Washington Gas rate case decision gives company $10.1 million of $42.5 million requested rate increase
BALTIMORE – State regulators on Thursday denied Washington Gas Light Company’s request for a $42.5 million rate increase, approving a far-reduced increase of about $10.1 million that relied heavily on arguments and evidence introduced by the Office of People’s Counsel.
The order by the Maryland Public Service Commission also put the company on notice that gas utilities must “consider the likely contraction in gas consumption in all capital expenditure plans” when proposing future rate increases. The Commission denied some of OPC’s recommendations to reduce gas infrastructure spending but warned that gas utilities “must consider all cost-effective non-pipeline alternative options . . . and not solely pursue infrastructure replacement’’ if they are to obtain approval of such expenditures in the future.
“The Commission’s decision is a small but welcome step forward toward reducing the risk that customers will be saddled with costs for fossil fuel investments that become obsolete as electrification takes hold,” Maryland People’s Counsel David S. Lapp said. “Much more action will be needed to mitigate the full impacts of Washington Gas’ spending.”
OPC continues to evaluate the monthly bill impact on residential customers. The Commission stated it will increase the average monthly bill for residential heating customers by 35 cents and will reduce the average monthly bill for residential non-heating customers by $1.26—not including the 30-cent monthly increase in the fixed service charge customers pay each month.
The Commission’s order agreed with OPC that the company’s proposed rate increase included significant amounts for projects that should not have been included as part of the rate case because they were completed too late to be included.
“The decision appropriately rejected Washington Gas’s efforts to circumvent basic ratemaking principles to inflate its request for a rate increase,” Lapp said.
Among others, highlights of the order include:
- Finding that the company failed to show how its proposed rates reflect at least $800,000 annually in corporate cost savings following its July 2018 merger with AltaGas, Ltd., an issue the Commission will take up after the Maryland Supreme Court rules on OPC’s appeal of the utility’s last rate case on how to calculate the customer savings required in 2018 as a condition for merger approval.
- Rejecting the company’s request to increase its monthly residential system charge to $12.15 from the current $11.55, approving a 30-cent increase to $11.85, instead, citing testimony from OPC and its own staff.
- Agreeing with OPC and Commission technical staff that costs for long-term employee compensation incentives should not be allowed at all, while eliminating 20 percent of the short-term employee incentive compensation expense based on OPC’s expert’s recommendation.
- Disallowing certain costs related to the company’s call center, whose poor performance contributed to customer service problems that resulted in an OPC complaint and a Commission $1,147,600 civil penalty. Commission technical staff recommended the disallowance in expert testimony.
- Removing $418,936 in promotional advertising expenses and certain expenses charged to ratepayers for Washington Gas’s membership in the American Gas Association, reflecting lobbying and activities “such as advocacy for the gas industry that primarily benefit shareholders” despite not being classified as lobbying.
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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