Legal Bulletins

The U.S. Chamber of Commerce recently published an extensive analysis of average electricity prices in all fifty states. The article, Your Electric Bill Is Going Up, But Where You Live Decides How Much, points out that electricity prices are increasing nationwide, but the magnitude of those increases varies dramatically by state. 

Although rates have increased in almost every state (Nevada, Hawaii and North Carolina are notable exceptions). This national trend obscures significant regional differences driven by state-level policy choices, infrastructure constraints, and access to energy resources. 

Maryland exemplifies a state where the national factors combine to produce above-average rate increases, and the underlying reasons align closely with the structural pressures identified in the article.
 
Maryland’s average electricity price per kilowatt hour of 16.83 cents is significantly higher than the average national rate of 13.63 cents / kwh. That cost has increased 26.35% over the last three years and an astounding 50.94% over a five-year period.  By way of comparison, our neighbor to the north, Pennsylvania, averages 14.11 cents / kwh. Our neighbors to the south and northwest, Virginia and West Virginia, are even lower at 11.41 and 11.40 cents / kwh. Even Delawares’ rate is lower than Maryland’s rate – coming in at 14.19 cents per kwh.

Although very high, Maryland does not have the highest electric rates nationally.  California, Hawaii, and New England can claim that dubious distinction. But an analysis of the differences in rate increases between states can shed light on the causes and may guide us in looking for solutions.

Supply-Demand Imbalance: A Structural Deficit

As in almost every state, electricity demand is rising faster than supply but the problem is especially acute in Maryland.

• Demand is increasing due to the state’s emphasis on electrification (heat pumps, building energy performance standards, electric vehicle goals, and the upcoming Clean Heat regulations.) 
• Large new loads such as data centers are not significant in Maryland but do have a significant impact on the regional supply-demand imbalance. 
• Maryland is facing significant generation retirements without equivalent replacement capacity. For example, the Brandon Shores coal plant has been forced to run beyond its expected decommissioning date because of the lack of a replacement.
• Maryland is a net importer of electricity. Imported electricity can become more expensive when regional supply tightens. For example, the transmission line proposed to replace Brandon Shores may cost as much as $1.5 billion to import yet more electricity from Pennsylvania.

Note that the location of data centers within a state’s borders does not equate to higher energy prices. Virginia, which has far more hyperscale data centers than Maryland, has lower rates and has faced lower increases. The same is true for data center hubs in Texas and North Carolina. In fact, North Carolina saw rates drop in 2025 even as more data centers were built.

The demand from large data centers is regional rather than state focused. However, the construction of data centers in the PJM region does significantly increase demand. As long as Maryland is reliant on imported power, it will be vulnerable to new demand that siphons off any of that supply. Moving a data center across a state line largely impacts property tax revenue rather than energy costs.  
 

Capacity Market Spikes in PJM

Maryland, like the rest of the PJM grid, has experienced a sharp rise in capacity market prices. Capacity prices are designed to ensure that there is adequate supply to meet future peak demands. Put another way, we need to assure sufficient supply will be available five or ten years down the road to meet the demand on the coldest winter nights and hottest summer days.

• For many years demand actually declined as the country implemented energy efficiency measures. Investment in new transmission lines and new generation was easy to neglect. That curve has now inverted and is skyrocketing upward. Unfortunately, the underinvestment will take years and millions of dollars from rate payers to reverse. Maryland, in particular, has reflected this underinvestment. Over the last five years, installed capacity in the state has only increased by about three hundred megawatts (almost all solar). 
• Forecasts of future demand growth may be overstating the need. Some observers believe that more data centers have been proposed for the PJM region than will ultimately be built. Others point out that some of the electrification policies motivated by climate concerns may fall short of projections (for example, electric vehicle proliferation).
• Restrictions in transmission capacity may amplify the capacity shortages. For example, the lack of adequate transmission infrastructure to replace the Brandon Shores plant has required that plant to continue to run at a highly subsidized rate.

Basically, there has been insufficient investment in infrastructure to prepare for future peak demand spikes, but forecasts are also uncertain. That said, PJM correctly points out that it would be better to overestimate future needs than to underestimate and face rolling blackouts at some future date.

Delays in Adding New Supply

While Maryland has policy goals encouraging clean energy, new generation projects have been slow to come online, reinforcing the supply constraint.

• The entire PJM grid has been constrained because new supply is not coming online as fast as demand is increasing.  PJM points to delays in siting and permitting new generation assets. Maryland points to delays in PJM approvals of interconnection requests.
• Renewable projects have been subject to extensive delays in PJM’s interconnection queue. PJM recently announced reforms but the focus is on projects providing the highest amount of capacity to the grid. Because they can operate 24/7, combined cycle gas plants achieve approximately a 60% capacity factor. Dependent on weather, solar can only provide around a 25% capacity factor (though the number can be improved by the addition of expensive batteries).
• Although natural gas provides significant capacity benefits, Maryland has not historically made significant investments in natural gas lines. Building that infrastructure will be expensive.

Because of Maryland’s climate goals, the focus on renewable development runs counter to PJM’s focus on the acceleration of projects that have the largest impact on capacity. Whichever alternative is pursued will be expensive and those costs will be borne by ratepayers.

Rising Distribution and Infrastructure Costs

Beyond wholesale energy costs, Maryland customers are also affected by increasing local distribution costs. BGE’s rates, for example, are significantly higher than the other electric utilities serving portions of Maryland.

• Utilities are investing heavily in poles, wires, and grid modernization. Some observers have pointed to large increases in costs incurred by BGE, in particular, as well as the rate of return provided to BGE over and above those costs. BGE, in turn, has pointed out the age of the distribution systems in Baltimore and the rapidly changing energy environment to justify those costs.
• The Maryland Public Service Commission approved “multi-year rate plans” for utilities in an effort to better forecast costs and reduce recovery delays. Some observers insist that this has allowed BGE to significantly increase distribution costs. BGE has insisted that the multi-year process saves money. The Commission will be reexamining the process. 

Distribution costs, unlike supply and demand, are largely local rather than regional. The need for investment and the justification for the expense of the investment is entirely determined by state policies.

Conclusion

The U.S. Chamber’s study underscores that electricity price increases are not uniform across the country, and Maryland provides a clear case study of why. While national trends—such as rising demand and infrastructure needs—are important, Maryland’s situation is shaped by a regional market structure (PJM), supply shortages, transmission bottlenecks, and policy timing issues.

For policymakers and stakeholders, the implication is that state-level and regional decisions—not just national trends—are decisive in determining rate outcomes. Rates are going up almost everywhere but “where you live” significantly determines how much your electric bill increases.

Michael C. Powell
410-576-4175 • mpowell@gfrlaw.com