 midterm election cycle for the first time in recent history. They replace the typical hot-button items of fuel prices and grocery costs—eggs, most notably, last year.”  Fortune Magazine, Nov 14, 2025.

Electric rates have multiple components.  This article focuses on the supply and demand sides of the equation but a significant, and some would say primary, part of the increase was in the distribution and transmission costs.  The Maryland Office of People’s Counsel has said that “the biggest drivers of higher utility bills for Maryland customers are increasing distribution rates and extreme weather.”

Maryland utilities, unlike the deregulated supply market, are guaranteed a reimbursement of costs plus a guaranteed profit on those costs.  Therefore, increases in costs from additional distribution or transmission can be profitable to the utilities.

However, the imbalance of supply and demand in the mid-Atlantic region has clearly caused a significant spike in prices recently and this paper focuses on that issue.

Supply

Let us start with information compiled by the U.S. Energy Information Administration (EIA) concerning power generated within the state.  The first lesson is that in-state generation is heavily dependent on the Calvert Cliffs nuclear power station.  Forty percent of the power generated in Maryland originates from that one facility. 

Compared to other states, relatively little of Maryland’s in-state generation comes from natural gas. Maryland is among the ten states with the lowest per capita natural gas use.  However, natural gas use is expanding.  “In 2023, natural gas generated more of Maryland’s total in-state electricity than nuclear energy for the first time.” (EIA, January 16, 2025) Natural gas accounted for 45.1% compared to nuclear ’s 42%.

Renewable energy, especially solar, has been expanding rapidly but still makes up a small amount of the in-state generated electricity.  According to EIA, about 8% of the electricity that Maryland produced was from solar, wind or geothermal sources. On a percentage basis, which is more than a six-fold increase from 1.4% in 2015 but still a small share.  This is especially noteworthy since the state’s goal is for 32.6% of the state’s consumption to come from renewable energy sources by 2024 and 52.5% by 2030.  Most of Maryland's solar expansion comes from community solar projects and rooftop panels.

Conowingo Dam provides about 5% of the in-state generated electricity and two fifths of the renewable power generated in the state.  Since the Dam and Calvert Cliffs are both owned by Constellation, that means that the vast majority of the carbon-free generation in the state is by that single company.

Wind power generation is largely nonexistent in the state.  Onshore wind sources are largely absent unless park land along the western ridges or certain areas of the Chesapeake Bay were developed.  A proposal to construct offshore wind is currently tied up in litigation between the state and federal governments and unlikely to produce power in the near term.

Maryland has one large remaining coal plant (Brandon Shores) that generated an even smaller percentage of the total at 3.1%.  The plant had been scheduled to close in 2025, but the closure date was extended until at least 2029 because of concerns about reliability if the plant were closed on time. An additional 1.1% of power is generated from a petroleum-fired plant.

Replacing the Brandon Shores power plant will be extremely expensive for Maryland rate payers.  In January 2025, BGE’s parent company estimated that construction of new transmission lines to import replacement power will cost Maryland ratepayers approximately $1.5 billion dollars.  On the other hand, forcing the plant to run past the scheduled closure date is costing ratepayers $12 to $13 million a month. 

If nothing else, these numbers for Brandon Shores show the dangers of planning retirements of plants before replacements are available.

Note, however, that this discussion has been about in-state generation.  Maryland is part of a regional transmission organization called “PJM” that coordinates the distribution of wholesale electricity over 13 states and the District of Columbia.  This is significant because 40% of Maryland’s electricity was imported from other states in PJM (including about 75% of the renewable energy consumed in the state). 

So, in summary, Maryland is highly dependent on nuclear and natural gas for in-state generation at the present time.  Renewable sources are growing but in-state sources are not growing as fast as the state’s goals.  In the meantime, the use of coal for generation has not been phased out as quickly as originally planned though retirements continue to be on the horizon. Because the in-state production is so low, the state is heavily depend on out of state sources and expensive transmission lines.

Capacity

It is also worth noting the difference between generation and “capacity.”  The easiest way to think of “capacity” is the ability of a source to produce power on demand regardless of extraneous factors like weather. Obviously a nuclear or fossil fuel plant will have a significant advantage over solar or onshore wind projects. This is important because the supply needs are dictated, at the end of the day, by the amount of power needed on the highest demand days rather than an “average” day.  Otherwise, you get brownouts or blackouts at the time when the power is most needed.

Renewable sources can reduce the difference by adding extensive, and unfortunately often expensive, batteries.  Batteries are an effective way to transfer power generated during a sunny day to satisfy nighttime needs.  Current battery technology is less capable of transferring power at an affordable price from spring or fall days to frosty winter nights and sweltering summer days.

Maryland’s peak demand days historically fell on the hottest summer days when air conditioning was run. However, changes in heating sources – driven by the switch to heat pumps - are causing a transition to peak demand falling on cold winter nights.  Unfortunately those are, of course, the times when solar power would be available only through battery storage.

Demand

Any analysis of demand must include the needs of new data centers, especially the “hyperscalers.” These massive facilities can consume as much electricity as 100,000 homes or more.  Research by S&P Global forecasts that the need will grow as much as three times by 2030.

