DPU Cuts Bay State Gas Rate Request by 45 Percent

BOSTON – The Department of Public Utilities (DPU) issued an order Friday (10/30) reducing by 45 percent Bay State Gas Company’s proposal to raise customers’ gas distribution rates by $34 million. The DPU also approved a new mechanism designed to “decouple” company revenues from sales and a new adjustment factor that allows the company to recover the cost of replacing older steel pipes.

In the rate case, the DPU reduced Bay State Gas Company’s proposed increase to $19 million, resulting in a monthly bill increase of $6, or 3 percent, for a typical residential heating customer. The increased rate for distribution took effect November 1, but its impact will be offset by a decrease in the company’s natural gas costs. When that reduction is factored in, the monthly bill for a typical residential heating customer will go down by $29 – a reduction of nearly 14 percent.

The DPU also approved Bay State Gas Company’s proposed revenue decoupling mechanism, submitted in response to a July 2008 DPU policy Order requiring utility rate structures that promote better use of energy conservation.

Decoupling eliminates disincentives for utilities to promote large-scale energy efficiency programs, and allows utilities to recoup the cost of those programs through rates. The Bay State Gas rate mechanism approved today would eliminate - or decouple - the link between the company’s sales for gas distribution service and company earnings. The October 30 order marked lowest-ever return on equity ordered by the DPU in a rate case, recognizing that decoupling lowers utility company risk.

Finally, the DPU approved the Bay State Gas Company’s proposal to recover costs associated with replacing aging steel pipes.

“The DPU’s actions will result in multiple benefits for Bay State Gas customers – containing ratepayer costs, advancing cost- and energy-saving efficiency programs and increasing the safety and reliability of the gas distribution system,” said DPU Chairman Paul Hibbard.

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