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The Maryland Public Service Commission (PSC) has decided against requiring regulated utilities to obtain prior approval for nonutility activities or diversification plans. The PSC also rejected a proposal that utilities pay a royalty to consumers of regulated services to account for

intangible benefits gained by the unregulated subsidiaries. The case involved complaints regarding merchandise and appliance services provided by Baltimore Gas and Electric Co. (BG&E). Trade and business groups charged that the utility had launched a new business venture of kitchen remodeling and was using ratepayer subsidization to support its expansion.The PSC found that the state's public service law only granted authority over rates and public utility services offered by a regulated company. Preapproval of diversification activities was, thus, not required to assure just and reasonable rates and adequate provision of regulated services. The PSC upheld, however, a decision by the hearing examiner requiring the utility to notify the PSC about nonutility activities.

The PSC rejected a proposal to require full structural separation of BG&E's utility and nonutility business, finding that unregulated operations have contributed net profits to regulated operations as a result of careful cost allocations under PSC rules. The PSC also adopted a set of allocation principles based on fully distributed cost allocation and fair-market cost imputation for intracorporate services provided to BG&E subsidiary operations. The PSC rejected a 2 percent of gross revenues royalty to compensate ratepayers for the use of BG&E's intangible assets. Re Baltimore Gas and Electric Co., Order No. 72107, Case No. 8577, Aug. 4, 1995 (Md.P.S.C.).

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