Baltimore Gas and Electric defended its controversial conduit deal with Mayor Brandon Scott during another marathon probe into the agreement Thursday, arguing the arrangement will bring long-term benefits for an aging city asset while delivering millions in costs savings to utility ratepayers.

Over the more than three-hour hearing, council members drilled BGE and the Scott administration on the utility’s newly proposed rate increase, the merits of the conduit deal and its the impacts for maintenance of the valued system. The contract would allow BGE, a private utility, access to the city-owned underground conduit by footing the bill for repairs to the network instead of directly paying city fees, an arrangement that has drawn intense backlash in some corners of city government in light of last year’s citywide vote barring privatization of the system.

Charles Washington, vice president of external and governmental affairs for BGE, pitched the benefits of the conduit deal to the city and to residents Thursday night and said that, by inking the deal, the company was able to request a $50 million lower rate hike before Maryland utility regulators last week — costs that otherwise would be passed along to customers. And concerns that deal gives BGE unilateral control over investments in the system are unfounded, Washington argued, in part because provisions in the contract require require monthly meetings with the city, and because the agreement ensures that investments benefit all other occupants as well.

The Baltimore Banner thanks its sponsors. Become one.

A 741-mile underground network of tubing housing the wires that power street lights, traffic signals and phone and internet services, Baltimore’s conduit system has become the center of fierce criticism toward the mayor from City Council President Mosby and other council members since the weeks before Election Day, when Baltimoreans were set to vote on whether the city should ban the sale or privatization of the system.

The hearing comes during an uncertain time for the conduit deal. The Scott administration has clashed with other elected officials over a basic question: whether or the city has already approved the contract with BGE. In a dramatic showdown last week, the mayor and two appointees forced the BGE contract through the city’s spending board despite a boycott by City Council President Nick Mosby and Comptroller Bill Henry, who each maintain that the vote taken in their absence was illegitimate.

Henry has included the contract on the agenda for next week’s Board of Estimates meeting, setting up another potential clash there between the mayor and the other elected members of the panel.

The Scott administration has insisted that the contract is already approved.

“It’s passed, it’s filed, it’s done,” Acting City Solicitor Ebony Thompson, an appointed member of the Board of Estimates, told council members Thursday, though she added that the administration would have no issue voting on it again next week.

The Baltimore Banner thanks its sponsors. Become one.

Mayor Brandon Scott and Ebony Thompson, City Solicitor, walk to talk to media after the Board of Estimates meeting at City Hall in Baltimore, February 15, 2023. (Jessica Gallagher/Jessica Gallagher)

Impacts for ratepayers, maintenance of the system

While the conduit deal has been public for just under a month, the Scott administration has insisted the city needed to move quickly to approve it ahead of BGE’s rate case before Maryland utility regulators, a 10-month process that kicked off with a filing deadline last Friday. If the city had missed that deadline, Scott and other officials have suggested BGE was prepared to sue.

BGE requested an average annual rate hike of $10.36 per month over three years, or an increase of about 5% a year for customers receiving both gas and electric service from the utility, in its initial filing to the Public Service Commission last week.

Thompson said Thursday that changes likely can’t be made to the contract with BGE, since the deal has been finalized and filed with regulators, and echoed BGE’s statements that the arrangement has delivered $50 million dollars in savings to ratepayers over the next three years.

“During our negotiations with BGE, we went from reaching an impasse that would have likely resulted in litigation,” said Thompson “to sitting down and negotiating a creative solution that resulted in securing a historic $134 million investment in our conduit,” all while the city can retain “100% ownership” of the system in line with the charter amendment passed in November.

The Baltimore Banner thanks its sponsors. Become one.

Councilman Eric Costello, who chairs the investigatory committee, pushed back on those arguments, suggesting that the new agreement could alter what has been a good relationship between BGE and city. The two parties have always agreed in the past because they had to, but with the “unilateral” decision-making power that BGE has under the new contract, Costello said that dynamic could change.

“BGE has always been a great partner to the city. No question about that,” he said. “But they don’t have to with this new contract.”

Also testifying at Thursday’s hearing were Comcast, Quantum and Crown Castle, companies that also utilize the conduit but occupy a fraction of BGE’s real estate. Those tenants haven’t taken a side on city’s agreement with BGE, but stressed that they have a host of unanswered questions, including how the deal will impact their lease payments to the city, and whether the utility giant will invest in parts of the system important to the other companies.

BGE uses about 75% of the city-owned conduit, paying $2.20 per foot, a rate approved by the Maryland Public Service Commission, which translates to payments of about $28 million a year, the city’s finance department has said.

Under the terms of the new contract, BGE would no longer directly pay the city access fees in exchange for paying for $134 million in system improvements during a four-year period between 2023 and 2027. The power company would also pay Baltimore an annual occupancy fee of $1.5 million, terms the administration has argued deliver a win for Baltimore residents and provide much-needed investment in the condition of the conduit.

The Baltimore Banner thanks its sponsors. Become one.

Scott’s administration has argued that the city has been losing $7 million a year on maintenance of the system, a claim that finance officials walked back on Thursday. Deputy Finance Director Bob Cenname said that figure was incorrectly reported by the administration, and said the point they were trying to get across is that the condition of the conduit is declining and in need of investment.

Mosby, who has been one of the most outspoken critics of the deal, honed in on that $7 million calculation, noting that the administration had “aggressively” touted those losses as a key justification for the contract. The administration’s backpedal on the claim is another example of poor communication with other elected officials, he said, on an issue that has been “kind of the crux of the matter, our main concern about this really rushed deal.”

NAACP calls for halt to agreement

Ahead of Thursday night’s hearing, the NAACP and a group of Black former BGE employees called on Scott to put the brakes on the deal with BGE, questioning how the city could move forward with the agreement without first addressing allegations that the company has fostered a work environment of intense racism.

The Baltimore Banner thanks its sponsors. Become one.

Those claims were outlined in a lawsuit filed by former BGE employees last April, according to reporting in the Baltimore Sun. The case has been kicked back to state court after being elevated to federal court, and attorney Tonya Baña said her side is filing an amended complaint outlining two additional discrimination complaints.

“Our issue is not so much with the contract. Our issue is with the process,” said Baltimore NAACP President Rev. Kobi Little, who called on the city to implement a thorough vetting process to ensure that it’s not doing business with companies with a track record of discrimination.

Malik Smith, one of the original plaintiffs in the lawsuit recounted Thursday that his supervisor when he was a young employee at BGE tied a noose in front of him and made threatening statements about it. Smith reported the incident to higher-ups at BGE, but no disciplinary action was taken, according to the lawsuit. Years later, Smith said he was fired after testing positive for traces of medical marijuana, a justification the lawsuit alleges was used as pretext for his termination.

“Thirteen years I gave to BGE, and they took my career,” an emotional Smith said Thursday.

At the hearing, Washington declined to comment directly on the allegations of the lawsuit but said an employee cited in a recent complaint has been fired, and added “in the strongest possible terms” that BGE “denounces racism.” Washington also defended BGE’s track record of work with minority-owned contractors, noting that the company “consistently” surpasses Maryland regulatory targets to contract with minority-owned business for at least 25% of its work, reporting that the utility has hit 44% in each of the last two years.

An initial investigative hearing called by Mosby earlier this month lasted for over four hours, ending with subpoenas on a slew of documents, including an accounting of maintenance fees and revenue produced by the conduit. The council received hundreds of pages of documents back, which members did not have time to review before the meeting.