City Council President Nick Mosby will call for an oversight hearing into the Scott administration’s discussions with Baltimore Gas and Electric to give the private company more control over the city-owned conduit system, a 741-mile underground network home to wires for street and traffic lights, as well as phone and internet service.
A draft proposal written by BGE, reviewed by The Baltimore Banner, calls for the city to stop charging the company franchise fees in exchange for paying for as much as $124 million in system improvements during a four-year period between 2023 and 2027.
The plan would move oversight of maintenance and improvement efforts from the city’s transportation department to BGE, which City Council President Nick Mosby said would leave the conduit a city asset in name only.
“To move into the direction of giving up control of it is problematic, particularly when we have no real analysis or research from the administration about why they want to do this,” the Democrat said. Pointing to a recent successful ballot measure that prevents the sale of the conduit to a third party, he said he plans to call for a hearing into the proposal.
The city currently charges BGE $2.20 per foot for use of the system, a rate approved by the Maryland Public Service Commission. BGE utilizes more than 75% of the conduit and pays Baltimore about $30 million in fees a year.
Acting city solicitor Ebony Thompson said the city is still in negotiations with BGE and, should the proposal be approved, it would still receive money from the company, but in the form of capital improvements instead of occupancy payments. She said the proposal would translate to $34.5 million of direct investment into the conduit each year for the next four years.
The draft agreement says all decisions on improvements would be up to BGE. The city would still be able to negotiate, or renegotiate, agreements for other companies to use conduit space.
BGE’s proposal is part of an amendment to a 2016 lawsuit settlement agreement between Baltimore and BGE, in which the city pledged to spend revenues on repairs to the conduit. Scott’s office has said the costs of maintaining the conduit outweigh the revenue it collects by about $7 million to $8 million every year.
The agreement is set to go before the mayor-controlled spending board on Feb. 15. The negotiations were first reported by The Baltimore Brew.
“By comparison, the city received approximately $28,000,000 per year in occupancy payments from BGE under the previous agreement,” Thompson said. “This amounts to a substantial increase while again preserving the city’s ownership of the conduit.”
She said that other companies that lease conduit space will continue to pay Baltimore, not BGE, should the proposal be approved.
In a statement, BGE spokesperson Talon Sachs said the company is focused on delivering reliable and safe energy to our customers.
“BGE relies on a healthy conduit system in Baltimore City to provide reliable power to customers and is in discussions with the City to determine how to ensure both going forward,” they said.
BGE’s failed attempt to buy conduit system outright
The utility company tried to buy the conduit from Baltimore in 2015 during Mayor Stephanie Rawlings-Blake’s tenure, offering the city $100 million. The Democrat turned down the deal and tripled the conduit’s fees from 98 cents to $3.33, in accordance with state regulations.
BGE responded with a lawsuit. In 2016, the city spending board and then-acting City Solicitor David Ralph approved a settlement for the lawsuit, which lowered the rate at $2.20 a foot. Ralph now serves as BGE’s general counsel; the company’s new proposal is an amendment to the 2016 settlement.
Catherine Pugh, who received significant financial support from BGE executives in her 2016 race for mayor, succeeded Rawlings-Blake a month after the lawsuit was settled. In 2019, then-City Council President Bernard C. “Jack” Young introduced a charter amendment to prevent Baltimore from selling the conduit, arguing that keeping the network in the city’s hands would prevent the privatization of basic services.
After Pugh resigned amid a corruption scandal and Young automatically succeeded her as mayor, the charter amendment passed successfully out of the council with support from then-City Council President Brandon Scott, who later bested Young in the 2020 Democratic primary for mayor.
In October 2022, weeks before the amendment was due to appear on city ballots, the Scott administration put a contract with FMI Capital Investors, a consultant firm that advises on conduit and telecom evaluations, before the mayor-controlled board of estimates. It stipulated payment as an upfront flat fee of $50,000 and a “contingent one-time transaction fee equal to a portion of any profit from a future deal, should it be able to identify a profit-making venture that the City accepts.”
Young took the dramatic step of criticizing the contract at a city spending board meeting, backed by Mosby and Comptroller Bill Henry, saying its terms incentivize FMI to recommend selling the conduit and that voters deserved to weigh in on the charter amendment. Mosby deferred a vote on the contract until after the election.
City voters overwhelmingly passed the measure with 77% support; the spending board later approved the contract. The acting solicitor, a Scott appointee, later introduced rules to limit the ability of board members to defer spending items up for a vote — a move Mosby called an unnecessary power grab.
Thompson said FMI has not yet finished its review or issued recommendations to the city. Mosby questioned the decision to discuss the terms of BGE’s proposal before the review was complete.
“Before a consulting agreement is even reported back out to the Board of Estimates, the administration already has a deal in place to basically take away the working capital that the city receives every single year, allowing this privately-held institution to control the priorities associated with the conduit system,” Mosby said.
Henry said he would like to see evidence that the combined proposed efforts of BGE and the city would be sufficient to fully cover the capital and operating needs of the conduit.
“It would be a mistake to make a long-term commitment to anything less, without including some expectation of eventually escalating BGE’s contribution to the point where it meets our actual needs,” he said.
Henry added that he will ask the Department of Audits to determine whether this deal would provide comparable transparency and accountability to continuing capital work in-house.
When the city spends capital planning dollars, it must take equity into consideration, a condition that Mosby noted does not apply to a private utility company.
“Equity is supposed to be at the core of what we deliver to our residents. So that’s another added angle of the city giving up its complete and total control over where projects are done,” he said.
Thompson noted that BGE has exceeded Public Service Commission requirements to outsource its own contracts to minority and women-owned businesses and said the proposal, if successful, will have no impact on efforts to expand broadband services for city residents.