Northwest Natural Gas Co. has filed with the Washington Utilities and Transportation Commission for a 4.8% general rate increase, the first such request in Washington since 2003.
If approved, the new rates would result in about a $5 per month increase for the average residential customer, the Portland, OR-based company said. Northwest Natural is requesting a return on equity of 10.65%. The proposed rate increase does not include any changes in rates for gas costs, which are set annually before the heating season.
“We know rate increases are hard on our customers and we’re doing everything we can to hold costs down,” said Northwest Natural CEO Gregg Kantor. “In the last 24 months, we completed a comprehensive benchmarking effort and restructuring of our business to become even more efficient. Unfortunately, despite the reductions we’ve made, cost increases over the last five years and increased investment in our distribution system are more than we can continue to absorb.”
Northwest Natural is seeking the rate change to cover increased operating costs and investments in the distribution system. The company is also proposing a rate mechanism that supports conservation and is designed to break the link between company earnings and the quantity of gas used by customers. The company has had a similar decoupling mechanism in place in Oregon since 2002.
Over the last couple of years such decoupling mechanisms have gained traction among utilities and their regulators. Residential gas consumption has been in decline for a number of reasons, including improved appliance efficiency and increased conservation efforts by consumers in response to higher commodity prices, and utilities have responded by seeking to reduce the amount of fixed costs they recover through volumetric charges (see Daily GPI, March 27, 2007; June 14, 2006). The National Association of Regulatory Utility Commissioners supports states’ ability to use decoupling (see Daily GPI, April 24, 2007). The Energy Information Administration has predicted that the use of decoupling mechanisms will grow (see Daily GPI, Aug. 16, 2007). Decoupling mechanisms have recently been approved in Illinois (see Daily GPI, Feb. 7), New York (see Daily GPI, Sept. 20, 2007) and Virginia (see Daily GPI, Aug. 1, 2007).
Northwest Natural’s proposed rate change follows an approximately 10% rate reduction for residential and business customers last fall due to lower commodity costs and the company’s gas purchasing strategies.
Northwest Natural serves nearly 655,000 customers in Oregon and Washington, with about 10% of its customer base in fast-growing southwest Washington, including the greater Vancouver area, Clark County and a number of smaller communities in the Columbia River Gorge.
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