City wants to triple rate BGE pays to use conduits
Utility threatens to pass on $8 monthly fee to residents
The Rawlings-Blake administration announced plans Monday to more than triple the rate Baltimore Gas and Electric Co. pays to use the city’s vast underground conduit system — a cost the utility has threatened to pass on to city residents as an $8 monthly fee.
City officials vowed to fight any such customer surcharge, which would have to go before the Maryland Public Service Commission for approval.
City transportation director William Johnson said the city needs to charge BGE more to use the conduit system in part because the company was granted a “sweetheart deal” more than a decade ago that cost the city nearly $36 million from 2003 to 2014. The agreement allowed BGE to pay a much lower rate than other users of the system, which carries power and telecommunication lines through 3,220 miles of ducts buried beneath the city.
BGE was “paying 27 cents or 58 cents when other users were paying 98 cents” per foot each year, Johnson said. “Now ... the rates are going to be adjusted to reflect the actual cost.”
The city’s spending panel — controlled by Mayor Stephanie Rawlings-Blake — is expected to approve the rate increase, effective immediately, at Wednesday’s meeting. The utility and other users of the system will pay $3.33 per foot annually, up
BGE was “paying 27 cents or 58 cents when other users were paying 98 cents” per foot each year.
from 98 cents now.
BGE accounts for about 80 percent of the system’s use, city officials said. Comcast is the system’s second-largest user, accounting for about 5 percent.
Johnson said the extra money collected from higher fees will be used in part to incorporate streetlight cables into the system, helping to reduce the roughly 20,000 outages each year. Many streetlight cables are buried but not woven into the conduit system, making them vulnerable to the weather and construction, he said.
But Aaron D. Koos, a BGE spokesman, accused the city of using the rate increase to help pay for other city services. As it is now, he said, the city doesn’t use all of the money it collects for the system’s upkeep.
“What this really amounts to is a new tax proposed by the city on the residents and businesses of Baltimore City,” Koos said in a statement. “As the largest user ... we pay our proportional share of the cost of maintaining and improving the conduit system.”
Koos said BGE pays $12 million a year to use the system. That would jump to $41 million under the city’s proposed increase. “BGE has an obligation to ensure that its customers only pay the actual cost of maintaining and improving the conduit, not paying for other city services,” he said.
He said BGE will take the issue to the Public Service Commission. An $8 surcharge represents the approximate cost for a city household if the PSC agrees the $41 million should be passed on to consumers, Koos said. Businesses would be assigned a different rate, which he did not estimate.
A PSC spokesman said the office is “aware of the issue but has not yet received a filing from BGE requesting a rate increase or surcharge.”
Overall, the increased conduit rates would generate $52 million for the city to maintain the system, according to Johnson. The city bills about $15 million for the system now, he said, but does not collect that total. Under the agreement, BGE has withheld a portion of its user fees, totaling about $5 million since 2003, Johnson said.
Koos disputed that claim, too. He said the city can charge BGE only for the actual cost of maintaining and improving the system, per the agreement that BGE says has not expired.
“BGE has paid and will pay the city for the actual costs as shown by their audited financial statements,” he said, adding that BGE will consider all legal options.
The reason BGE got a lower rate years ago was because the company was con- structing portions of the system for the city, Koos said. He didn’t elaborate.
Johnson said he didn’t know why city officials at the time gave BGE the deal, which was approved while Martin O’Malley was mayor.
A former city solicitor under O’Malley, Thurman Zollicoffer, said his recollection of the deal is fuzzy, but said officials had looked at the rate BGE historically had paid and increased it greatly. Zollicoffer said the city also had factored in the company’s argument that it had built much of the system and turned it over to the city.
“We compromised on a rate that would significantly increase revenue to the City,” Zollicoffer said in an email.
In recent months, BGE offered the city $100 million to buy the system, but the city rejected the offer. Johnson said the system is worth much more, though the market value hasn’t been determined.
The system was largely constructed a century ago as a series of interconnected pipes with terra cotta ducts that have outlasted their design life, Johnson said. It was originally built to carry electric cable and telephone wires.
The system now carries cables for electricity, telephone service, fiber optics and street and traffic lights. It is accessed from more than 14,000 manholes and stretches throughout most of the city, except the outskirts.
Johnson said any money generated by the new rate “will only be used for the maintenance of the conduit system and related administrative expenses.” He said any claims that the city’s been spending money collected from the conduit user fee for other reasons is false.
City officials and analysts have for years called the city’s rates too low, and out of line with what other cities charge. The rate in Mesa, Ariz., is $6 per foot compared to Baltimore’s current rate of less than $1. Boston charges $5 and Grand Rapids, Mich., $4.04.
William Johnson, city transportation director