Science & Technology
3:59 pm
Wed February 29, 2012

Gas Company Proposes 9% Rate Hike For Residential Customers

Peoples Natural Gas is asking the Pennsylvania Public Utility Commission (PUC) to approve a base rate increase of $28.4 million to fund its modernization efforts. The plan, which began last year, is to replace all 44 miles of cast iron pipes throughout the company's system.

"We look at the cast iron pipeline system as the most at-risk pipelines." said Joe Gregorini, Vice President of Rates and Regulatory Affairs. "The fact is that's fairly old pipeline that's been around many, many years."

He said by the end October they want to dig up the old cast iron pipelines and replace them where they can with state-of-the art plastic pipelines. "In some cases where it's larger diameter pipelines, we may need to do steel pipeline," Gregorini said. "The new steel pipelines are protected, coated, wrapped so they won't corrode over the years."

The next phase of the modernization plan would remove older steel pipes. Gregorini said that replacing the cast iron pipelines will create about 100 jobs, improve customer service and lead to cost savings for the utility.

"Part of having older pipelines requires more maintenance," he said. "We have to survey for leaks, making sure they're not leaking. When you have state of the art pipelines in the ground, you're doing a lot less of that. So, in the long run, it will save costs, operating costs for the company and for the rate payers."

But if the PUC approves the request, the average residential customer will pay $86.74 per month, an increase of $7.14 or 9%. The company is asking for the rate hike to be effective April 28 to recover labor and benefits expenses, taxes, debt costs and for "a reasonable return on investment." About 50% of a customer's bill is the actual cost of the gas, which has been falling due to the abundant supply. Utilities cannot earn a profit on the natural gas itself.

"So we think it's a fair balance for consumers even with this rate increase factored in," Gregorini said. "Even if the PUC would give us our entire request, we're still coming out with rates that are lower than some of the other gas companies in the area."