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Regulators order rate reduction

Washington Gas told to refund $7.5 million

(Published November 4, 2002)

By KATHRYN SINZINGER

Staff Writer

Washington Gas has been ordered by the D.C. Public Service Commission to refund about $7.5 million in the form of reduced rates to nearly 150,000 households and businesses in the District that heat with natural gas.

The rate reduction takes effect on Nov. 8 and comes on the heels of an early onset of frosty temperatures for the Washington area. The commissionís order, issued Oct. 29, estimates that average residential customers of the gas company will see their bills fall 7.9 percent and commercial customers will get a 7.4 percent break.

D.C. Peopleís Counsel Elizabeth A. Noel, who filed a complaint on behalf of D.C. consumers in February 2000 that challenged the "reasonableness" of Washington Gas rates, hailed the commissionís decision as a "slam dunk" for natural gas customers.

"This winter, consumers can rest assured that their rates will not be affected by Washington Gasís greed," she said. "At a time when the company demanded consumers assume a variety of shareholder costs, we are now reassured that these savings will remain in the pockets of D.C. consumers, where they belong."

The Office of the Peopleís Counsel alleged, and the commissionís order agreed, that Washington Gas has been earning more than its authorized rate of return as a regulated utility. The order also denied the gas companyís consolidated request for a $16.3 million rate increase and called the companyís proposal to increase several miscellaneous fees Ė including maximum customer deposits, reconnection fees and charges for dishonored checks Ė "unreasonable."

The rate case was the first for Washington Gas since 1994, when the commission set the basic rate structure under which the companyís customers are currently charged. The timing of the commissionís decision caused WGL Holdings Inc., the parent company of Washington Gas, to delay its scheduled Oct. 30 announcement of fiscal 2002 year-end financial results. That announcement was expected, at press time, to be made on Nov. 4.

Washington Gas spokesman Tim Sargeant said company officials were "very disappointed" by the commissionís decision and were "analyzing the impact this may have on our company."

In a dissenting opinion, Public Service Commission member Anthony M. Rachal III expressed concern that the three-member commissionís decision "fails to recognize the realities of the marketplace, which support the need for higher funding levels." He said he believes commission Chairman Angel M. Cartagena Jr. and Commissioner Agnes A. Yates, in the majority opinion, rejected "appropriate" charges for employee acquisition and consumer education that should be included in the companyís costs of service, which get passed along to consumers.

"While I am in favor of a rate decrease, the position supported by the majority in this case is aimed at providing ratepayers with the largest decrease possible, without giving full consideration to the ultimate consequences for consumers and the company," Rachal wrote in his dissent.

He cautioned that the decisionís "potential long-term ramificationsÖmay have a detrimental impact on future rate stability, and the financial security of the company" and force Washington Gas "to prematurely re-file a rate case in the very near future, which may in fact support a significant rate increase." He also noted the high costs associated with a rate case, which Washington Gas estimated at more than $1.4 million for its own costs.

Rachal based at least part of his support for a rate decrease on "a blatant error identified by Commission staff" that was not addressed in the majority order. Correcting the gas companyís error in overstating the Districtís gross receipts tax attributable to its regulated sales and distribution of natural gas "would likely decrease rates to District ratepayers by approximately $850,000," Rachal said.

"For ratepayers, this situation adds insult to injury by requiring ratepayers to pay excess taxes on revenue unrelated to [Washington Gas Lightís] utility function," Rachal wrote. "In my opinion, WGL is overcharging ratepayers for this additional amount of Gross Receipts Taxes associated with non-utility services."

The commissionís order referred to an upcoming "Phase II of this proceeding" during which it would consider the tax matter and other issues. The order directs Washington Gas "in its next rate case to explain its capital structure fully and clearly, including specifically the basis of its choice between historical and daily average short-term debt figures." The utility further was ordered to file quarterly reports with the commission of its "weather normalized, jurisdictional earned returns" and to work with commission staff to address questions related to disconnection of Residential Essential Service customers.

Copyright 2002, The Common Denominator