Deal could cost users

BGE, city set­tle suit over con­duit use, to ask for fee in­crease

Baltimore Sun - - FRONT PAGE - By Luke Broad­wa­ter

Bal­ti­more Gas and Elec­tric Co. will pay Bal­ti­more about $24 mil­lion a year to use the city’s un­der­ground con­duit sys­tem, an ex­pense the util­ity sig­naled Wed­nes­day it could pass on to cus­tomers.

The com­pany and city of­fi­cials agreed this week to set­tle a law­suit BGE filed last year over fees to use the cen­tury-old sys­tem. The util­ity will pay more than twice what it pays now for use of the sub­ter­ranean pipes, which carry util­ity lines.

Mayor Stephanie Rawl­ings-Blake’s ad­min­is­tra­tion tripled the orig­i­nal rate last year, prompt­ing the law­suit.

The set­tle­ment, ap­proved Wed­nes­day by the city Board of Es­ti­mates, sets the rate for BGE and other uses at up to $2.20 a foot per year. The util­ity had paid 98 cents per foot to use the 741-mile con­duit sys­tem.

Act­ing City Solic­i­tor David Ralph said the city and BGE will go be­fore the Mary­land Pub­lic Ser­vice Com­mis­sion to ad­vo­cate for any re­sult­ing elec­tric­ity rate hike for cus­tomers. The in­crease would be charged to all BGE users, not solely Bal­ti­more­ans.

Any pro­posed rate hike for en­ergy cus­tomers would re­quire the com­mis­sion’s ap­proval.

“The city and BGE are now on the same side in go­ing be­fore the PSC, con­vinc­ing them that this is some­thing that should be shared by all rate-users, not just the city of

Bal­ti­more,” Ralph said.

It was un­clear how much BGE would seek to off­set the higher fees. After the city tripled the rate last year, the util­ity pro­posed charg­ing Bal­ti­more res­i­dents about $8 more per month.

With the set­tle­ment, BGE spokesman Justin Mulc­ahy said, the com­pany would need “sub­stan­tially less” money now.

“Costs such as the con­duit fee are re­cov­ered through elec­tric rates,” Mulc­ahy wrote in a state­ment Wed­nes­day. “Ul­ti­mately, it will be up to the Mary­land Pub­lic Ser­vice Com­mis­sion to de­ter­mine how BGE should re­cover this ex­pense in rates.”

Paula Car­mody, head of the Of­fice of Peo­ple’s Coun­sel, said the con­sumer ad­vo­cacy agency would ex­am­ine such a pro­posal when it comes.

The terra cotta con­duit sys­tem, which car­ries wires for elec­tric­ity, tele­phone ser­vice, fiber op­tics, and street and traf­fic lights, was built in the 1890s. It cov­ers most of the city and is ac­ces­si­ble from more than 14,000 man­holes.

BGE, which has rented space in the con­duit sys­tem for more than 100 years, is its largest user, ac­count­ing for more than 75 per­cent of the ca­pac­ity.

The Board of Es­ti­mates, which is con­trolled by Rawl­ings-Blake, voted last year to ap­prove in­creas­ing BGE’s rate to $3.33 per foot each year.

City of­fi­cials ar­gued last year that they had to raise the rate be­cause BGE re­ceived a “sweet­heart deal” more than a decade ago.

“We came to the con­clu­sion the rate was sim­ply too low to cover the cost of up­keep, main­tenance and up­grades,” Rawl­ingsBlake said at the time. “Due to the low amount of money we col­lect, we’ve had to have a re­ac­tive, in­stead of proac­tive, main­tenance sys­tem.”

BGE sued. The util­ity al­leged the city was try­ing to gen­er­ate rev­enue with the rate in­crease, not use the money to main­tain the con­duit sys­tem.

Ralph said Wed­nes­day those al­le­ga­tions were false.

“This is not rev­enue pro­duc­ing,” he said. “This is to main­tain a sys­tem. It’s not money that can be used for Rec and Parks or other things.”

The new rate means BGE will pay the city about $17 mil­lion less than it would have paid un­der the higher rate pro­posed last year.

BGE of­fered this year to buy the city’s con­duit sys­tem for $100 mil­lion. City of­fi­cials said that price was too low. The agree­ment an­nounced Wed­nes­day in­cluded no ad­di­tional of­fer to buy the sys­tem.

Some city of­fi­cials and an­a­lysts have said the rates are too low. But BGE has con­sis­tently ob­jected to pro­pos­als to raise them.

In a 2000 re­port on gov­ern­ment ef­fi­ciency, The Greater Bal­ti­more Com­mit­tee and the Pres­i­dents’ Round­table called the con­duits an un­tapped source of rev­enue.

The business groups noted a 1996 study that found that in­creas­ing rates could add $3 mil­lion to $25 mil­lion to Bal­ti­more’s gen­eral fund.

Re­searchers learned that cities across the coun­try charged an av­er­age of $2 per foot. At­lanta charged $5 per foot.

Un­der the agree­ment an­nounced Wed­nes­day, BGE and other users will pay $2 per foot for the next three years, and then $2.20 per foot after that.

BGE said the lower rate agree­ment will al­low the city to bet­ter keep up with main­tenance of its con­duit sys­tem.

“We are pleased that as a re­sult of the agree­ment reached be­tween BGE and the City of Bal­ti­more, BGE elec­tric cus­tomers will ben­e­fit from lower costs and a safer, more reli­able and ef­fi­cient un­der­ground con­duit sys­tem,” Mulc­ahy said. “This is a win for BGE’s cus­tomers and for the City.”

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