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Maryland Regulators Approved Rate Normalization Mechanism for Washington Gas

Washington Gas Light Co. said Monday that Maryland regulators have approved a new rate mechanism to minimize rate and revenue volatility due to changing weather conditions and fluctuating commodity prices. The WGL Holdings utility subsidiary said that it plans to use a revenue normalization adjustment (RNA) for its residential and commercial customers, which account for 40% of the company's total customer base.

In addition to reducing rate fluctuations for customers, "Washington Gas has a greater opportunity to stabilize revenues, which, in turn, will level the cash flows designed to support expenditures for daily operations, including maintenance and improvements that ensure system integrity and reliability," said Adrian P. Chapman, vice president of regulatory affairs and energy acquisition. "This is a win-win for Maryland customers and Washington Gas."

The new RNA will reduce bills when winter weather is colder-than-normal and usage is higher, and it will attach a surcharge to bills during periods of warmer- than-normal weather and lower usage. A factor based on normal customer usage will be applied to each billing period to determine the appropriate credit or surcharge.

The new tariff caps the monthly adjustment to $0.05 per therm in any month. For the average Washington Gas residential heating customer, this means that the adjustment would not exceed about $3.50 in an average month. The billing reconciliation process will begin on Oct. 1. The first adjustment, if there is one, would be reflected in the distribution charge in the December billing cycle. Any amount in excess of this cap will be collected or credited in subsequent months.

Washington Gas presented the RNA proposal to Maryland regulators as part of a settlement agreement it reached with its Maryland customers and other stakeholders in a current rate case. The settling parties include the Maryland Office of People's Counsel, the Apartment and Office Building Association of Metropolitan Washington, and the Department of Defense and Federal Executive Agencies.

According to a 2005 study by the American Gas Association, 37 utilities in 17 states have tariffs with normalization mechanisms similar to Washington Gas.'

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