BGE rate hikes and pricey infrastructure overhaul raise concerns among consumer advocates

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Maryland’s largest utility company has been scrutinized for continuing to raise rates amidst a massive, multi-billion-dollar infrastructure overhaul that critics say prioritizes profit over the needs of consumers.

The company has defended their pricing model and maintains that replacement of aging gas mains is critical to long-term safety and efficiency. BGE representatives also stressed the impact of federal and state policy on ratemaking, and how these investments are largely driven to be in-line with policy objectives.

Increased Rates

Baltimore Gas & Electric customers have seen increased costs in the summer months due to air-conditioning needs and rising electricity prices.

The subsidiary of Illinois-based Exelon serves approximately 1.3 million electric customers and 700,000 gas customers in Maryland. 

At the end of May, the Maryland Public Service Commission ordered BGE to shift the recovery of supply costs to the fall and spring to relieve the burden on consumers, according to Maryland PIRG. However, due to the high cooling costs in the summer, BGE customers will still see an increase on their bills. 

According to the company, customers can expect to pay a total yearly average in gas distribution charges that is $150 higher than in 2023, holding usage rates the same.

According to OPC, BGE’s gas rates have risen by 50% since 2020, outpacing inflation more than twice over. Electric rates have also risen by 30%. Rates for both gas and electric distribution have been outpacing inflation since 2013. 

The enactment of the 2013 STRIDE (Strategic Infrastructure Development and Enhancement Plan) Law, coupled with Exelon acquiring BGE in 2012 coincides with gas rates starting to outpace inflation rates. 

STRIDE was enacted by the Maryland General Assembly to accelerate the rate of replacement of aging natural gas infrastructure, which state and federal regulators had become concerned about — Maryland has the seventh highest cast iron inventory in the country but was at a below average pace in terms of replacement.  

All rates must be approved by the Maryland Public Service Commission after a lengthy process. The supply cost is largely out of the hands of utilities and regulators, while the delivery cost is managed by BGE and regulated by PSC. According to the company, rates have increased at a rate which is in line with state and federal policy.  

The company has tripled its profits since 2010, according to Maryland PIRG. In 2024, a group of former employees seeking to join a petition against the multi-year rate proposal accused the company of mismanagement and fraud — the PSC rejected the request as the deadline to join as a party had passed.

Their allegations centered around a former employee who had falsified contractor compliance audits.

A subsequent investigation by PSC found that the company had failed to adequately inspect the affected sections. The company conceded that the employee had failed to complete inspection reports but maintained that the former employee’s conduct did not compromise the safety of any gas mains.

The employees brought a separate discrimination suit against the company. In July, a Baltimore court denied a motion from BGE to hold the plaintiffs and their lawyers in contempt.

Operation Pipeline

BGE has heavily invested in replacing aging gas mains with new, plastic delivery systems as part of the decades-long, multi-billion-dollar Operation Pipeline, which began in 2010, according to the company. 

Emily Scarr, senior advisor for Maryland PIRG, said the STRIDE Law, which enabled the project, allows utility companies to prioritize sweeping investments over routine maintenance, and that these investments have not coincided with safer delivery. The amount of gas leaks has increased steadily over the past 15 years, according to data compiled by Maryland PIRG. 

This claim was refuted by a spokesperson for the company, who said the increase is due to a change in the way in which leaks are reported to the federal government. In 2018, the company worked with regulators to start tracking above-ground leaks, which were challenging to track due to typically being fixed rather quickly in comparison to below-ground leaks. 

The company maintains that below-ground leaks have decreased by more than 40% since the adoption of STRIDE.  

Scarr claims that more serious incidents than typical leaks have not been a result of aging infrastructure but rather of human error.  

“If you look at the major explosions we’ve had in the past decade, none of them have been because the pipes are old,” Scarr said.  

She alleged that two large gas explosions in Bel Air, in August 2024, and Columbia, in August 2019, were both caused by a “common trench” issue, that refers to gas and electrical lines being run through the same area beneath a building.  

The investigation into the Bel Air explosion, which killed a homeowner and BGE contractor, has not confirmed a direct cause, though the pipelines involved were only two decades old. BGE was fined over $400,000 for violating regulations for the Columbia explosion, which injured no one.  

“They’re spending a million dollars a day on Operation Pipeline,” Scarr said, and stressed the need for repairs of common trenches.

A representative from BGE clarified that their spending over the last 5 years equates to roughly $315,000 a day.

Operation Pipeline, according to BGE’s records, aims to replace aging cast iron and bare steel pipes with durable gas mains that should operate for decades. The project seeks to replace all infrastructure in place as of 2013 by 2043. 

According to a report from the Office of People’s Counsel, customers could pay a total of $15 billion over the course of Operation Pipeline. In 2022, BGE charged $107 million per year for the project. Given the current rate of investment, that could increase to $234 million yearly in 2032 and $386 million yearly in 2042.

A representative for BGE said that despite these high costs, the project is necessary to ensure safe and cost-effective delivery for customers long term. Additionally, regulators have only approved the company’s spending and rates through 2026. 

“If we didn’t replace this infrastructure, we were going to have to spend a lot more money every year to fix all of the leaks,” said John Frain, director of regulatory strategy and revenue policy at BGE. “The infrastructure that hasn’t been replaced is leaking at increasing rates over the last 12 years or so.”

According to company records, outmoded infrastructure represents only 12% of all BGE pipeline, but accounts for two-thirds of the leaks. Eighty percent of aging, cast-iron mains are located in Baltimore City, which has piping installed as early as 1864.

BGE estimates that the average Baltimore block will see a leak every 3-4 years with the cast-iron infrastructure, whereas the new, plastic mains could likely eliminate the probability of leakage over an individual’s lifetime.  

Additionally, the Pipeline and Hazardous Materials Safety Administration recommended to Congress that replacement of cast-iron mains is preferable to routine repairs. BGE maintained that its work is driven by exhaustive engineering and government recommendations in addition to making service safer for customers.

Wins for Consumer Advocates

Since there is no natural market competition in the utility sector, companies are regulated by the state. But without prudent guardrails — and without the economic need to please customers — consumer advocates allege that gas and energy distributors often prioritize profits over safety and customer satisfaction. 

A representative for BGE said that the company has invested 90% of its profits since 2021 back into gas and electrical systems.

“BGE should not be breaking ground on new gas pipeline replacements until they can demonstrate that their projects are cost-effective and properly prioritizing safety,” Scarr said.  

In a win for consumer advocates, the PSC ordered utility companies to stop subsidizing new customers’ connections to the gas system. Essentially, companies like BGE can no longer charge existing customers for pipeline extensions to meet the needs of new customers. 

Scarr applauded the decision and said that the decades-long practice of subsidizing extensions has hurt both customers and the environment while adding to the profits of companies like BGE.  

“By ending these subsidies, the Public Service Commission has struck a major victory for consumers, safety, and public health,” she said.

Analysis from OPC claims that the decision will save BGE and Washington Gas ratepayers $150 million annually.  

The United Way of Central Maryland estimates that 1 in 3 Maryland households struggle to pay utilities and other bills. In another win for consumers, BGE partnered with the nonprofit to help relieve some of the costs for middle and low-income customers.

Funded by a $15 million donation of shareholder dollars from Exelon and disbursed through United Way, BGE customers can receive assistance from $250 to $750.

“What’s in the best interest of our customers is in our best interest, too,” Frain said.  

This story has been updated to clarify some information and correct John Frain’s title.