Columbia Gas of Massachusetts files new rates with the DPU
Filing seeks DPU support to facilitate aggressive plan to replace aging natural gas pipes and enhance public safety
Westborough, MA., Columbia Gas of Massachusetts, a subsidiary of NiSource Inc. (NYSE: NI), today filed a petition with the Massachusetts Department of Public Utilities (DPU) to increase total annual revenues by $29.2 million, or 6.4 percent. The primary reasons prompting the Columbia Gas request include seeking DPU support to establish an ongoing infrastructure replacement program that relies on capital cost recovery in a timely, adequate and predictable manner, and recovering operating costs incurred to provide safe, reliable and cost-effective service to customers.
The Columbia Gas request for additional revenues is typical for a regulated utility, seeking base rate adjustments for changes in costs to deliver natural gas to its customers, such as operations, maintenance and repairs, wages, healthcare costs and inflation. Yet the current request also seeks a change in ratemaking policy necessitated by significant ongoing replacement of aging natural gas infrastructure. This activity is expected to continue for the next several years as Columbia Gas replaces steel and cast iron gas mains with safer, more reliable plastic pipe. A significant amount of the steel pipe was installed in a relatively short period of time, in the 1950s and 1960s. These facilities are now reaching the end of their useful life.
If approved by the DPU, the change would impact the gas bill for a typical residential heating customer by $6.10 per month, or 5.8 percent, beginning November 2012.
The filing marks the beginning of the public process of rate setting for a utility, as required by the DPU. Public hearings on the filing will be held within the next several months. A decision on the filing is expected by October 31, 2012.
“With the lowest natural gas costs we’ve seen in a decade, and the expectation that low gas costs will continue for the foreseeable future, this is an opportune time to keep our attention focused on rebuilding infrastructure. The delivery of natural gas to customers requires solid infrastructure, both in terms of the pipeline facilities used to distribute gas across the system and in terms of the information systems used to support financial, customer and field operations,” said Steve Bryant, president of Columbia Gas of Massachusetts.
“The core activity of Columbia Gas as a regulated gas distribution company is to build and maintain the infrastructure necessary to deliver natural gas in a safe and reliable manner to our nearly 300,000 customers in the 61 cities and towns we serve. Columbia Gas is currently in an intensive effort to evolve our gas distribution and information systems to a place where the known physical vulnerabilities having the potential to affect the public safety are eliminated. “
“These undertakings require sizeable capital investment and operating and maintenance expenditures. In addition, in recent years we have increased our focus on employee safety. While these efforts have provided admirable returns in the form of reduced employee injuries and avoidable vehicular accidents, there is a cost related to time spent with employees to continually reinforce the benefits of safe work practices,” continued Bryant. “In order to keep all these activities moving forward, we look forward to working with the DPU during this proceeding to structure a ratemaking process that enables the rebuilding program to rely on a reasonable and measured method of capital cost recovery that is timely, adequate and predictable,” said Bryant.
Columbia Gas operates one of the largest natural gas distribution systems in Massachusetts, with underground pipes spanning nearly 5,000 miles and currently has a range of vintages. The infrastructure replacement program targets 1,100 remaining miles of aging natural gas pipe needing replacement. During the replacement construction activity, over 50,000 customer service lines will also be replaced. Since 2004, Columbia Gas has already replaced over 270 miles of gas pipe. Bryant said, “We continuously monitor our gas system, making needed repairs and fixing leaks as situations require. However, we want to aggressively execute our public service obligation in a steady and proactive fashion by replacing the known aging infrastructure until it’s all gone. An ongoing program to rebuild our infrastructure will also provide a steady stream of good jobs and positive economic activity for years to come.”
Base rates only include those costs associated with the delivery, distribution and customer services operations for Columbia Gas. Base rates typically represent approximately 36 percent of a customer’s total bill. The base rate increase requested is not related to the cost of the natural gas commodity costs, which are directly passed through to the customer on a dollar-for-dollar basis. Natural gas commodity costs have been steadily declining due to an abundant domestic supply. In fact, proposed gas commodity costs for customers for the summer season effective May 1, 2012 are 31 percent lower than last year. As a result, when the commodity reduction is applied to a typical residential customer’s total monthly bill during the summer season, it is reduced by 13.3%, or $5.61.
The impact of the customer’s bill associated with the Columbia Gas base rate increase proposal is softened due to anticipated lower gas commodity costs going forward. On behalf of its customers, Columbia Gas works with natural gas pipelines and suppliers to secure the best possible commodity prices, while maintaining the reliability of gas supply to customers during peak demand periods.
Information on the DPU or any Columbia Gas filings is found on the DPU’s web site www.mass.gov/dpu.
About Columbia Gas of Massachusetts.