For Immediate Release - February 16, 2011

AG Coakley's Office Seeks Rejection of Unjustified Rate Hike by New England Gas Company

BOSTON -Attorney General Martha Coakley's Office is seeking to reject a proposed $6.2 million rate hike for consumers of New England Gas Company (NEGC).

In a reply brief filed by AG Coakley's office with the Department of Public Utilities (DPU), Coakley asks the DPU to reject a $6.2 million rate hike requested in 2010 by NEGC, a subsidiary division of Houston, Texas-based Southern Union Company (Southern Union). This is the Company's third requested rate hike since 2007.

"Our office believes that many of the costs Southern Union is trying to pass off to Massachusetts ratepayers are unjustified," AG Coakley said. "We do not believe ratepayers should have to foot the bill for many of these unjustified costs, including the costs of environmental litigation by the company. We're also still waiting for the results of an audit from NEGC's last rate increase, and don't believe any increase should be approved until that audit is completed."

In addition to questioning several specifics costs in this case, the Attorney General also questioned the validity of NEGC's accounting, pointing out the department's lingering questions about the company's last rate case in 2008. After the 2008 case, the DPU ordered a financial audit due to "doubts as to the general reliability of NEGC's accounting records in any rate-related matter." After the independent auditor's report was completed, the DPU ruled that the audit was deficient and ordered a new audit, since the scope of the audit did not include the costs associated with the 2008 rate case. On January 26, 2011, the DPU ruled that NEGC's revised contract with the auditor still does not comply with the order to audit the costs related to the 2008 rate case. Results from this audit are still pending, raising questions on whether the Company's latest case should have proceeded at all.

NEGC has also been involved in costly litigation regarding environmental remediation of a site in Tiverton, Rhode Island, in which NEGC's predecessor dumped hazardous waste. The Attorney General's Office alleges that Southern Union has passed nearly $30 million in costs associated with an environmental lawsuit against it to Massachusetts consumers, including $18.5 million in legal fees to a law firm in which the company's chief operating officer maintains a financial interest. The Attorney General argues that Southern Union's failure to control those costs is an example of the company's poor management of NEGC.

If the Company's request is approved, a residential customer using approximately 110 therms per month will see an increase of $10.80 per month, a 6.8% increase in rates during the winter season. A decision on the Company's request is expected on April 1, 2011.

New England Gas Company is a subsidiary of Southern Union Company, a public utility holding company based in Houston, Texas. New England Gas Company provides retail natural gas service to approximately 53,000 customers throughout Massachusetts.

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