Maryland regulators denied efforts Monday by Baltimore’s dominant utility provider to keep confidential an internal memo that sheds more light on a controversial deal the company inked earlier this year with Mayor Brandon Scott — an agreement a state watchdog says could cost ratepayers hundreds of millions of dollars in the coming decades.
The Public Service Commission’s ruling allows Baltimore Gas and Electric Co. 10 days to suggest redactions to the accounting memo — which it had entered as confidential evidence in its ongoing rate case — before the public can access the document.
The regulatory decision settles a dispute between BGE and the Maryland Office of People’s Counsel, an independent state agency representing customers in the 10-month rate case. The Office of People’s Counsel had argued in October and November filings that the Public Service Commission should unseal the document, while BGE pushed for it to remain classified.
What exactly the memo might reveal remains unclear, but it could prove consequential to the Public Service Commission’s decision on a portion of BGE’s rate case concerning the utility’s plans for financing its investments into the city-owned conduit system, a 741-mile underground network housing the wires that power homes, street lights and phone and internet services. Under an agreement BGE struck with the Scott administration earlier this year, BGE agreed to make improvements to the aging conduit, and the utility is seeking permission from state regulators to collect returns on those investments from its ratepayers.
In Monday’s order, the five-member commission said it has long worked to base its rulings in rate cases on publicly available information, arguing that no decision should rely on evidence “that is shielded from view by the public” — an outcome they said would render their verdict a “black box.”
While those party to the rate case, including the people’s counsel, have had access to the memo for months, the commission said transparency concerns still apply, since the watchdog’s client, Maryland ratepayers, have not been able to see it.
Over the course of BGE’s rate case, the Office of People’s Counsel has argued that the company should not be allowed to earn profits off its investments in the conduit, an asset it doesn’t own. The watchdog has estimated that the conduit deal could wind up costing ratepayers $860 million over the next 50 years, as customers foot the bill for BGE’s rate of return and for its taxes on those returns.
People’s Counsel David S. Lapp welcomed the decision Monday and praised the commission’s “recognition of the importance of transparency.”
BGE spokesman Nicholas Alexopulos said in a statement that while BGE disagrees with “the factual and legal basis” of the Public Service Commission’s decision, the company will comply with the ruling. And while the company believes the document should remain protected because it contains “confidential technical accounting information,” Alexopulos said the memo “clearly supports” the company’s arguments.
In a letter to the commission earlier this month, BGE stated that “the only reason” regulators and the Office of People’s Counsel have seen the memo at all is because the utility submitted it to the case record confidentially “in good faith and to be transparent.”
Alexopulos also pushed back Monday on the watchdog’s estimates about the long-term costs of the conduit deal to ratepayers, arguing that the deal allowed the company to reduce the rate increase it was was seeking by tens of millions of dollars. “Importantly, the memorandum and its accounting conclusions were confirmed by BGE’s independent and nationally recognized auditors,” he said in the statement.
BGE said that people’s counsel should have raised a complaint when it first received the confidential document on July 31 and pushed back on the watchdog’s position that the document should be subject to open records law.
While BGE had asked that the memo remain protected under an “accountant/client” privilege, regulators said nothing in the document covers confidential financial details, and that it instead addresses “the rationale” for the utility’s spending plan under its conduit deal.
Under the agreement between BGE and the city, the utility would receive access to the city-owned conduit by funding $212 million in system improvements between now and 2029 instead of paying rent. Those terms sparked an uproar in City Hall earlier this year — coming to a head in a dramatic meeting of the city’s spending board — as some elected officials pushed back on the deal in light of the recent voter referendum barring privatization of the underground system. The power company would also pay Baltimore an annual occupancy fee of $1.5 million.
In the past, BGE customers have helped cover about $28 million in annual lease payments for the utility’s use of the underground conduit system.
A subsidiary of the Chicago-based Exelon Corp., BGE pushed for the city to ink the deal in February before the start of its rate case, estimating since then that the deal allows ratepayers savings of $57 million over the next three years.
Emily Scarr, state director for the public interest advocacy group Maryland PIRG, applauded the Public Service Commission Monday “for ruling in favor of increased transparency” of BGE’s plans to finance investments in the conduit system.
“We hope the commission will also give tough scrutiny to BGE’s rate proposal related to the deal,” she said.
Asked earlier this month what would happen to BGE’s deal with the city if regulators deny the financing plan, a spokesperson for the utility pointed to terms of the agreement that would still hold the company to $120 million of investments into the conduit system.
BGE serves more than 1.3 million electric customers and 700,000 natural gas customers in Baltimore and the surrounding region and has asked to hike rates on customers over the next three years in order to cover the costs of more than $600 million in improvements to its infrastructure.
The Public Service Commission is expected to reach a decision in the utility’s application for a rate increase by Dec. 14.
