The Kentucky Public Service Commission approved a proposed settlement in Columbia Gas of Kentucky’s rate case, after modifying the agreement to reduce Columbia’s annual revenue increase by $322,000, from $13.408 million to $13.086 million. Columbia originally had sought to increase annual revenues by $25.241 million, or more than 27 percent. The modified settlement, which is contingent upon Columbia’s acceptance of the PSC’s changes to the agreement this week, would increase Columbia’s annual revenues by roughly 14 percent.
The modified settlement increases the monthly service charge for a Columbia Gas residential customer to $16 from the current $15 and raises the delivery charge per 1,000 cubic feet of gas from $2.27 to $3.57. In its original application, Columbia proposed increasing the monthly residential service charge to $19.75 and the delivery charge to $3.87 per 1,000 cubic feet.
The rate case has no bearing on the cost of the natural gas used by the customer, because it is determined by supply and demand in the market. Natural gas costs are passed through to the customers on a dollar-to-dollar basis.
Columbia Gas has until Dec. 29 to accept the PSC’s changes. If it does so, the new rates will take effect as of December 27.
The PSC’s modifications to the order also reduced the return on investment that Columbia Gas earns on its program to replace aging gas mains and on the financing costs of construction expenses. The settlement calls for a rate of return on equity of 9.8 percent, which the PSC reduced to 9.5 percent.
The PSC also expressed concerns with Columbia’s underlying application in regard to proposed staffing levels, an assumption that the company would pay no dividends in the coming year and the size of the management fee paid each year to Columbia’s parent company, NiSource, Inc.
The PSC’s recent order stated that:
- The revenue figure set by the settlement, with the PSC’s reduction, supports a staffing level of 144 employees, a reduction of 14 from the number underlying Columbia’s original application.
- Columbia should have assumed some level of dividend payout in 2017, in keeping with an average annual payout of $5.8 million from 2011 through 2015.
- Columbia, despite several rounds of questions from the PSC, had failed to provide a clear basis for its payments to the NiSource Corporate Service Co., which have increased from $13.449 million in 2013 to a projected $20.060 million in 2017. The PSC put Columbia on notice that it is expected to “clearly identify the support” for the charges in its next rate case so that the PSC “can determine the reasonableness of those charges.”
Provisions of the settlement left unchanged by the PSC include:
- Columbia agrees not to file its next request for a rate increase prior to May 2019.
- Columbia will withdraw its application to construct a new training facility for its employees and will not file another such application before April 2019.
- Columbia will increase shareholder contributions to its energy assistance programs for low-income customers while also reducing the amount it collects from ratepayers to fund the program.
Columbia’s last rate adjustment, which increased revenue by $7.660 million, or about 8 percent, was granted in December 2013.
Columbia Gas filed its application for the current rate increase in May. The company stated that the additional revenue was needed to continue upgrading its distribution system, to make
additional safety improvements, and to meet higher operating costs.
Columbia Gas of Kentucky serves about 134,000 customers in 30 counties in eastern and central Kentucky, with the majority in and around Lexington.
Other parties to the case – all of which agreed to the settlement – included the Kentucky Office
of Attorney General; Lexington-Fayette Urban County Government; Kentucky Industrial Utility
Customers, Inc., which represents large industrial consumers; and Community Action Council
for Lexington-Fayette, Bourbon, Harrison and Nicholas, Inc., representing low-income ratepayers.