Deal would cut gas-rate increase

The important issue not resolved is the structure of Dominion’s rates that residential customers pay.

STAFF REPORT

COLUMBUS — An agreement has been reached in the Dominion East Ohio natural gas distribution rate case that would benefit residential consumers.

The deal would cut the utility’s proposed $75 million increase by nearly half, according to the Office of the Ohio Consumers’ Counsel.

The distribution rate is a fixed charge representing the amount the utility collects for items such as the cost of delivery, billing and maintenance.

This rate has nothing to do with the cost of the gas, which is variable depending on the amount used.

The OCC said Tuesday that it, the Public Utilities Commission of Ohio staff, Dominion and other parties involved in the rate case signed the agreement late Friday. It must receive the approval of the PUCO commissioners before going into effect.

“This agreement benefits residential consumers by cutting Dominion’s proposed distribution rate increase by $34.5 million per year until the utility files another rate case. In addition, agreed-upon annual price caps and other changes to Dominion’s proposed pipeline infrastructure replacement plan would lift some of the cost burden on households and provide more accountability for costs,” said Janine Migden-Ostrander, OCC counsel.

In addition to lowering the amount of revenue collected from consumers, the agreement provides funding for Dominion’s energy-efficiency programs, which would increase from the current level of $3.5 million to $9.5 million per year. A collaborative group consisting of the utility, the OCC, PUCO staff and representatives from other parties in the case would monitor and evaluate the energy-efficiency programs.

As part of the agreement, Dominion will also provide $1.2 million of shareholder-funded money during the remainder of 2008 to local organizations for assisting customers in paying gas bills and using gas efficiently, according to Marty Berkowitz of OCC.

The agreement also places a cap on annual rate increases Dominion may seek to charge customers during an initial five-year period for its Pipeline Infrastructure Replacement plan. These charges to customers will provide funding for Dominion to replace unprotected cast iron and steel pipes with plastic.

The parties also agreed to Dominion’s recovery of its investment in new, automated meter-reading technology.

The OCC said the important issue not resolved through this rate case agreement is the structure of Dominion’s rates that residential customers pay, Berkowitz said.

The PUCO staff recommends increasing the utility’s flat-rate customer charge, while reducing the portion of the delivery charge that is based on the amount of natural gas used each month.

At a rate increase level of $40.5 million, the PUCO staff would increase a residential customer’s monthly flat-rate charge from $5.70 (in eastern Ohio) or $4.38 (in western Ohio) to $12.50 in the first year, and reduce the usage-based portion of the gas bill. In the second year, the flat-rate monthly charge would increase to $15.40.

The OCC continues to oppose raising the flat-rate customer charge because such a change in the rate structure would negatively impact customers who attempt to conserve energy and result in low-income, low-use customers subsidizing high-income, high-use customers, Berkowitz said.