HAGERSTOWN Md. — Hagerstown electric customers could see higher bills in 2027, as the city plans to request approval for a $1.4 million increase in yearly electric utility revenue.
During a work session on Sept. 8, city officials and utility consultants presented their proposed rate change to the Hagerstown City Council. They discussed the financial challenges facing the municipal electric system and explained how the increase would affect residential, commercial, and industrial customers.
Nathan Fridinger, deputy director of electric operations, informed the council that the previous electricity rate increase was implemented on Feb. 1, 2025. After examining the audited financial statements for fiscal year 2025, officials concluded that the utility requires an extra $1.4 million to sustain current operations.
Jake Thomas and Tara Dubose from GDS Associates explained the rate-setting process to the council. This process includes figuring out the utility’s revenue needs, dividing costs among different customer groups, and setting rates to cover those costs. Thomas said this is the same process that utilities regulated by the Maryland Public Service Commission use.
Although the proposed increase is about 19 percent on the city’s basic electricity rate, officials emphasized that customers will not see their total bills go up by 19 percent.
The base rate is just one part of the bill. Hagerstown also adds a purchase power cost adjustment to recover the cost of buying electricity. The consultants said that, with this charge included, the proposal would mean an overall increase in total electric rate revenue of about 3.5 percent.
For households, the proposed increase would be about 3.3 percent. During the council discussion, officials said this would likely mean about $4 more per month for an average customer.
Residential customer charge would rise
Under the recommended rate structure, the monthly charge for residential customers would rise from $5 to $6.30.
The residential energy charge would also increase from just under 2 cents per kilowatt-hour to about 2.2 cents per kilowatt-hour. The purchase power cost adjustment would remain separate from these basic charges.
The consultants reviewed customers with different monthly usage levels, such as 500, 1,000, and 1,500 kilowatt-hours. They noted that 1,000 kilowatt-hours is the average monthly usage for residential customers.
The proposed increases will vary by customer class because the cost-of-service study found that some current rates cover more of the service costs than others.
The study found that residential customers now generate about 85.3 percent of the revenue needed to serve their group.
In contrast, the city’s largest users in the light-and-power or industrial sector are now paying about 104 percent of their allocated service costs.
Because of these differences, officials suggested raising rates by different percentages instead of giving everyone the same increase.
The proposed increases are about 3.3 percent for residential customers, 7.2 percent for commercial customers, and 1 percent for light-and-power customers.
Outdoor and street lighting would see the largest percentage increase, at 10 percent. The consultants noted that current rates for these categories cover less than half the cost of providing the service.
He added that the lighting sector makes up only a small part of the electric system’s total revenue, even though the study recommends a larger percentage increase for those customers.
City identifies $8.9 million revenue requirement
The study found that the city needs about $8.9 million in base-rate and other revenue to meet the electric utility’s financial needs.
The consultants calculated a revenue requirement of about $9.9 million before subtracting about $950,000 in non-rate revenue from other sources.
Currently, the city’s base-rate revenue is about $7.5 million, leaving a gap of around $1.4 million.
Several factors are causing this gap.
The consultants reviewed the need to adjust employee salaries and wages, pensions and benefits, rate-case expenses, and investments in the electric system infrastructure.
The presentation included operating expense adjustments of about $1.47 million and a plant-in-service adjustment of around $2.2 million. The city’s gross electric rate base is about $52 million, with a net rate base of roughly $25 million after accounting for things like accumulated depreciation and customer deposits.
The rate-of-return calculation includes forecasts for 30-year Treasury bonds.
City officials also said they are focusing more on managing vegetation around electric infrastructure. Utility companies are putting more effort into removing or controlling trees and overgrowth near rights-of-way, since these can cause outages during severe weather.
Council discusses development as revenue source
The discussion covered more than just raising rates.
Council members also asked how the city could bring in more electric revenue through development and redevelopment in the parts of Hagerstown it serves.
One council member pointed to a new residential development within the city’s electric service area, saying it is expected to generate about $140,000 to $150,000 in additional utility revenue.
The conversation highlighted that Hagerstown’s municipal borders and its electric service areas are not always the same.
Council members said that redeveloping vacant or underused properties could attract new customers and help grow utility revenue over time.
These comments came as city officials continued to promote both residential and commercial growth in Hagerstown.
Public Service Commission review comes next
The city cannot move forward with the proposed rates yet because its electric utility is regulated.
The city must submit its request to the Maryland Public Service Commission, where the proposal will undergo regulatory review.
Thomas said the city intends to file the new rate case in September.
This process allows anyone interested to review the city’s financial information and comment on or challenge the requested rates. In Hagerstown’s previous rate case, both the Public Service Commission staff and the Maryland Office of People’s Counsel participated.
The Office of the People’s Counsel serves residential utility customers in Maryland and campaigns for utility service at the lowest possible reasonable cost, in accordance with state policies.
It usually takes some time between submitting a rate request and receiving a decision from regulators.
The previous rate case was filed in 2024, and the new rates took effect on February 1, 2025. Consultants expect the approved rates for the new proposal to take effect sometime in the second quarter of 2027.
During the meeting, staff members asked the council for permission to move forward with the September filing.
Council members expressed support, allowing staff to proceed with sending the case to the Public Service Commission.
The commission is still reviewing the proposal, so final rates and approved amounts could change before customers see any adjustments on their bills.
