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2018 CPA Rate Case Frequently Asked Questions

On Friday, March 16, 2018, Columbia Gas of Pennsylvania, Inc. (Columbia Gas) filed a request with the Pennsylvania Public Utility Commission (PUC) seeking approval to adjust base rates for distribution service in order to allow for the continued replacement of its natural gas distribution system. These filed rates seek an increase in annual revenues of approximately $46.9 million.

What do you mean by a base rate adjustment?

We are seeking approval from the PUC to adjust the customer charge and distribution usage charges, which are commonly referred to as base rates.

What are base rates?

Base rates generate the revenue needed to recover the costs to repair, upgrade, and operate Columbia Gas of Pennsylvania’s natural gas delivery system. This system includes approximately 7,500 miles of pipelines, regulator stations, meters and other facilities. This charge is separate from natural gas commodity costs, which generally make up about a third of the total bill. As a regulated utility, Columbia Gas purchases gas on the wholesale market and, under Pennsylvania law, passes those natural gas costs on to the customer without mark-up or profit.

Base rates are made up of a customer charge, a usage-based distribution charge (per therm rate) and a Weather Normalization Adjustment (WNA).

  • The customer charge is a flat rate customers pay on each bill regardless of how much gas Columbia Gas delivers to their home or business.
  • The distribution usage charge is based on how much gas Columbia Gas delivers to their home or business.
  • A WNA is an adjustment on the distribution portion of a customer’s bill to reflect normal weather levels if temperatures are 5% greater or 5% lower than normal during the winter heating season.

The Gas Commodity Charge, which is separate from base rate charges, recovers the cost of the natural gas used by a customer. Natural gas costs, which make up around a third of the total bill, are passed through to customers on a dollar-for-dollar basis. Under Pennsylvania law, utilities cannot profit on the gas commodity charge.

The customer charge and the distribution usage charge are the only source of revenue for Columbia Gas. All of Columbia Gas of Pennsylvania’s investments in pipes, meters and all of its expenses that support safe and reliable gas service – including responding to gas-related emergencies – are recovered through the customer charge and distribution usage charge.

What does this mean for a customer’s bill?

If our proposed adjustment is approved by the PUC, the average total bill for a residential customer who purchases 70 therms of gas per month from Columbia Gas would increase from $91.63 to $99.88, a 9.0 percent increase.

If implemented as proposed, it is important to note that when adjusted for inflation, the total average residential bill would still be about 21 percent lower in 2019 than it was in 2006.

Why does Columbia Gas need to adjust its rates?

As part of Columbia Gas of Pennsylvania’s commitment to safety, expedited investments to upgrade aging infrastructure are required to enhance the safe and reliable distribution system that Columbia Gas currently operates.

From 2007-2017, we invested over $1.6 billion to modernize and expand our distribution system in Pennsylvania. Of that amount, approximately $1.2 billion was dedicated to replacing over 922 miles of priority pipe. In 2018 alone, we plan to invest $284 million in Pennsylvania, with more than $215 million dedicated to upgrading aging underground infrastructure throughout the 26 Pennsylvania counties where we provide natural gas service.

This filing is needed to pay for our significant investment in Pennsylvania.

What do you mean by aging infrastructure? Are we safe?

Yes, our system is safe. Our system is safe as evidenced by our ability to address leaks appropriately, as well as other operational improvements including more frequent leakage surveys and better emergency leak response. However, we must be a prudent operator and address the systemic problem of replacing our unprotected bare steel, cast iron, and wrought iron facilities.

After decades of providing service to our parents and grandparents, some of our pipes must be replaced to ensure continued safe and reliable service. These pipelines served us well, but it has come to the point where it is more cost effective for us to replace the pipe now, rather than repair the pipe only to replace it in the near future. Much like other types of infrastructure such as roads and bridges, deterioration occurs over time and repairs or replacement are eventually needed.

How is Columbia Gas working to reduce costs for customers?

Columbia Gas is working more efficiently than it has in the past. We have taken the following steps to save money and will continue to look for additional ways to make the most cost-effective decisions for our customers:

  • We are making technological investments, such as investing in Automated Meter Reading technology, to reduce the costs associated with reading meters monthly.
  • We have secured long-term contracts with our pipeline contractors, ensuring affordable and predictable rates for their services.
  • We partner with our sister gas distribution companies in Ohio, Maryland, Kentucky, Virginia, Indiana, and Massachusetts—as well as our parent company NiSource—to save money through consolidated, in-house services as well as to gain economies of scale through the ordering of supplies, materials, and contractors.

Our approach is working. If approved as filed, rates would still be about 21 percent lower in 2019 than they were in 2006, when adjusted for inflation.

Doesn’t Columbia Gas already adjust my rates every quarter?

Not base rates. Every quarter, we file our quarterly gas cost adjustment for the natural gas commodity portion of your bill. Natural gas costs represent about a third of your total bill. We purchase our gas on the wholesale market and, under Pennsylvania law, pass those costs on to the customer without mark-up or profit.

When was the last time Columbia Gas asked to adjust its rates?

The most recent base rate adjustment was requested in March 2016. Columbia Gas continues to invest millions of dollars in its distribution system, and filing a rate adjustment with the Pennsylvania Public Utility Commission provides Columbia Gas with the opportunity to earn a fair return on its substantial investment.

