AUGUSTA — The city has filed a petition to intervene in a Maine Natural Gas rate increase case before the state Public Utilities Commission out of concern it could have a large effect on local ratepayers.

City Manager William Bridgeo said a PUC staff recommendation that the costs of Maine Natural Gas’ ongoing expansion into the Augusta area not be shared with ratepayers statewide, as the company had proposed, but potentially be funded only by Augusta-area customers could increase dramatically the costs for MNG users in the city.

“It’s clear the (city) council is unanimously objecting to this concept of Augusta ratepayers exclusively bearing the costs of Maine Natural Gas’ expansion,” Bridgeo said.

He said the rate increase, as first proposed to the PUC, was projected to increase the rates of MNG customers statewide by about $500 a year after its three-year phase-in period. But if the company’s costs of expanding in Augusta are funded only by Augusta ratepayers, Bridgeo said, the increase for them would be “way more” than $500 a year.

The company’s proposal would increase delivery rates, which make up about a third of a typical customer’s total bill, by 62 percent over the next three years.

The PUC staff, in its analysis of the case, said the commission should consider having the costs of the expansion funded by either Augusta-area ratepayers or MNG shareholders, or both.

MNG had proposed a statewide rate increase, needed in part, company officials said, to help cover the costs of its past, ongoing and future expansion into the Augusta area.

Dan Hucko, manager of corporate communications for MNG parent company Iberdrola USA, which also owns Central Maine Power Co., said MNG has recovered the costs for all of its past system expansions into areas such as Freeport, Bath and Brunswick from its entire customer base, not just customers served by those expansions.

“The costs to expand, maintain and grow our system in the Kennebec Valley should not be treated any differently,” Hucko said. “Our proposed rate increase will recover those investments, plus the expenses needed for the growth and continued safe operation of the entire system, and keep our company financially viable. These increases should be equally distributed since all of our customers will receive equal benefits.”

Hucko said it is entirely appropriate that the city is intervening in the MNG rate case before the PUC, especially since a growing number of its customers are in Augusta. He said the firm looks forward to working with the city and all other parties to reach a fair and equitable outcome.

In their analysis, PUC staff members said they think MNG imprudently spent more money than its initial plans indicated it would in expanding in Augusta, in part in an effort to beat competitor Summit Natural Gas of Maine.

The staff report said commissioners could “disallow” some MNG expansion costs in Augusta that it deems to be “imprudent,” leaving those costs to be covered by company shareholders. The staff presented the commission with multiple options for apportioning those costs.

Hucko said MNG disagrees with the characterization that some of the company’s decisions to rush to expand in Augusta were imprudent. He noted the firm had a contractual obligation to supply gas to MaineGeneral Medical Center’s then-new regional hospital in north Augusta by Nov. 1, 2013.

“We developed our schedules to hit that date, and we did,” Hucko said.

He said the company hasn’t raised its rates since 2011; hasn’t had a return on equity, or a profit, of more than 3 percent since 2009; lost money in 2013; and needs a rate increase to earn a reasonable profit and stay viable while it continues to invest and grow its network of pipes safely.

Big gas users, including the state of Maine and MaineGeneral, negotiated contracts that lock gas delivery prices in place, so they won’t be affected by the rate increase request. Bridgeo noted that means Augusta residential and small-business owners who use gas could be forced to pay for a disproportionate share of the cost of the expansion into the area.

Last week, city councilors voted unanimously after an executive session to intervene in the rate case, which gives the city the right to participate and testify.

Harry Lanphear, administrative director of the PUC, said the commission will probably decide the case by the end of November.

 

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