Maine Natural Gas Rate Case Could Set Precedent

Dec 11, 2015

AUGUSTA, Maine — The Maine Public Utilities Commission is considering a proposed settlement of a rate case in which Maine Natural Gas had been seeking a substantial increase over three years.

The company has reached an agreement with the public advocate on a lower increase, but interveners, led by the town of Brunswick and Bowdoin College, remain opposed.

Utility rate increases rarely move outside of single digits. So last March Maine Natural Gas caused a stir by asking for a 21 percent increase in rates for each of the first two years of a three year plan, and a nearly 40 percent increase in the third year.

"We have invested a lot of money in putting pipe in the ground to make sure we can serve the city of Augusta, that's been consistent with the state policy that encourages all utilities to try and expand access to other energy choices, particularly natural gas," explains John Carroll of Iberdrola USA, the owner of Maine Natural Gas.

But $40 million is a lot of money, says Public Advocate Tim Schneider. And Schneider points out that Maine regulates gas utilities differently from electric and phone companies, which have a monopoly in certain geographic areas.

Gas utilities, he says, can compete for customers in the same geographic area, just as Maine Natural Gas is competing with Summit Natural Gas in Augusta. And in this case, he says the cost of growth should not be passed along to consumers.

"The commission's precedent is very clear that when a company expands into present competition like we have in Maine between gas companies, the risk of that expansion is on shareholders, not the utility's customers," Schneider says.

But regulators in this case are faced with deciding how much Maine Natural Gas shareholders, and their customers, should be asked to pay. The PUC staff has recommended that half the investment, $20 million, be assigned to shareholders, and $20 million to customers.

Schneider, as part of a broad deal designed to settle the case, supports a 17 percent per year increase for three years, which would shift most of the burden to ratepayers, with just $6 million borne by shareholders.

That's a bad deal, according to Bill Harwood, the attorney representing Brunswick and Bowdoin College, who says more of the costs should be borne by shareholders.

"Was it prudent to spend $40 million to invest in a system that currently today serves a little over 300 customers?" Harwood says.

Maine Natural Gas has just 300 customers in Augusta, and about 4,000 customers in the area of Brunswick, Bath and Freeport.

Harwood says the customers in Augusta should pay for more of the cost of the new pipelines that they are using.

"The customers I am representing in Brunswick are saying, 'Why should we pay for our system and then turn around and pay 90 percent or 80 percent of the Augusta system that we get no benefit from?'" he says.

But in defending the proposed settlement agreement, Schneider says utility construction costs have traditionally been paid for by all customers of a utility to even out costs of providing service to rural areas of the state.

"Once we go down the road of charging different rates for one type of area over another, we could really end up in a place that we don't want to go, where the cost of service in rural areas could be much higher than in urban areas," he says.

But in the proposed stipulation to settle the case, Schneider and the gas company have agreed to implement a surcharge on Augusta customers for three years. Harwood says that would only raise about $150,000, and is calling for a higher surcharge over a period of maybe ten years.

The matter is now before the three members of the PUC, and they can accept the plan worked out by the public advocate, modify it, or reject it and adopt a totally different rate setting approach.