Why is Columbia Gas requesting this increase so soon after the last rate adjustment?

Safety is Columbia Gas of Pennsylvania’s core value, and we are committed to our continued investment in the safest possible natural gas delivery system for our customers and communities. This filing seeks a reasonable return for our aggressive investment in replacing and upgrading our natural gas distribution system.

Additionally, Columbia Gas is focused on safely operating and maintaining our pipeline system, meeting or exceeding all federal and state requirements. This base rate request incorporates expenses associated with safety initiatives, including enhanced training and technological system improvements to reduce the amount of damage done to Columbia Gas of Pennsylvania’s distribution facilities by third parties, the number one risk to the safety of our system.

The costs of these replacement projects have also increased significantly due to higher contractor and paving costs, locations of certain projects in highly-populated areas and larger-diameter pipes needed to carry gas throughout our large service territory. We saw a 127% increase in the cost to replace one foot of pipe in 2008 vs. 2016, in large part due to the increasing costs of restoring roads, sidewalks and property.

I already have trouble paying my bill. What can I do?

We are committed to providing our low-income customers with the tools, resources, and programs to stay safe and warm in their homes. These programs help customers mitigate the impact of a rate adjustment.

Budget Payment Plan
Available to all Columbia Gas customers, the Budget Payment Plan allows customers to spread annual bills evenly across the year instead of paying account balances each month, helping to eliminate high winter bills. The budget year begins in May, but customers can enroll any time during the year.

Low Income Home Energy Assistance Program (LIHEAP)
Columbia Gas serves as a link to federal energy assistance funds which provide help with residential heating costs. These energy grants do not have to be repaid by the customer. Enrollment guidelines, which are revised each new heating season, are based on household size and income.

Customer Assistance Program (CAP)
The Customer Assistance Program offers affordable payment plans for residential customers with low incomes and long-term bill payment difficulties. CAP features reduced monthly payments for current bills for income-eligible customers, as well as debt forgiveness for prior balances.

Customer Assistance, Referral & Evaluation Services (CARES)
The CARES program helps customers who have a true inability to pay their utility bills and are facing additional challenges.

Dollar Energy Fund
The Dollar Energy Fund is an independent, non-profit organization that provides assistance to people who are on low or fixed incomes.

WarmWise: Low Income Usage Reduction Program
Formally called “Warm Choice,” Columbia’s Low Income Usage Reduction Program (LIURP) provides income-eligible customers with no-charge home weatherization assistance to help reduce annual heating costs. LIURP identifies improved home weatherization opportunities in the home and then installs the most cost effective measures to reduce consumption.

WarmWise: Audits & Rebates
Audits & Rebates offers a free, comprehensive in-home energy audit identifying and recommending energy saving improvements throughout the home to income-qualified customers. Customers can also choose to take advantage of rebates for energy saving improvements.

Crisis – Emergency Energy Assistance
A component of the Low Income Home Energy Assistance Program (LIHEAP), Crisis Emergency Energy Assistance provides funds for customers in emergency situations and who are in danger of losing their heat.

What are the customer benefits in this rate filing?

Infrastructure Upgrades. We are enhancing the safety of our system through our pipeline replacement program. We will continue to be a leader in pipeline replacement in Pennsylvania and invest millions of dollars each year to replace aging distribution pipelines. We remain committed to providing safe, reliable, and efficient natural gas distribution service, and we plan to dedicate more than $215 million in 2018 just to replace aging infrastructure.

System Reliability. Upgrades to the system with plastic and cathodically protected steel pipe not only maintain safety, but also provide an upgraded system design ensuring more reliable service during extreme cold temperatures. The new system also provides more flexibility in adding new, high efficiency equipment and allows for the installation of smaller, less expensive interior piping system for customers.

Pipeline Maintenance Enhancements. System maintenance practices will further improve the safe and reliable delivery of natural gas, such as enhanced training (including a new training facility that opened in mid-2016) and system improvements to reduce the amount of damage done to our distribution facilities by external parties, the number one risk to the safety of our system.

Job Creation. Our pipeline replacement program is adding jobs, both full-time employees (engineers, engineering technicians, land agents and construction inspectors) as well as contractors who perform the actual pipe replacement (including laborers, equipment operators, crew leaders and support staff), and associated support services such as paving, traffic control, trucking, sand and gravel and a myriad of other material purchases and support activities.

Is this rate hike fair to Columbia Gas customers?

This is a fair and reasonable request for the significant investment in Pennsylvania which, if approved as filed, will provide customers with a number of tangible benefits. Our continued investment enhances the safety and reliability of our natural gas delivery system.

When will this adjustment impact my bill?

In a general rate proceeding such as this, it could take the PUC up to 9 months to review the filing and issue a formal order, with the new rates effective at the end of 2018.

How can I get involved?

Customers can reach out to the PUC. Information on how to get involved is included in our public notice in newspapers, and will also be included in all customer bills in April.

This rate filing process is very public. Anyone interested in the case can participate. We have an extensive customer outreach program designed to communicate what we are filing and why. Please be sure to watch our videos about our pipeline replacement program and rate case process for additional program information.