Because the PJM grid interconnects all of the 13 states and DC, a data center will impact demand even if located in another state.  For example, the significant increase in data center growth in Northern Virginia clearly impacts demand in the entire region.  One of the side effects is that, because Maryland already has a supply deficit, power imported into Virginia is likely to transit from Pennsylvania through Maryland.  That, of course, requires new or expanded transmission lines through the Maryland countryside.  Similarly, any new data centers in Maryland will either need to be accompanied by new generation sources or new transmission capacity because Maryland lacks a surplus.

The pros and cons of data centers are beyond the scope of this article but there are projections of enormous economic benefits – including incredible amounts of property tax revenue.  Data centers located in other PJM states, such as Pennsylvania, will impact demand in Maryland but provide property taxes to the hosting states, such as Pennsylvania. Discouraging data center construction in Maryland will not avoid impacts on the cost of electricity if the data centers are simply relocated to other states.  Prohibiting data center construction could result in all the downsides of increased demand and none of the economic benefits.

Moreover, data centers are not the only new demand sources impacting the Maryland market.  The State is moving aggressively to force commercial and multi-family buildings to switch from fossil fuels (natural gas, propane, and heating oil) to electric sources.  The state’s Building Energy Performance Standards will begin to penalize buildings that fail greenhouse gas and energy efficiency standards starting in 2030.  Those standards become progressively stricter over the ten years following 2030.  The state is also working on Clean Heat Standards and new appliance regulations which may encourage or force new construction, including single family homes, to move to electric sources for hearing, cooling, and cooking. 

In addition, the state has a statutory mandate to transition, over time, from petroleum fueled vehicles to electric vehicles.  Although penalties have been deferred under an Executive Order, the statute mandates that 51% of new model 2028 vehicles to be electric, rising to 100% by 2035.

Finally, the state’s economy, thankfully, continues to grow.  New and existing residents use more electric devices, and manufacturing may finally see a resurgence in state.  The use of AI technologies for everything from medical diagnosis to school homework will contribute additional demand.

Bottom line is that PJM predicts that demand load in Maryland will increase regardless of data center growth but data centers will further increase the growth rate.  As PJM summarized it: “Takeaway: Electric load is likely to rise due to electrification of residential and commercial heating and commercial fleets, the resurgence of manufacturing; and the increase of other large electric loads, including data centers.” 

The Balance

So, we have increasing demand in a state which already is heavily dependent on out-of-state supply. But much of the existing in-state fossil fuel supply is being retired despite the deficit.  These retirements are occurring faster than the replacements (primarily renewable sources) are being deployed. 

As PJM summarized it: “Generators are retiring in Maryland due to a mixture of economic and policy justifications and without replacement generation in place.  Takeaway: Maryland, already an importer of power, has seen the retirement of 6,000 MW of resources since 2018 and the addition of only 1,600 MW of resources during that time frame.”

The retirements are being driven by environmental policies (especially climate change issues) as well as economic factors.  Although the federal government has announced retreats on some of the environmental policies, those retreats are tied up in litigation and Maryland’s state policies are among the most aggressive in the country.  In addition, the economic issues driving the retirement of coal and petroleum plants seem unlikely to change.  Natural gas is a cheaper source of capacity and solar is a cheaper source of everyday supply.

Bottom line, Maryland is operating at an energy deficit, and the deficit has been getting worse.  The system is badly imbalanced, and the imbalance looks likely to grow absent new policies.

Progress?

As noted before, electricity prices are increasing across much of the US (and, indeed, in other countries as well) because of inflation and increased demand.  However, the imbalance has significantly impacted Maryland. According to EIA, Maryland has the 15^th highest average retail price of electricity to the residential sector as of August 2025.

In 2025, the General Assembly began to try and address this issue with the Next Generation Energy Act. The Act eased the rules for community solar plants by limiting some local restrictions and encouraged additional battery storage and, controversially, providing a mechanism for the procurement of new natural gas generators.

On the other hand, the federal government repealed much of the financial incentives for renewable development – though some projects are being grandfathered if near completion. 

Only time will tell if the result is a significant increase in generation within the state.  Early signals suggest that community solar deployment is speeding up but that could slow once the supply of grandfathered projects exhaust the remaining tax incentives.  In addition, as noted previously, solar facilities alone are not sufficient to address the capacity issue for cold winter nights. The rising interest in new battery storage facilities is an encouraging sign since that would address some of the capacity issues.  However, solar remains a small portion of the state’s total supply.

Constellation Energy’s announced interest in expanding the Calvert Cliffs plant also provides reason for optimism.  However, nuclear expansion requires significant time to come online.

Finally, natural gas is often characterized as a bridge fuel to tide the state over until renewable sources can be deployed in sufficient numbers.  However, the PSC’s procurement effort produced only three responses. One is confidential so the details are unknown.  A second is simply an expansion of an existing facility.  The third would provide additional capacity but depends on state support for increased natural gas supply.

A solution to this complex problem that developed over many years will not be simple nor quick.  My opinion is that the state needs to provide development avenues for all these potential sources of new supply.  That may require coordination of climate change goals with political and economic realities even as new supply must take into account those goals.  The climate goals do not need to be abandoned but may need to be tempered or adjusted by realities just as the efforts to build new generation will have to be adjusted to reduce greenhouse gas emissions. 

The state needs to aggressively pursue carbon free sources while, at the same time, reexamine climate policies that forbid natural gas plants and increase demand before supply is available.  The situation may call for compromises on both sides of the aisle though, unfortunately, there has been little evidence of a meeting of minds.