For Immediate Release - August 02, 2011

DPU Cuts Proposed New Charges for Fitchburg Electric Customers by 54.2% and for Gas Customers by 16.3%

Decision reduces Fitchburg Gas & Electric revenue request by $4.6 million; restricts company to lowest rate of return in a utility rate case in over 50 years

BOSTON - Tuesday, August 2, 2011 - The Department of Public Utilities (DPU) issued an order late yesterday substantially reducing the rate increases requested by Fitchburg Gas and Electric Light Company, a subsidiary of Unitil Corporation, for its electric and gas divisions, which serve 43,100 customers in six communities. The DPU's order also holds the company to the lowest Return on Equity it has allowed in any utility rate case in at least the past 50 years, and denies about a third of the 2008 ice storm expenses the company's electric division had sought to recover. In denying the storm expenses, the DPU cited the company's poor performance in preparing for and responding to the impact of the storm, which left some of its customers without power for as long as two weeks. Accordingly, the DPU did not allow executive compensation increases that it concluded were unwarranted.

While acknowledging that the 2008 ice storm was an overwhelming and rare event that caused widespread outages and damage in other service territories as well, the DPU order found that Fitchburg Gas & Electric's "lack of planning and training for a significant storm event left it unprepared to respond to the magnitude of system damage that it experienced during Winter Storm 2008." The DPU order denies $6,954,492 of the $22,042,033 (or 31 percent) in storm-related expenses the company sought to recover. The disallowed amounts include the company's fees for lawyers and consultants associated with the DPU's investigation into Unitil's storm performance, fees associated with storm-related company witnesses in the rate case, a proposed storm fund, carrying costs, retroactively-awarded overtime pay for salaried employees, and certain executive compensation increases.

"The DPU's actions will result in multiple benefits for Fitchburg Gas & Electric Co. customers - cost containment, expansion of critical energy saving efficiency programs, and a signal that companies must maintain the highest level of service and reliability, even in the face of extreme weather events," DPU Chair Ann Berwick said, noting that the DPU continues to keep a watchful eye on the company's response to storms.

Fitchburg Gas & Electric requested an increase in its revenues of $7,149,629 for its electric division and $4,447,529 for its gas division. The DPU's order shrinks the electric division's revenue to $3,275,871 (a 54.2 percent reduction), and the gas division's revenue increase to $3,723,535 (a reduction of 16.3 percent in the amount requested). The total reduction in the company's revenue request when gas and electric revenues are combined is $4.6 million, or 40 percent of what was proposed.

The DPU's order also provides the company a return on equity of 9.2 percent (as compared to the 10.70 percent return the company requested), and rejected several capital financing proposals that would have shifted more costs to ratepayers.

Culminating a six-month investigation that included a public hearing in the company's service territory and 20 days of evidentiary hearings, the order will generally result in modest increases in monthly bills for Fitchburg Gas & Electric Co. customers. Regular residential and low-income residential electric customers will see average monthly increases of $6.08 and $2.70 monthly, respectively. The company's proposal for electric bills would have resulted in a regular residential and low-income residential electric bill increases of $12.41 and $7.69, respectively. Regular residential customers who heat with gas will pay approximately $27.70 (the company's proposal would have resulted in an increase of $32.88) more during the winter months and $4.51 in summer (the company's proposal would have resulted in an increase of $5.63), while low-income gas heat customers will see an average monthly bill increase of $7.84 (the company's proposal would have resulted in an increase of $27.46) in winter and a slight bill decrease in summer (the company's proposal would have resulted in an increase of $4.70).

Under the order, the DPU also approved Fitchburg Gas & Electric's "decoupling" program, spurring company efforts to promote large-scale energy efficiency efforts mandated by the Green Communities Act and championed by the Patrick-Murray Administration. Decoupling eliminates the link between the volume of sales for distribution service and company earnings, and provides incentives for the company to offer efficiency programs that will save ratepayers on energy costs.

Fitchburg Gas & Electric Co. serves gas and electric customers in Fitchburg, Townsend, Lunenburg, and Ashby; and gas customers in Gardner and Westminster. In total, the company serves 27,900 electric customers and 15,200 gas customers in these Massachusetts communities.