Washington Gas’s rates should be reduced, not increased by $49.4 million per year, OPC tells regulators
BALTIMORE – Washington Gas’s request to the Public Service Commission for a rate increase of $49.4 million per year should be rejected, the Maryland Office of People’s Counsel said in testimony filed Friday with the Public Service Commission. Instead, the utility’s rates should be slightly reduced, OPC said.
Washington Gas in 2022 added $58 million in new gas distribution infrastructure—4.5 times more than over the previous four years combined. That spending is driving a 19 percent increase in distribution charges the utility is requesting in the rate case, OPC explained in its testimony.
“The same year that the General Assembly passed the Climate Solutions Now Act and stated its intent to electrify Maryland’s buildings, Washington Gas significantly expanded its spending on its fossil gas system, locking in costs it expects to recover over decades to come,” People’s Counsel David S. Lapp said. “These investments would be unreasonable and imprudent if they occurred in a competitive market. They are equally unreasonable in a regulated monopoly market and come at a high cost for customers.”
OPC filed the testimony of five expert witnesses Friday in the ongoing rate case that was triggered by Washington Gas’s May 18, 2023, rate hike request. Among other points, OPC’s testimony explained:
- Regulators should reject WGL’s proposed recovery of $425,190 in advertising expenses to promote WGL services to attract new customers. OPC’s testimony explains that promotional advertising should be excluded from rates because it provides no direct benefits to customers and is not in the public interest—in part because advertising for new gas customers is inappropriate given changes in technology and State policy goals.
- Demand for gas in WGL’s service territory has declined over the past five years. Residential gas consumption accounts for about three quarters of consumption for the utility, and it is likely that declines are due to electrification of appliances and home heating, which can be expected to continue.
- For large capital projects costing customers tens of millions of dollars, the company does not track its cost estimates to see how they compare to actual costs. OPC recommends a disallowance for imprudent management for this failure.
- Washington Gas’s existing customers pay significantly for the utility to add new customers. In 2022, the utility spent $61.1 million for new customers, while those new customers contributed just $1.0 million. The utility’s customer extension policy assumes new customers will receive service and pay for the gas infrastructure for 30 years. OPC said the utility should revise its policy to account for the likelihood that new customers will leave the system or substantially reduce their consumption over the next ten years.
- Washington Gas’s corporate costs that the company said would go down from “synergies” resulting from its 2018 merger with Canadian-based AltaGas instead have increased by over $8.5 million. OPC’s testimony argued that to reflect the merger savings promised, the utility’s requested revenue increase must be reduced by $8.1 million.
The Commission will hear comments on Washington Gas’s rate-increase proposal in a virtual public hearing beginning at 7 p.m. Thursday, September 21st. The deadline for registering to speak at the public hearing is noon on Monday, September 18th, and written comments must be filed electronically or by first-class mail by November 6, 2023. For information on how to participate in the hearing, watch it on the Commission's YouTube channel or to submit written comments, see the Commission’s notice here.
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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