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Baltimore, BGE reach settlement over use of conduit system

City, BGE agree on rate increase to use conduits, unclear whether deal raises rates for customers.

Baltimore officials are poised to settle a lawsuit with Baltimore Gas and Electric Co. over how much the utility must pay to use the city's century-old conduit system.

The sides have battled over the issue since the city spending board voted more than a year ago to more than triple the fees companies pay to use the underground network.

Few details were provided Monday, and neither the city nor BGE immediately provided a copy of the settlement agreement.

The Board of Estimates is expected to approve the agreement Wednesday. Officials did not say whether city residents would face a rate increase or surcharge.

According to the board agenda, the sides have reached "an agreed-upon conduit rental fee rate." The settlement sets the rate through 2022.

The terra cotta conduit system, which dates to 1898, contains electric, telephone and fiber-optic cables. Companies that use the system pay the city semiannual fees.

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 utility and a group of telecommunication providers sued the city over the rate increase.

The new rate was expected to cost BGE about $30 million. The utility sought to offset the cost by charging Baltimore residents about $8 more per month. It estimated it would charge businesses between $15 and $3,350 more.

The utility said the city's decision to raise rates had the potential to affect customers in eight Maryland counties.

A BGE spokesman said the agreement does not propose a surcharge for city residents. The spokesman, Aaron D. Koos, said it was premature to discuss the specific terms.

"We are hopeful that it will enable us to continue our partnership with the City in improving this important piece of infrastructure," Koos said in a statement. "We worked closely with the City to identify a rate structure that saves customers a significant amount of money and still provides the City with the revenue needed to modernize the conduit system."

It is unclear what cost savings the agreement might yield.

The Board of Estimates agenda contained few details about the agreement.

"BGE and the City have continued their efforts to reach an amicable resolution regarding BGE's occupancy of the City's conduit system," officials wrote in the document. "The Settlement Agreement currently before the Board for approval provides certainty in the rates the City is entitled to charge BGE. … It further reduces the risk of BGE relitigating issues related to the City's conduit lease rate for the foreseeable future."

The Maryland Public Service Commission, which regulates utilities,declined to comment Monday. A spokeswoman said the commission had not seen the terms of the agreement.

The city's spending board agreed in September 2015 to charge companies $3.33 a foot per year to use the conduit system, up from the old rate of 98 cents a foot per year.

The Rawlings-Blake administration argued that the old rate was too low to cover the cost of upkeep, maintenance and upgrades to the system.

Users of the system include Comcast and the University of Maryland, Baltimore. The university, which uses the conduits to provide phone, data and electricity to its campus, has said the increase would cost it an additional $100,000 annually.

The Public Service Commission agreed in June to let BGE raise rates for the fifth time since 2010, but regulators limited the increase to less than half of what the utility initially requested to recover investments it had made.

The increase is projected to generate an additional $90 million a year for the company, raising the average residential customer's monthly bill by about $7.53.

ywenger@baltsun.com

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