January 22, 2014
PURA Issues Final Decision on CNG Rate Request
Decision Calls for 1.9% Rate Increase
Connecticut's Public Utilities Regulatory Authority (PURA) today issued a final ruling authorizing a 1.9% ($6.505M) rate increase for the Connecticut Natural Gas Company (CNG). CNG requested regulatory approval for a 6% overall increase, which would have increased revenues by $20.047M. The PURA also approved a 9.18% return on equity, rather than the 10.25% CNG requested.
As CNG builds out its plant pursuant to PURA's recently concluded natural gas expansion plan proceeding, it will be required to track and report actual revenue requirement and revenues for the gas pipeline expansion activities through a new System Expansion Reconciliation Mechanism.
The decision also includes two new revenue mechanisms: one for revenue decoupling and one for an earnings sharing mechanism. The new earnings sharing mechanism is designed to provide CNG a performance incentive, and allows a 50/50 customer/shareholder split if revenues collected exceed the allowed return on equity.
The decoupling mechanism, required by recent legislation, decouples revenue to maintain and operate the pipeline delivery system, separate from actual gas sales. It enables collection of revenues necessary to maintain and operate the distribution system, but no more than authorized by PURA.
Today's decision - which follows six months of discovery, public hearings, and analysis - establishes a reporting requirement to track the success of CNG's plant expansion efforts, and implements a federally-required Distribution Integrity Management Program (DIMP) to monitor CNG's plant integrity.
In its ruling, PURA approved a DIMP schedule and budget for system integrity projects that target needed replacement of cast iron mains, bare steel mains and bare steel services. DIMP will facilitate recovery of revenue associated with main replacement activity between rate applications, helping to reduce the potential for price spikes.
CNG stated that the additional requested revenues were needed to ensure sufficient financial strength and resources to continue to invest in critical energy infrastructure to support the goals of Connecticut's Comprehensive Energy Strategy, and to continue to meet its public service obligations.
The rate design approved by PURA includes new system expansion rates, which mirror existing tariffs, but include a higher delivery rate component for a ten-year term for new customers who were previously "off system."
PURA also determined that the approved revenue levels will provide CNG with sufficient revenue to maintain and operate its gas distribution system and provide a safe, adequate and reliable service to customers, while providing it an opportunity to earn a reasonable profit.
CNG will file complete rate schedules and tariffs, amended to reflect PURA's changes, no later than January 23, 2014.
At a public meeting finalizing the case, PURA Commissioner Michael A. Caron stressed that the approved increase in revenues, and authorized rate of return on equity, combined with the new rate mechanisms and other rulings, will result in just and reasonable rates. He added that "this is an exciting moment for Connecticut with many challenges but also opportunities."
The decision is undergoing final technical revisions and edits, and is expected to be publically available no later than January 23, 2014.
CNG is a subsidiary of New Haven-based UIL Holdings Corporation. It provides natural gas service to approximately 165,500 customers in the Greater Hartford area and southwestern Connecticut in the following cities and towns: Avon, Berlin, Bloomfield, Canton, East Hartford, Farmington, Glastonbury, Granby, Greenwich, Hartford, Hebron, Manchester, Mansfield, New Britain, Newington, Portland, Rocky Hill, Simsbury, Unionville, West Hartford, Wethersfield, and Windsor.