Baltimore Gas and Electric Co. rates will rise over the next three years after state regulators on Thursday approved a cost increase of just under $408 million for the utility’s customers as part of the company’s multiyear rate plan.

Maryland’s Public Service Commission’s unanimous decision settles a monthslong disagreement between city leaders, advocates and utility stakeholders. The utility company filed an application in February seeking permission for a series of rate increases from 2024 through 2026.

Beginning in January, the average customer’s electric bill will increase by $4.08 per month and residential gas bill will increase by $10.43 per month. The commission said average increases will shrink in subsequent years, to 34 cents a month for electric and $2.80 a month for gas in year three.

The company sought an increase of $602 million, which it said “was necessary to cover continued investments in the electric and gas distribution systems in order to sustain safe and reliable service, and to increase system resilience in the face of Maryland’s increasing electrification goals,” according to a statement from the state’s Public Service Commission.

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“We are reviewing the details of the order, which appears to represent a balanced and reasonable outcome that will provide many benefits to our customers and the state,” the company said in a statement. “Importantly, the order ensures that BGE can continue to provide safe, reliable, and affordable services to our customers, while laying the foundation for the grid of the future.”

Maryland People’s Counsel David S. Lapp criticized the decision, saying the order fails to address the massive and risky fossil fuel investments that BGE has been making at a rate of more than $1.2 million a day.

“The order is more detrimental than beneficial to utility customers,” Lapp said. “We welcome the Commission’s acknowledgement that we raised ‘important issues’ and that it will later consider whether alternative ratemaking is in the public interest, but that is no consolation for the deleterious impacts on customers of the past three—or next three—years of rate increases.”

The Exelon-owned company has said the rate increases are the most cost-effective way to begin the infrastructure work required for Maryland to meet its 2045 net-zero emissions goal set by the Climate Solutions Now Act. Opponents have argued the plan is based on projected spending with little accountability and would pose a financial hardship for customers.

The commission found that a return on equity of 9.5% for BGE’s electric distribution service and 9.45% for BGE’s gas distribution service was supported by the evidence presented in the case.

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The commission said those are “comparable to returns that investors expect to earn on investments of similar risk, are sufficient to assure confidence in BGE’s financial integrity, and are adequate to maintain and support BGE’s credit and attract any needed capital.”

In testimony filed with the Public Service Commission in February, BGE sought to raise the total bill for an average gas and electric customer by more than $13 per month in 2024 and an additional roughly $17 per month by 2026.

The Maryland Office of People’s Counsel’s own estimates suggested the originally proposed rate increase would have been more costly for customers, with monthly gas and electric bills going up by as much as $77 in the winter by 2026.

A spokesperson for the People’s Counsel declined to comment Thursday evening.

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The ruling on Thursday comes after the commission approved an earlier batch of rate increases for 2021 through 2023. Company leaders said its expenses for those years ended up higher than what it was legally authorized to charge customers. BGE has also asked for approval to recoup funds to make up the difference.

BGE had also pointed to improvements made to the city’s conduit system — an asset it doesn’t own — as part of the reason it needed to raise rates again.

Correction: This story has been updated to correctly state that BGE asked for approval to recoup funds in addition to rate increases as part of its multiyear plan.