Regulators should lower Washington Gas’s rates instead of raising them, OPC testimony says
BALTIMORE – Washington Gas’s proposed rate increase should be rejected and its rates slightly reduced, according to testimony the Office of People’s Counsel filed in the utility’s rate case. If the Public Service Commission adopts OPC’s experts’ recommendations, residential customers would avoid a rate increase of about 20 percent compared to current rates—and a total winter bill increase of about $18 dollars per month, on average*—and would instead see a slight rate decrease.
Washington Gas Light Company (WGL) requested a rate increase of $82.5 million; OPC’s expert witnesses are recommending a rate decrease of about $11.8 million. This decrease reflects a combination of recommended adjustments to WGL’s proposal, driven primarily by OPC’s request to substantially lower WGL’s proposed profit levels so that they are closer to the profit levels of competitive firms, from the utility’s proposed 10.85 percent to 6.74 percent.
“Utilities are monopolies with captive customers,” said Maryland People’s Counsel David S. Lapp. “Utility investments are low-risk and it is unjust for their shareholders to receive profit levels significantly higher than firms subject to competition. Those excessive profits elevate shareholder interests over affordability for customers.”
A utility’s profits are largely determined by the return on equity (ROE) that the Commission awards to the utility. WGL has proposed an ROE that is based on improper and biased assumptions regarding the company’s cost of equity, OPC’s expert witness explains. The witness recommends setting the ROE using objective measurements of unbiased asset managers and academic institutions rather than relying on utility witnesses whose estimates of the cost of equity “are significantly different from the estimates produced by the far larger group of financial and academic experts regularly working in the financial markets across all industry sectors.”
The gap between what investors actually require for a return and what utility witnesses recommend “is generally not discussed in regulated utility proceedings, but it is well-known in the financial and academic world,” OPC’s expert explains.
OPC also presented testimony concluding that WGL has not met its burden of showing that $115.1 million of recent spending for its Strategic Infrastructure Development and Enhancement (STRIDE) program was reasonable and prudent. STRIDE is a 2013 law that allows gas utilities to benefit from accelerated cost recovery for work to replace aging infrastructure.
On STRIDE, OPC’s expert witness concluded, among other points:
- Excavation and vehicle damage are the leading causes of federally reportable explosion and ignition events on WGL’s system.
- Replacement of a steel service pipe (a pipe that connects a gas main pipe to a building) with plastic pipe provides little if any net benefit in reducing safety incidents, and WGL failed to compare the costs and benefits of replacing service lines to reduce leak frequency.
- WGL moved forward with STRIDE projects despite having information showing that costs outweighed the projected benefits.
- WGL failed to evaluate whether alternatives, such as relining and non-pipeline alternatives, could have reduced the cost of its risk-reduction activities.
- WGL has an obligation to operate a safe and reliable system, but its decisions have misallocated resources away from fulfilling that obligation.
After further rounds of testimony, the PSC will hold evidentiary hearings on WGL’s requested rate increase starting on May 18, 2026. The PSC will hold public hearings in which customers can comment on its proposal; public hearing information will be posted on the PSC website here. A ruling on WGL’s proposed rate increase is anticipated in July 2026.
*Based on WGL’s proposal to increase the monthly customer charge by $3.58, increase the dollars-per-therm rate for residential heating customers by $0.0886/therm, and an assumption of 160 therms per month winter usage. $3.58 + ($0.0886 x 160) = $17.76
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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