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Washington Gas Offers Five-Year Rate Freeze

Washington Gas Offers Five-Year Rate Freeze

In order to keep pace with Maryland's gas deregulation, Washington Gas filed a rate plan with the Maryland Public Service Commission (MPSC) yesterday, in which the utility proposed a five-year rate freeze and plan that would result in credits on customers' bills if the company's return on equity (ROE) exceeds 12%. Washington Gas hopes to have the filing approved this fall.

"All customers and shareholders will benefit from adoption of the incentive rate plan because the company will be encouraged to focus on performance, reduce operational costs, increase service quality, implement new technologies and improve productivity," Adrian Chapman, vice president of regulatory affairs and energy acquisition, said. "Washington Gas is committed to remaining competitive in the energy market by managing its operations within current rate levels for all customer classes for the five-year period."

The company said the last customer rate increase was in 1994. If the new freeze is approved, Washington Gas said its customers would enjoy a 10-year period of rate stability, which would be "unprecedented in the past three decades." Based on average historic and forecasted consumer price change over the 10-year period, Washington Gas said the total freeze would result in a 20% rate decrease.

The customer credit would be generated from the earnings sharing mechanism proposed in the filing. The mechanism enables customers to receive 50% of the revenues associated with the utility's earnings in excess of a 12% ROE. If applicable, the credit would be instituted during the winter months when gas bills are normally at their highest.

The plan requires that Washington Gas bear the downside risk of certain criteria such as weather, general inflation and impact of capital improvements. It is applicable to residential, commercial and industrial customers in Maryland only.

The plan also proposed that items outside of Washington Gas' control, such as legislative mandates, changes in tax law and accounting modifications would continue to receive MPSC consideration outside of the base rate freeze. The plan provides the company with the opportunity to adjust rates, subject to MPSC review and refund, should Maryland's ROE drop below 8.5%.

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