New England Gas Seeks 13 Percent Rate Increase
Sep. 2–With gasoline and heating oil prices at record highs and an electricity rate increase on the horizon, Rhode Islanders are now facing another price spike on the energy front.
New England Gas yesterday asked state regulators for a rate increase that would raise a typical heating customer’s bill by 13 percent, or about $188 a year.
The company asked the Public Utilities Commission to allow the increase to go into effect Nov. 1.
Also yesterday, the PUC decided to ask the utility companies to voluntarily ease the requirements to restore service for low-income customers who have been shut off for nonpayment.
“With the high prices of utilities the people are facing this winter, I think it’s going to be worse than it’s ever been,” said commissioner Mary E. Bray, who made the proposal at an open meeting yesterday. She said she had planned to raise the issue before yesterday’s filing.
Energy prices in general have been rising at an alarming rate over the past two years. Analysts say major reasons include growing demand for oil in the United States and in developing countries such as China and India, increased reliance on natural gas to generate electricity, and a drop in domestic natural gas production in the Gulf of Mexico.
The problem has been exacerbated this week by Hurricane Katrina, which virtually shut down oil and gas drilling rigs and refineries in the Gulf of Mexico. The disruption has sent energy prices surging and has raised concerns in some parts of the country about possible gasoline shortages.
New England Gas, a subsidiary of Wilkes-Barre, Pa.-based Southern Union Co., provides service to 245,000 customers in Rhode Island. About 46 percent of the state’s households use natural gas for heat, according to the 2000 census.
The company buys gas on behalf of its customers and is allowed to pass on those costs, without markup, as long as it makes “prudent” decisions about the purchases.
In its filing, the company said the increase is needed because of a projected rise in the cost of natural gas between November and October 2006. If approved, it would raise a total of $322.4 million through October 2006.
Part of that money — $10.4 million — would cover an expected shortfall through this October, because current rates are not covering the full cost of natural gas the company provides to its customers, the company said.
New England Gas does not attribute its current rate increase to the price spikes associated with Hurricane Katrina. The company made its projections based on futures prices as of last week, before the hurricane, said Marissa Albanese, a spokeswoman for the company.
Since natural gas prices have surged as a result of the hurricane, New England Gas’s cost projections could be too low and require an adjustment in the future.
The company said in its filing that as of Aug. 31, it purchased or locked in the price for 57 percent of the gas it expects to deliver this winter.
It did so under a gas-buying program, established by the PUC and the company in 2001, that rewards New England Gas for making wise gas-purchasing decisions, and penalizes it for making poor decisions.
“The bulk of the company’s winter supplies are shielded from current price increases occurring in the market,” said Gary L. Beland, director of gas supply for New England Gas, in testimony filed yesterday.
Beland said that without the gas-buying program, the company estimated it would be seeking a 25-percent rate increase, rather than a 13-percent increase. The company said the program in September alone will save customers $4.4 million, based on the closing price of gas on Aug. 29.
Still, gas bills have been sharply and steadily rising. New England Gas was granted a 4.9-percent increase as of May 1, and a 3.1-percent increase last November. Current rates for a typical residential heating customer are about 18.2 percent, or $222 a year, higher than they were three years ago, according to calculations by The Journal.
The Public Utilities Commission addressed the pressing problem of energy affordability at an open meeting yesterday, which had been scheduled in advance of the gas company filing.
Bray, who joined the commission two weeks ago, proposed that Narragansett Electric and New England Gas voluntarily relax rules for those who have lost utility service because they have overdue past balances.
Bray proposed that the companies allow low-income customers to restore service by paying only 20 percent of their overdue balance, as opposed to the 25 percent to 100 percent required by current PUC rules.
She also suggested the companies allow the remainder of the balance to be paid over a 24-month period, rather than the 12 months now required.
Bray suggested that low-income customers who have an outstanding balance of less than $2,800 be allowed to participate. Under the proposal, customers could take advantage of the relaxed rules until Nov. 1. That’s the day a state moratorium on shutoffs for low-income customers begins.
The proposal, which would go into effect only if the companies agree, mirrors a state law that was in effect for about six weeks this summer. Customers who had been shut off had until Aug. 15 to sign up for the relaxed restoration agreements.
Bray and chairman Elia Germani voted for the proposal. The third commissioner, Robert Holbrook, was not present for the meeting.
Albanese, the New England Gas spokeswoman, said she was not aware of the proposal and could not comment.
Narragansett Electric spokesman David Graves said “we do not consider it to be an unreasonable request” given the current state of energy prices. The company expects to give a formal response to the PUC some time next week, he said.
Narragansett Electric has a rate-increase request now pending before the PUC. It proposed a 12.4-percent electricity rate increase that could go into effect as early as Oct. 1.
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