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2018 CMD Rate Case Frequently Asked Questions (FAQs) - Settlement

On Wednesday, November 21, 2018, the Maryland Public Service Commission (“PSC”) approved the settlement between Columbia Gas of Maryland, Inc. and the parties in Columbia Gas’s base rate case in support of the Company’s continued and significant improvements to its natural gas distribution system. The base rate settlement allows an increase in annual revenues of approximately $3.7 million. The new rates will go into effect on November 26, 2018.

What is a base rate case?

Columbia Gas sought approval from the PSC to adjust the system charge and distribution usage charges, which are commonly referred to as base rates.

Unlike most companies, which can change the price of their product/service without outside approval, regulated energy providers—like Columbia Gas—must submit a detailed request to change their base rates. The request includes evidence to support the increase and demonstrate how it benefits customers.

The process—referred to as a regulatory rate review or rate case—must be decided by the Maryland Public Service Commission (PSC).

Customers have had the opportunity to have a voice in the review process in multiple ways, including through written comments or by attending public hearings. Residential customers are represented throughout the process by the Maryland Office of People's Counsel.

This rate case review is public. All of the documents that were part of this rate case can be found on the PSC’s website here.

What are base rates?

Base rates generate the revenue needed to recover the costs to repair, upgrade, and operate the Company’s natural gas delivery system. This system includes 658 miles of pipelines, regulator stations, meters, and other facilities. This charge is separate from natural gas costs, which generally make up about a third of the total bill. Columbia Gas purchases its gas on the wholesale market and, under Maryland law, passes those natural gas costs on to the customer without mark-up or profit.

Base rates are made up of a system charge and a usage-based distribution charge (per therm rate).
  •  A system charge is a flat rate customers pay on each bill regardless of how much gas Columbia Gas delivers to their home or business.
  • Distribution usage charge is based on how much gas Columbia Gas delivers to their home or business.

The system charge and the distribution usage charge are the only source of revenue for Columbia Gas. All of Columbia Gas’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 system charge and distribution usage charge.

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 about a third of the total bill, are passed through to customers on a dollar-for-dollar basis. Under Maryland law, utilities cannot profit on the gas commodity charge.

What does this mean for my bill?

Under the new rates that will go into effect on November 26, 2018, the total bill for an average residential customer who purchases 70 therms of gas per month from Columbia will increase from $76.72 to $82.66, a 7.74 percent increase.

The average total bill for a residential customer will still be about 30 percent lower than it was in 2009, when adjusted for inflation.

Why does Columbia Gas need to adjust its rates?

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

From 2007 to 2017, Columbia Gas invested over $120 million in the modernization and expansion of its distribution system in Maryland. Of that amount, approximately $80 million was dedicated to replacing 72 miles of priority pipe.

In 2018, Columbia Gas will invest approximately $25.7 million in Maryland, with over $20 million being invested to upgrade aging underground infrastructure.

This settlement represents a reasonable return for the Company’s significant investment in Maryland.

How is Columbia Gas trying to reduce costs for customers?

Columbia Gas is working more efficiently than it has in the past, to reduce cost for customers and improve customer service and satisfaction. 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:

  • Technological investments, such as investing in Automated Meter Reading technology, to reduce the costs associated with reading meters monthly.

  • Long-term contracts with our pipeline contractors, which ensure affordable and predictable rates for their services.

  • Partnerships with our sister gas distribution companies in Ohio, Pennsylvania, Kentucky, Virginia, 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.

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

No, not base rates. Every quarter, Columbia Gas files its quarterly gas cost adjustment for the natural gas commodity portion of your bill. Natural gas costs represent about a third of your total bill. Columbia Gas purchases its gas on the wholesale market and, under Maryland law, passes those costs on to the customer without mark-up or profit.

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

Columbia Gas last filed for a rate adjustment in April 2017. The proposed rates were implemented in October 2017.

