In order to keep pace with Maryland’s gas deregulation,Washington Gas filed a rate plan with the Maryland Public ServiceCommission (MPSC) yesterday, in which the utility proposed afive-year rate freeze and plan that would result in credits oncustomers’ bills if the company’s return on equity (ROE) exceeds12%. Washington Gas hopes to have the filing approved this fall.

“All customers and shareholders will benefit from adoption ofthe incentive rate plan because the company will be encouraged tofocus on performance, reduce operational costs, increase servicequality, implement new technologies and improve productivity,”Adrian Chapman, vice president of regulatory affairs and energyacquisition, said. “Washington Gas is committed to remainingcompetitive in the energy market by managing its operations withincurrent rate levels for all customer classes for the five-yearperiod.”

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

The customer credit would be generated from the earnings sharingmechanism proposed in the filing. The mechanism enables customersto receive 50% of the revenues associated with the utility’searnings in excess of a 12% ROE. If applicable, the credit would beinstituted during the winter months when gas bills are normally attheir highest.

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

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

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