• City's rate hike amounts to new tax on BGE electric customers

• City collected nearly $375 million in conduit revenue since 2016 but has not been transparent about where that money went, how customers benefited, and why an increase is justified

BGE today filed a request with the Maryland Public Service Commission to protect customers in surrounding counties from tens of millions of dollars in additional costs resulting from Baltimore City's unilateral decision to increase conduit fees by 84%.

The City's increase functions as a customer-funded City infrastructure tax that would ultimately be recovered through electric bills, burdening all BGE electric customers with nearly $50 million in new costs next year alone. Baltimore City intends to automatically increase the conduit fee each year, creating a growing and potentially permanent financial strain on customers already facing significant affordability pressures.

Under BGE's proposal, customers outside Baltimore City would not pay costs associated with the City-owned conduit system and a separate Baltimore City conduit surcharge would appear on the bills of Baltimore City electric customers beginning after Jan. 1, 2027. The surcharge is estimated to be around $9 per month for an average residential electric customer and would be higher for commercial customers. BGE's proposal is subject to approval by the PSC.

With no direct connection to the customer-driven reliability needs, infrastructure priorities, or operational requirements of the electric distribution system, the City's conduit fee increase ought not be paid by BGE customers outside Baltimore City.

"This is a matter of doing what's equitable for our customers. BGE cannot support requiring families and businesses outside the City to pay for a revenue increase imposed by Baltimore City," said Tamla Olivier, president and CEO of BGE. "Customers across central Maryland are already concerned about affordability, and our filing ensures that those costs remain where the City's decision was made."

Baltimore City owns the underground conduit system and is responsible for its management, maintenance, inspection and capital improvement. City law requires underground electric facilities in Baltimore to be placed in the City-owned conduit system, leaving BGE with no alternative but to use the infrastructure.

"This outcome was avoidable," Olivier said. "BGE proposed a path that would continue to deliver substantial improvements to the conduit system while helping protect customers from higher bills. The Baltimore City Board of Estimates, led by City Council President Zeke Cohen, rejected that approach and instead approved a dramatic fee increase without adequately demonstrating why customers should bear costs of this magnitude."

The current agreement between BGE and Baltimore City expires at the end of 2026. Under that agreement, BGE committed approximately $30 million annually to capital improvements to the City-owned conduit system instead of paying conduit fees. Like other long-lived utility infrastructure, the cost of those improvements was spread over many decades, which significantly reduced the annual cost paid by customers. Some City leaders erroneously refer to the cost of financing this work as "profit". Without this approach, customers would have had to bear the full cost of conduit improvements as they were made every year rather than spreading those costs over decades while receiving the immediate benefits of the improvements.

BGE kept costs lower for customers by leveraging the scale of its construction portfolio to secure more favorable contractor pricing. Contractors were expected to mitigate the effects of inflation in their pricing and find efficiencies in exchange for the opportunity to perform additional work across BGE's broader capital portfolio.

All BGE's conduit investments directly benefit utility customers by improving the conduit system. In fewer than four years, BGE completed more capital improvements than the City completed during the previous decade.

That work accelerated progress towards making the conduit system safer and more dependable. BGE offered to continue investing in the system, but Baltimore City walked away from discussions after seeking an astronomical and unacceptable increase to BGE's annual capital commitment, which would drive up customer costs by tens of millions of dollars.

The Cohen-led Baltimore City Board of Estimates subsequently approved the increased tax on customers. The increased revenue would support new City overhead costs and an undetermined amount of capital work.

BGE is one of approximately 40 users facing higher operating costs as a result of the City's decision to increase conduit fees. Baltimore City's new rates could generate approximately $70 million from conduit users in 2027. The City collected a combined $375 million in conduit revenue since 2016, but has not provided sufficient public accounting to demonstrate how an 84% increase is necessary or how the resulting revenue will translate into specific improvements for customers as opposed to being used for City administrative and overhead expenses. BGE requested this and other conduit information from Baltimore City through the Maryland Public Information Act and received only one document in return, enumerating annual revenues for the last 10 years.

"The City has a responsibility to maintain its infrastructure, clearly account for the money it collects and demonstrate that any customer charges are supported by a credible plan," Olivier said. "It should not use our customers as an open-ended source of revenue for City operations. BGE will continue advocating for transparency, accountability and an outcome that protects customers."

The condition of the century-old conduit system has significant consequences for BGE customers. A consultant hired by Baltimore City to examine recent underground fires determined that manholes overcrowded with equipment from conduit tenants and general deterioration of the system were a contributing factor and that the improvements made by BGE were the kinds of improvement that were necessary to address the problem. The crumbling conduit system can also contribute to electric service outages in the City.

The PSC will review BGE's request to protect customers outside Baltimore City from being charged substantially higher costs tied to the City-owned conduit system and issue a decision at a later date.