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FOR IMMEDIATE RELEASE
March 8, 2022 |
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Court Reverses Public Service Commission on Washington Gas Merger and Rate Issues, in Victory for OPC
BALTIMORE – The Public Service Commission should not have allowed Washington Gas to charge customers $8.6 million more than the utility promised its 2018 merger would save them, the Circuit Court for Baltimore City ruled last week in a case brought by the Office of People’s Counsel. The PSC also failed to properly review costs the utility proposed to recover for various projects, such as replacing pipes, the Court ruled.
“Washington Gas promised customers would see savings as a result of AltaGas’s acquisition, but then it tried to impose new costs,” said People’s Counsel David S. Lapp. “This decision sends a signal to the utilities—and the Commission—that promises made in merger cases can’t be later disregarded.”
On the merger savings issue, OPC argued—and the court agreed—that the Commission’s 2018 decision approving the utility’s acquisition by Canadian energy company AltaGas conditioned that approval on customers realizing at least $800,000 in corporate cost savings for each of the five years following the merger.
Instead of $800,000 in savings, Washington Gas argued before the Commission that it should receive a $7.8 million rate increase. The Commission accepted the utility’s argument that the rate increase was acceptable because of other claimed savings from the merger. But the court said that the utility and Commission’s argument “collapses under its own weight and under the plain text” of the merger condition, which required net customer benefits of $800,000. Between the promised merger benefit of $800,000 and the increase of $7.8 million in corporate costs that the court invalidated, the court’s decision on the merger issue benefits customers by $8.6 million.
Separately, the court agreed with OPC that the Commission had neglected its statutory duty to protect customers from exorbitant utility spending. The Commission performs this task in rate proceedings where it conducts a “prudency” review of utility expenditures and sets customer rates.
OPC presented evidence showing systemic problems with 14 Washington Gas projects, recommending prudency disallowances totaling more than $5 million. The Commission never actually decided whether the costs were reasonable but simplistically concluded that there was evidence upon which prudency “could” be found. The court concluded that the Commission failed to provide “any discernable reasoning” for approving the costs or disagreeing with OPC’s evidence.
“This decision requires the Commission to be faithful to its statutory duty of making sure that customers only pay costs that the Commission has reviewed and found reasonable,” Lapp said. “Faithfulness to that obligation is fundamental to protecting ratepayers from monopoly utilities.”
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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