PSC issues decision in Washington Gas rate case
BALTIMORE – Washington Gas Light Company (WGL) deserves less than half of the revenue increase it sought from ratepayers, the Maryland Public Service Commission determined this week, accepting certain positions advanced by the Office of People’s Counsel.
The PSC awarded WGL a $38.1 million revenue increase, cutting WGL’s requested revenue increase of $82.5 million, but stopping well short of reducing the company’s overall revenue, as OPC had recommended. The PSC’s decision partially agreed with OPC that:
- WGL failed to demonstrate it had complied with earlier Commission orders and the 2025 Next Generation Energy Act (NGEA) to evaluate alternatives such as pipe repair before replacing pipes. The PSC, citing to its prior orders and noting the NGEA’s requirements, thus disallowed WGL’s request to recover—through regular rates—about $2.7 million for STRIDE accelerated pipe replacement projects that began construction after January 1, 2024.
- WGL’s PSC-set authorized profit level—its return on equity (ROE)—should decrease. The Commission awarded WGL an ROE of 9.40 percent, reduced from WGL’s request of 10.85 percent. That reduction accounted for approximately $17.6 million of the PSC’s $44.3 million overall reduction from WGL’s requested revenue increase of $82.5 million. (WGL’s prior ROE from its last rate case was 9.50 percent.) OPC argued for a substantially lower ROE of 7.07 percent—closer in line with overall stock market returns.
- WGL’s requested depreciation expenses—generally, the reduction in value of a previously purchased asset over a year—were overstated and should be reduced significantly. The PSC reduced WGL’s depreciation expense revenue by $12.3 million, about half of OPC’s recommended reduction of $23.6 million.
- WGL overstated or failed to justify other costs such as certain employee incentive costs.
- WGL’s monthly residential customer charge should remain at its current level of $11.85.
- WGL’s proposed large-load tariff for data centers and other large facilities is premature and lacks clear ratepayer protections.
Regarding the $2.7 million denial of STRIDE projects from 2024 and after, the PSC will still permit the company to recover costs for the “disallowed” projects through the STRIDE surcharge on customer bills—and will allow the company to seek rate base recovery of those projects in the future. Thus, Monday’s order provides little ultimate relief for ratepayers from those costs despite the PSC’s finding that WGL has not demonstrated compliance with its orders for alternatives analysis—which the NGEA likewise requires.
“We commend the PSC for rejecting Washington Gas’s request for customers to pay record-level profit levels to grow shareholder returns,” People’s Counsel David S. Lapp said. “But the PSC-set rates continue to reflect equity returns far in excess of what a monopoly utility company with captive customers should be permitted to earn.”
“We are encouraged by the PSC’s finding that WGL had failed to demonstrate compliance with its orders and the NGEA’s amendments to the STRIDE statute,” Lapp continued. “The PSC’s decision, however, is disappointing in that it allows the utility to continue collecting under a customer bill surcharge for projects for which the utility has not shown that it performed the alternatives analysis the PSC itself required.”
For more information on gas utility regulation, including the Future of Gas proceeding and STRIDE, visit OPC’s website.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers in 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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