BGE’s plan to pay for conduit costly for customers, OPC analysis shows
BALTIMORE – Baltimore Gas and Electric’s proposed plan to pay for its conduit agreement with Baltimore City would cost its utility customers as much as $860 million over 50 years, the Office of People’s Counsel explained in an analysis filed with the Maryland Public Service Commission. Ultimately, costs could be even higher, OPC found, because the agreement does not give BGE access to the conduit after 2029, and the utility likely will be required to resume annual lease payments to the city again in 2030.
“The conduit deal appears to provide some benefits for the city,” Lapp said. “But BGE’s proposal to pay for the deal would cost customers dearly.”
BGE’s conduit agreement with the city requires BGE to spend $120 million on the conduit by the end of 2026. It includes a three-year extension that would require additional expenditures of $92 million by the end of 2029. Because BGE is proposing to spread those costs out over time, the annual expense over the next six years to customers would be lower than the approximate $28 million in annual lease payments customers have paid in the past. But the long-term costs to customers could be significantly higher than $212 million—totaling $860 million—because BGE customers would be paying BGE’s rate of return and its taxes on that return.
BGE’s proposal before the Commission is unusual—and highly favorable to its investors, OPC’s filing explains. Normally, utilities do not earn a return for spending on assets they do not own. In its current multi-year rate case where BGE’s proposal is pending, BGE has acknowledged that it has no other capital infrastructure investments—those investments upon which it earns an investor return—on any other electric or gas distribution projects that it does not own.
BGE’s proposal illustrates why it is inappropriate for a utility to earn a return on assets it does not own. According to OPC’s filing, after 2029, BGE customers would still have almost 50 years of payments to make for the conduit improvements the agreement obligates BGE to make, but on top of those payments, BGE will likely have to purchase new rights to use the conduit every year after 2029.
The annual costs for BGE’s improvements to the conduit—paid for in customer rates—will be about $40 million per year in 2030, OPC estimates. Further, those payments will continue almost 50 years after 2030, through 2078. But because the agreement with the city gives BGE no continued rights to the conduit after 2029, BGE also will likely have to pay the city lease payments after 2029. If so, in 2030, BGE customers would be paying twice for use of the conduit.
“BGE is gambling on the Public Service Commission approving a novel proposal to have customers pay for a deal that no business in a competitive market would ever enter,” Lapp said. “BGE is engaging in a monopoly company’s gambit that State regulators will approve a deal that is fundamentally harmful for customers, to the benefit of the investors of BGE’s parent company, Illinois-based Exelon.”
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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