Baltimore Gas and Electric Co. customers will be paying higher rates this year, with the average bills rising by several dollars a month, to cover the cost of upgrading the utility's infrastructure.

Maryland's Public Service Commission, which regulates the company, said Friday it approved an increase to distribution rates that will cost the average residential electricity customer an additional $3.33 a month and the average residential gas customer an extra $2.70 a month. The utility had sought larger rate increases.

The commission shaved 35 percent off the utility's request, which also included higher commercial rates. BGE will receive about $113 million annually from the rate increase, money that is largely for gas mains, poles and other infrastructure and projects related to safety and reliability — such as tree trimming around electrical wires.

The new charges go into effect Saturday.

"It's one of those things, I guess, you've just got to live with," said Paul Verchinski, a Columbia resident who testified before the commission with concerns about the rate request on behalf of the Howard County Citizens Association. "I'm glad it's not as much as what they asked for."

BGE rate increases have been the subject of much debate and customer ire in recent years.

The Maryland Office of People's Counsel, which represents residential utility consumers, and regulatory staff had recommended lower rates than those approved by the commission. The staffers thought BGE needed about $9 million less than the commissioners ultimately approved. The people's counsel argued that BGE could manage with half as much of an increase.

BGE, which disagrees, warned Friday that it will likely need to file more frequent rate increases to keep up with its costs.

"While we believe the rate adjustments are a step in the right direction, they fall short of providing BGE with adequate funding for the significant investments we've made and must continue to make," said Robert L. Gould, a spokesman for the utility.

The commission, which has signaled it prefers rate increases be used to reimburse expenses rather than pay for future ones, refused to allow almost $20 million for proposed safety and reliability work.

But part of commission's decision to approve a lower increase came down to simple profits.

Commissioners set BGE's rate of return lower than the company had wanted — and lower than the amount approved in the utility's last rate case in 2010.

"The return BGE's investors will be allowed to earn in this case is appropriate, particularly under the present economic climate," commissioners wrote in their order.

Paula M. Carmody, head of the Office of People's Counsel, was glad to see those reductions. But the distribution rates are rising more than they did the last time.

"Even though the commission has reduced significantly the amount of money they can charge customers, it still results in a significant increase," she said.

Employers were disappointed, too.

"It really is a tough time for rate increases," said Todd R. Chason, an attorney who represents the Maryland Energy Group, which advocates for hospitals and other large energy users.

BGE said customers' bills will typically be lower than in 2009, even with the new increase, because the cost of energy has dropped. Commodity prices account for about 70 percent of the tab.

The company also said the average residential electricity customer should actually see an increase of less than $3.33 a month in distribution charges because average power use has dropped "considerably" below the level the commission used in its calculation.

Customers who use electricity and gas will be hit by increases to both distribution rates, but less than the two averages put together, BGE said. That's because the typical residential consumer in that group uses less electricity than electric-only customers.

Verchinski, the Columbia resident, will see both rates go up because he uses electricity and gas. What concerns him, though, is the likelihood of another hit in the near future.

Both chambers of Maryland's General Assembly passed bills this month that would make it easier for utilities to get surcharges — up to $2 a month on gas customers' bills — for accelerating replacement of aging pipelines. If the measure is finalized as expected, BGE said it will request such a surcharge.

BGE said the extra funds — with collections starting as the work is done instead of afterward — are needed to pick up the pace on replacing old cast-iron and bare-steel pipes.

But consumer advocates opposed the move.

"The issue that we're concerned about is that they're going outside the rate structure," said Hank Greenberg, state director for AARP Maryland, which represents the interests of older residents. "We think it is both unnecessary and ill-advised to add surcharges on top of increased rates."

Baltimore Sun reporter Steve Kilar contributed to this article.

jhopkins@baltsun.com

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