Washington Gas Light Co. has asked for permission to upgrade its gas pipes and charge customers upfront for the work.
Maryland law passed this year allows gas companies to charge for infrastructure upgrades or improvements before those are complete and bypass the typical method of recouping the money later through a rate increase.
On Nov. 7, Washington Gas Light filed a 22-year, $869 million plan with the Maryland Public Service Commission to repair or replace 633 miles of pipe main and 75,200 services.
To pay for the upgrades, the utility would tack a 29-cent monthly fee on the average residential heating customer’s bill. The fee would fund the first five years and $200 million of the upgrades and also would pay for $5.2 million of improvements made in August and September. It could increase each year up to the maximum $2 per month allowed by the new law, according to the utility’s request.
In its request, the utility said the new fee would take effect Dec. 7.
But the PSC has put a temporary kibosh on the fee, suspending it for 150 days so the commission can mull it over.
“The suspension period is necessary to provide the Commission with an opportunity to determine the justness and reasonableness of the proposal,” according to a Nov. 13 order issued by the PSC.
Washington Gas is the third Maryland utility to apply to the PSC for a surcharge since the law passed in the spring.
In its request, the utility said the project would create more than 250 jobs, eliminate gas leaks and reduce gas emissions.
Del. Charles E. Barkley (D-Dist. 39) of Germantown, sponsor of the law, said it was intended to accelerate infrastructure repairs on miles of aging pipe. It also sought to save customers money and create jobs, he said.
“Ratepayers are eventually going to pay for this stuff anyway,” Barkley said. “If utilities can get some money as they go along, it should save some interest down the road.”
Washington Gas will be required to file a full rate case after the five years, but Barkley said it cannot double dip and ask for a rate increase to pay for what the surcharge covered.
Del. Alfred C. Carr Jr. said Washington Gas lobbied for the law, which he opposed, and that it will actually increase company profits.
“My understanding is that Washington Gas has the ability and resources to raise the money to make the needed upgrades to keep system safe and reliable using the traditional rate making process,” said Carr (D-Dist. 18) of Kensington. “They prefer to do this way because it is more profitable for them.”
The law also opened the door for other utilities to seek similar surcharges, he said.
“My expectation is that you’ll see electric utilities pushing for a similar law,” he said, noting that electric utilities already have begun to see the surcharges through other means.
In July, the PSC granted Pepco $24 million of a $192 million surcharge, tacking about 6 cents per month upfront on customer bills. That decision is currently facing appeal in court.