BGE seeks commission approval for two network geothermal pilots, asks for regulatory asset to track costs

Baltimore Gas & Electric Co. (BGE) asked the Maryland Public Service Commission on the first day of the hearing to authorize a regulatory asset so the utility can defer and later recover incremental costs for two proposed pilot network geothermal systems required by the Warmth Act of 2024.

BGE said the pilots—one in Columbia (Verona at Oakland Mills and nearby community facilities) and one centered on Coppin State University in Baltimore—are conceptual at this stage and intended to test whether networked ground-source heat systems can provide a reliable, efficient alternative to burning gas. Joel Michel, representing BGE, introduced a team that includedLauren Urbanik (senior manager, strategic planning), Jennifer Hendrick (principal business program manager) and John Frane (vice president, regulatory policy and strategy).

BGE’s panel described the technology as a network of vertical boreholes connected by an ambient loop and circulated by a centralized pump house that serves multiple buildings. Lauren Urbanik told the commission BGE sees the pilots as supporting the state's decarbonization goals and said the technology “transfers energy rather than generates energy,” which reduces peak electric demand compared with other electrification options.

Why it matters

The pilots are presented as tests of feasibility, customer acceptance, technical design and financial viability for an approach that could both lower operating emissions and flatten electric load compared with widespread adoption of air-source heat pumps. If the commission approves cost recovery mechanisms now, BGE said it could proceed with design and contractor selection on the timetable in its filing.

What BGE proposed and the budgets

BGE said it narrowed more than 50 candidate sites through site visits and desktop geology and capacity screens to five, then two finalists. The Columbia pilot would link a roughly 200-unit multifamily property (Verona at Oakland Mills, owned by the Howard County Housing Commission) to community facilities including the Columbia Association community center and an ice rink that BGE proposes to use as a waste-heat source. The Coppin site would center on Coppin State’s residence hall and nearby low-income senior housing (St. Stephen’s Court, 72 units).

BGE’s filing presents conceptual budgets the company says reflect current expectations but will change during final design. BGE told the commission the two pilots together would cost about $83 million WITH estimated federal and state incentives (Investment Tax Credit and IRA/MEA support) and about $130 million without those incentives; BGE’s slide presentation also listed a $54 million estimate for Columbia and $44 million for Coppin as site-level conceptual numbers (BGE explained the two-site total does not equal the simple sum because of shared-cost synergies).

How BGE would own and recover costs

BGE told commissioners it intends to own the thermal network elements (vertical loops, ambient loop and pump house) and to take ownership of ground-source heat pumps for a limited period in order to qualify for tax credits that require company ownership (Frane: “we are merely asking for a regulatory asset that would allow us to defer and track the incremental costs associated with deploying these pilots.”). BGE asked the commission to recognize a regulatory asset now so those costs can be tracked and then evaluated for prudency in a future rate case; BGE said it would not seek to earn a rate of return on that deferred balance until a later rate proceeding determined an appropriate return.

Customer rates and opt-outs

BGE told the commission the Warmth Act requires pilot customers not to pay more than they would have paid for gas service the prior year. For that reason BGE proposed initial pilot customer rates set at the low end of each customer’s 2024 range and planned an annual true-up comparing each participating customer’s actual network-geothermal bill with what they would have paid for gas service. BGE said it would install BTU meters to learn how best to bill by energy consumption if network geothermal continues beyond the pilot.

Commissioner questioning and concerns

Commissioners pressed BGE on: whether ownership would be placed in rate base for the five‑year period required by the ITC, what would happen to below‑ground infrastructure if pilots ended early (BGE: it would abandon below‑grade pipe and remove above‑ground assets such as pump houses), and how the utility reached site selections. Commissioners repeatedly pressed BGE to justify the pilot costs (one commissioner said the two pilots together could reach roughly $130 million to serve a few hundred customers) and asked how scalable the work would be if it proved successful.

BGE acknowledged design uncertainties and said the pilots include behind‑the‑meter retrofits (electrifying appliances and replacing HVAC in units), which the Warmth Act requires and which materially increase upfront cost estimates. The company said it has conducted stakeholder outreach—labor, local governments, housing owners and community groups—and will continue to refine designs and cost estimates during the next phase. BGE also said it favors a regulatory asset track and not a customer surcharge for initial cost recovery but said it would not oppose a surcharge in principle if the commission preferred that approach.

Discussion versus formal decision

The commission did not vote on either pilot at this hearing. BGE’s filing requests formal authorization for a regulatory asset and budget approval so it can move to detailed design and procurement; commissioners took testimony and asked extensive questions but did not take final action. Any actual cost recovery or rate‑base treatment remains subject to later prudency review and the commission’s decisionmaking process.

Clarifying details and open issues

- Budgets: BGE presented conceptual totals of about $83 million for both pilots together with identified federal/state incentives and about $130 million without incentives; Columbia and Coppin site conceptual figures were shown as $54 million and $44 million. - Scope: Columbia pilot would include ~200 multifamily apartments and community facilities; Coppin would include campus housing and a 72‑unit low‑income senior property. - Ownership: BGE said it would own the vertical loops, ambient loop and pump house; it would own ground‑source heat pumps long enough to qualify for ITC and then transfer ownership as required by tax rules. - Customer protection: pilot customers are to pay no more than they paid for gas service the prior year, with annual true‑ups and potential adjustments. - Reporting: BGE committed to semiannual reporting and stakeholder updates; final design will determine contractor selection and whether particular construction tasks are performed by unionized crews or contractors.

What’s next

BGE asked the commission for prompt approval of the regulatory asset and pilot budgets so the company can meet the timelines in its filing and move to procurement and design. The commission left the record open for additional filings and follow‑up questions. Any decision by the commission to approve cost recovery or program budgets will include consideration of prudency and may include conditions to protect ratepayers.