In 1999, the General Assembly enacted the Electric Customer Choice Act, Md. Code Ann., Pub. Util. Cos. § 7-501 et seq. That statute ended an era where BGE had a monopoly on energy because BGE supplied both the commodity and the delivery of energy. The statute permitted customers to purchase the commodity of energy from competing customers and forced BGE to deliver that energy. Despite the statue, most customers did not switch to different companies and BGE maintained their monopoly. Therefore, the General Assembly authorized the PSC to set BGE’s energy rates at levels that were appropriate for the public good, while still permitting BGE to run a profitable business. Md. Code Ann., Publ. Util. Cos. § 4-201. The PSC-set rate is called the Standard Offer Service ("SOS").

The cost of supplying energy is not uniform to all types of customers. It costs BGE more to supply energy to manufacturers than it does to supply energy to residences. Therefore, the General Assembly created two categories of customers: Type I customers and Type II customers. Type I customers are residential and small commercial customers, while Type II customers are large manufacturers. The PSC is authorized to set Type II rates higher than Type I rates.

This action commenced when the PSC raised energy rates for Type II customers without raising rates for Type I customers. In 2008, BGE experienced a change in energy supply cost, resulting in large losses. To compensate BGE for its losses, the PSC substantially raised energy rates on Type II customers, but not on Type I customers. This resulted in a $400,000 increase in Severstal Sparrows Point, LLC’s energy bill so Severstal filed this action contesting the PSC’s authority to raise energy rates for Type II customers and not Type I customers

The Court of Special Appeals analyzed the statutes granting the PSC authority to regulate the SOS and concluded that the PSC did not have the authority to disproportionately assess energy costs to Type II customers. The Court found that though the cost of supplying energy differed between customers, the rates between the two types should be proportional to that cost. The Court found that the costs to BGE should be "allocated" to the different types of customers and Type II customers should not "subsidize" Type I customers. Therefore, the Court of Appeals declared the CPS’s action unlawful.