May 24--WARWICK, R.I.--The Public Utilities Commission yesterday accepted a plan that will cut gas rates by $3.9 million and freeze base rates through 2005.

The new rates will go into effect July 1.

In a surprise move, the commission voted to accept the deal, which was similar to the one it rejected only a few days ago. The commissioners said at the time of that vote that the deal didn't cut gas rates enough.

The decision wraps up a major rate case that began in November. The process is used to set gas rates based on gas company projections of its costs of doing business over the next several years. It does not include the amount paid for the natural gas itself.

The deal approved yesterday was reached late last month by New England Gas Co. and the Division of Public Utilities and Carriers, the state agency that represents ratepayers.

New England Gas is the only gas utility in Rhode Island, with 238,000 customers.

Yesterday, at an emergency PUC hearing, the company agreed to modify the settlement slightly. And the deal got a boost from an appearance by Atty. Gen. Sheldon Whitehouse, who urged the commission to accept it. It is unusual for the attorney general to personally testify in a utility rate case.

PUC Chairman Elia Germani and commissioner Kate Racine voted to accept the settlement; commissioner Brenda Gaynor said she concurred in part and dissented in part.

The gas company said it was pleased with the decision.

"We believe it's a very good agreement for New England Gas Co. customers and all other parties," said Chris Medici, a spokesman for the company.

The company had testified that if it was required to reduce rates more than $3.9 million, it would have to implement cost-cutting that would include trimming its work force.

Under the settlement, a typical customer in the former Providence Gas region who uses gas for home heating would see rates fall by about 7.7 percent on July 1. Non-heating customers would get a 5.4-percent rate decrease.

A typical residential heating customer now paying $1,177 a year would save about $90.

Customers of the former Valley Gas would see a rate decline of about one-tenth of 1 percent. A typical residential heating customer of Valley Gas paying $1,028 would save $1 a year.

However, rates for Valley Gas heating customers would increase 2.1 percent next year and non-heating customers would see an 8.1-percent increase.

     

The rates in the former Valley Gas areas have been lower and the settlement is designed to equalize rates throughout the state.

Part of the $3.9-million rate reduction comes from money New England Gas anticipates it will save as a result of combining Providence Gas, Valley Gas and Bristol and Warren Gas. The company will pass on to customers $2.05 million -- half of the $4.1 million in savings.

The deal calls for the company to share some of its profits with its customers. In the past, profits were capped with any excess returned to customers.

The rate cut proposed in the settlement is a sharp reversal of what New England Gas had requested in November. The company said it would need to raise rates by about $7.2 million because of increases in its costs.

The Division performed its own calculations and recommended that rates should instead be cut by about $7.5 million.

Racine earlier had rejected the settlement and urged her colleagues to allow the case to go to litigation. In such a proceeding, the company and the Division would have presented expert witnesses in two weeks of hearings. Then the PUC would decide on the rates.

A settlement such as the one approved yesterday, avoids the need for that litigation, and possible court challenges later.

Racine said in an interview that she was concerned that the cost to the gas company of litigating would ultimately take away from the rate reductions for customers.

"When you constantly litigate, at some point, you begin to lose out on the benefits you're seeking," Racine said.

Gaynor said she agreed "in principal" to a settlement and said she's happy customers will get reductions. However, she said there were a few items she disagreed with, including spreading out costs over 18 years for Y2K fixes and a computer system. She said she preferred a shorter period that was more in line with the life of the computer systems.

Germani could not be reached for comment after the vote. He had voted in favor of the earlier settlement, calling it "a tremendous win for the ratepayer."

Whitehouse said this was only the second time he has given a statement in a utility rate case since he took office three years ago.

He did it, he said, because it helps the current labor lockout come to a conclusion. It eliminates uncertainty for the company about what their revenues will be allowing it to sign off on the contract it has tentatively reached with the Steelworkers union.

He also said he believes it was a "good settlement."

"Because it's a rate reduction, the quicker it can be implemented, the more the savings for the customers," Whitehouse said.

The amendments approved by the PUC call for the company to file a service quality plan before Sept. 30. That plan will keep oversight on the company's service complaints and will link its performance to how much extra profits the company will be allowed to keep.

Also, the company will waive account-restoration charges and return-check fees for customers eligible for low-income assistance programs.

Power Report

-- Anonymous, May 25, 2002