Washington Gas is backing legislation in Maryland that would allow for expedited cost recovery for pipeline replacement programs outside traditional base rate cases. The utility cites pipeline safety as the reason for its support, but a building trade association opposes the associated costs.

The Maryland Strategic Infrastructure Development and Enhancement Program (STRIDE), is pending before both the state House (HB 856) and Senate (SB 332). The legislation would allow gas companies to collect a surcharge from customers to pay for infrastructure costs on a real-time basis, but the surcharge must be approved by utility regulators.

The hearing date for SB 332 was scheduled for Tuesday (March 8) and the hearing date for HB 856 was scheduled for Wednesday (March 9). Traditional ratemaking requires utilities to include infrastructure replacement costs in base rate cases. Under this model, utilities incur maintenance expenses up front and can only recover those costs through a rate case.

According to Washington Gas, the U.S. Department of Transportation's Pipeline and Hazardous Material Safety Administration has expressed support for alternative ratemaking methodology, such as that included in the STRIDE bill, that would provide for expedited replacement programs for aging pipelines.

The utility said its customers "say they are willing to pay a surcharge to reinforce the pipeline system throughout the state. Over 20 states have passed similar measures that allow gas companies to file plans and seek approval from regulators to recover pipeline replacement costs between traditional base rate cases, which tend to be infrequent and expensive. Federal pipeline safety regulators are urging states to approve more expedited ways to facilitate the nation's pipeline replacement programs."

In a poll paid for by the utility, 63% of respondents said they would favor a monthly surcharge of no more than $2 to make pipeline repairs and replacements, Washington Gas said.

The Apartment and Office Building Association (AOBA) opposes the legislation and notes that commercial customers would be charged $5.

"The proposed legislation is vague as to total cost and impact on ratepayers," AOBA said. "Moreover, no question(s) regarding the safety or reliability of the existing Maryland intrastate natural gas pipeline infrastructure have been identified to warrant passage of this legislation. There has been no demonstrated need that natural gas companies require revenues above those that would be collected through the proposed surcharges. Further, such funds for infrastructure upgrades are typically granted by the Public Service Commission after oversight of a natural gas utility company's expenditures on a case-by-case basis."

The legislation is also opposed by the Maryland Public Service Commission and the Maryland Office of People's Counsel, AOBA said.

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