June 2, 2011
DPUC Draft Decision Denies the Yankee Gas Services Company’s Requested Rate Increase
In a Draft Decision released today, the Department of Public Utility Control indicated it will not approve the requested revenue increase for the Yankee Gas Services Company. Yankee originally requested a cumulative $78.507 million (8.53%) increase over current revenues. However, during the course of the proceedings, the Company modified its filings twice, reducing its cumulative request to $68.542 million (7.47%). The Department’s draft Decision approves cumulative revenues of $932.938 million, a cumulative decrease of almost $5.0 million (0.53%) over current revenues. The Department’s reduction to the Company’s request was primarily due to increased sales forecast, current capital market conditions, decreased payroll, reductions to rate base and savings from the proposed NU/NStar Merger.
The exact effect of the approved revenues on each rate class (residential heating and non-heating, various commercial/industrial, etc.) will not be known until later in 2011. The Company will be ordered to file new tariffs (rates) for the first year by July 1 that will produce the first year revenue permitted by the Department’s decision. Once approved by the Department, new rates will become effective late July.
In any request for an increase in revenues, the applicant must prove that it requires the additional revenue to meet its obligations. State law directs the Department to calculate rates that are adequate to ensure safe, adequate and reliable service. In this case, the evidence presented did not convince the Department that Yankee requires significant additional revenue to meet its obligations to its ratepayers.
State law further directs the Department to set an allowable rate of return on equity so that a company can earn a return on its investment and attract additional capital. Yankee’s current return on equity is set at 10.10%; but will change to 8.83% if the draft Decision is adopted.
The Department will accept Written Exceptions from the case participants on or before June 14, 2011 and, if requested, will hear their Oral Arguments on June 23, 2011 at 1:30 p.m. A Final Decision by the panel of Commissioners assigned to this matter is expected on June 29, 2011 at the Department’s regular meeting to be convened at 9:30 a.m.