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

Safety is Columbia Gas’s number one priority, and we are committed to our continued investment in the safest possible natural gas delivery system for our customers and communities. Columbia Gas is investing over $20 million to replace aging pipe in 2018 alone. This rate settlement represents a reasonable return for this investment in replacing and upgrading our natural gas distribution system.

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

Columbia Gas is committed to providing its 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 yearly bills over twelve months instead of paying your account balance each month, helping to eliminate high winter bills. The budget season starts in May but customers may sign up at any time.

Maryland Energy Assistance Program (MEAP): 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. MEAP applications are accepted year-round. 

Utility Service Protection Program (USPP): USPP protects families with low incomes from utility cut-offs and allows MEAP eligible households to enter into a monthly payment program to help stabilize energy bills. MEAP grants are deducted from the estimated annual utility bills, lowering monthly budget payments.  For households with back bills, special agreements with Columbia Gas are available to arrange for payment on the balance. 

Heat Share: The Columbia Gas of Maryland Fuel Fund provides energy grants to customers with low incomes for use in offsetting arrears or restoring service to terminated accounts.  Heat Share funds are only available to customers who have exhausted all other available energy assistance programs. 

Low Income Weatherization Program (LIWP): Columbia Gas’s Low Income Weatherization Program (LIWP) has partnered with existing weatherization programs in Allegany, Washington and Garrett counties to repair and replace unsafe heating equipment. The county weatherization program is a free program that first identifies an energy usage snapshot of your home and then takes action to seal up areas of heat loss. This program is offered to customers with low incomes and high gas usage. Columbia Gas and the Maryland Office of Weatherization have joined together to provide conservation measures designed to achieve affordable, efficient and safe gas usage.

If you are having trouble paying your bill, please contact Columbia gas at 1-888-460-4332 or visit https://www.columbiagasmd.com/billing-payment-options/assistance-programs

Are there any customer benefits in this rate filing?

Yes. While this base rate adjustment is focused on making Columbia Gas whole for changes in capital investments, revenues, and expenses since the utility’s last base rate case, customers will continue to benefit from expedited investments in aging infrastructure. Columbia Gas remains committed to providing safe, reliable, and efficient natural gas distribution service and expects to invest over $20 million in 2018 to replace pipelines.

Is this rate increase fair to Columbia Gas customers?

Columbia Gas views this as a fair and reasonable adjustment of rates for the significant investment in Maryland. Our continued investment enhances the safety and reliability of our natural gas delivery system.

When will this adjustment impact my bill?

New rates will go into effect November 26, 2018.

Doesn’t Columbia Gas include an Infrastructure Replacement and Improvement Surcharge (IRIS) under STRIDE? Why is Columbia Gas asking for this increase along with the IRIS surcharge?

The STRIDE mechanism allows Columbia Gas to recover a portion of its costs of replacing aging infrastructure through a monthly surcharge on customers’ bills. By law, however, the residential STRIDE surcharge is capped at $2.00 per month. Columbia Gas’s current level of investment in qualifying facilities exceeds that amount.

It is therefore necessary to move investments out of the STRIDE surcharge and into base rates in order to allow continued funding of Columbia Gas’s ongoing infrastructure replacements. The law includes protections to assure that there is no double recovery.

Additionally, the STRIDE surcharge covers only investments in facilities, and not operation and maintenance costs. It is therefore also necessary to adjust base rates to allow Columbia Gas to recover its increased O&M costs.

Do the new rates take tax reform into account?

Yes. Tax calculations for the new customer rates in this adjustment reflect Maryland law and federal law, including the Tax Cuts and Jobs Act of 2017 (“TCJA”) which was signed into law December 22, 2017.

Additionally, Columbia Gas passed back to customers the difference between taxes collected at the previous federal 34% tax rate versus the new 21% tax rate from January 1, 2018 to March 31, 2018. Residential customers received a credit of $1.91 per month April through October.