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
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%
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
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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