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 annual revenues by $30.1 million, representing a 7.5 percent increase in total operating revenues. The requested increase is necessary because the Company has incurred substantial costs to carry out a multi-year, transformative effort to upgrade its distribution infrastructure and vital information systems. The system modernization that will result from this transformative effort will ensure that safe, reliable and cost-effective service to customers is maintained over the long term.
The Company's request for additional revenues is typical for a regulated utility, seeking to upgrade its operating platform for the long-term benefit of customers. The Company's modernization efforts focus on eliminating the greatest areas of risk on the system, including continuing efforts to create an organizational structure that will oversee the replacement of aging infrastructure so as to optimize efficient distribution of gas and incorporate quality assurance. The Company also has experienced operating cost increases that are not accounted for in rates. Under DPU precedent, operating cost increases and the costs incurred by Columbia Gas in relation to its modernization effort cannot be recovered through rates without the filing of this request for a base-rate change.
If approved by the DPU, the change would impact the gas bill for a typical residential heating customer by $6.33 per month, or 6.8 percent, beginning March 1, 2014.
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 February 28, 2014.
"Relatively low and stable natural gas costs continue, and are expected to do so for the foreseeable future. This establishes 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.
"Our core business as a regulated natural gas distribution company is to build and maintain the infrastructure necessary to deliver natural gas in a safe and reliable manner to our 304,000 customers in the 65 cities and towns we serve. Columbia Gas is currently in an intensive multi-year transformative effort to modernize its systems for that purpose."
"These undertakings require sizeable capital investment and operating and maintenance expenditures," 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, representing over 20 percent of the Company's entire gas distribution system. During the replacement construction activity, approximately 50,000 customer service lines will also be replaced. Since 2004, Columbia Gas has already replaced over 300 miles of gas pipe. Bryant said, "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 relatively low due to an abundant domestic supply. On behalf of its customers, Columbia Gas works with natural gas pipelines and suppliers to secure the best possible commodity prices, while maintaining reliable gas supply for customers during peak demand periods.
Information on the DPU or any Columbia Gas filings is found on the DPU's website www.mass.gov/dpu.
About Columbia Gas of Massachusetts