For Immediate Release - September 04, 2013

Columbia Gas to Refund $8.9 Million for Undisclosed Contract Payment

AG Alleges Payment Should Have Gone Directly to Ratepayers in 2006; Consumers to Receive Rate Reductions this Winter Heating Season

BOSTON – Columbia Gas has agreed to return $8.9 million to ratepayers after allegedly failing to disclose a payment related to changes in its contract with a Springfield generation plant, Massachusetts Attorney General Martha Coakley announced today.

The settlement, filed with the Department of Public Utilities (DPU) yesterday, resolves allegations that Bay State Gas Company d/b/a Columbia Gas of Massachusetts received an estimated net $12 million partial buyout payment from MASSPOWER in 2006 that should have been immediately returned to ratepayers. As part of the buyout, Columbia Gas reduced the annual payments required on a 20-year special contract for gas transportation but failed to disclose the payment to the DPU.

“We alleged that Columbia Gas received the benefit of using $12 million from this deal that should have been disclosed and returned directly to ratepayers at that time,” AG Coakley said. “Our office is pleased to reach an agreement that will mitigate the cost of gas distribution service to consumers this winter season.”

In 1993, Columbia Gas entered into a 20-year agreement with MASSPOWER to provide gas to its generation plant in Springfield, which would have yielded close to $2.5 million in annual revenues. After constructing the pipeline for this service, Columbia Gas filed a petition in 2005 with the DPU to adjust rates with an assumption that the pipeline was in service and the company would continue receiving the contracted $2.5 million payments. By law, utility companies can ask to recover the costs of infrastructure from ratepayers.

In 2006, however, Columbia Gas accepted a $12 million buyout payment and agreed to modify the contract with MASSPOWER by reducing the annual contracted payments from $2.5 million to approximately $500,000.

According to the AG’s Office, had this $12 million buyout been disclosed, the payment should have been credited to ratepayers immediately as required by the DPU. The AG’s Office only discovered the buyout payment during another rate case for Columbia Gas in 2009.  As a result of that discovery, the DPU agreed to open an investigation.

As a result of this settlement, rate credits worth a total of $8.9 million will be refunded to Columbia Gas customers between November 1, 2013 and April 30, 2014, which includes taking into consideration the revenue lost by Columbia Gas when it agreed to the early buyout and the modified contract with MASSPOWER. 

The Attorney General’s Office of Ratepayer Advocacy is by statute the utility ratepayer advocate for Massachusetts and is authorized to intervene in or institute administrative and judicial proceedings on behalf of consumers in connection with any matter involving the rates, charges, prices or tariffs of any gas or electric company doing business in the Commonwealth.