Suburban Natural Gas Company's application to increase distribution rates
Suburban Natural Gas (Suburban) filed an application with the Public Utilities Commission of Ohio (PUCO) on August 31, 2018 to increase its rates for natural gas distribution service.
What are natural gas distribution rates?
Natural gas bills are comprised of two main parts – the cost of the natural gas and the cost of distributing the natural gas to homes.
The distribution rate pays for all the things that Suburban must do to deliver natural gas to its customers, including installing and maintaining natural gas pipelines, reading natural gas meters, processing bills and taking customer service calls.
The cost of natural gas is not a part of this rate case. This cost is passed through to customers on a dollar-for-dollar basis with no mark-up or profit to the utility company.
What is the PUCO’s role in setting distribution rates?
According to Ohio law, a public utility is allowed to recover its operating expenses, plus a reasonable return on its infrastructure investments. When a utility requests a rate increase from the PUCO, several steps are taken to review the company’s financial condition and ensure that the company is fulfilling its obligations to customers.
When evaluating proposed rates, the PUCO staff looks at whether the proposed rates will provide the company with adequate operating revenue according to Ohio law. In general, the cost of providing service to customers includes operating expenses (i.e. labor, supplies, maintenance of infrastructure and equipment, depreciation expense and taxes) and a return on the company’s infrastructure investment, which are used to calculate the company’s revenue requirement. The revenue requirement is the amount of money a company is allowed to collect from its customers during a given year.
What did Suburban request in its application?
Suburban requested an increase of annual revenues of approximately $3.4 million. This would increase the monthly fixed base distribution rate for residential customers from its current level of $29.42 to $41.86, for an increase of $12.44.
Suburban is also proposing modifications to its general service tariff, including increasing the reconnection charge.
What did the PUCO staff recommend?
On February 6, 2019, the PUCO staff issued a report recommending a revenue increase of $764,000 to $1.1 million. This represents an increase of 4.10 percent to 5.84 percent. This would increase the monthly fixed base distribution rate for residential customers from its current level of $29.42 to $33.88, for an increase of $4.46. Staff also recommended a rate of return in the range of 6.72 percent to 7.72 percent. The PUCO staff report advises the PUCO commissioners of the staff’s recommendations. However, the Commission is not bound by the staff recommendations and may implement some of the staff’s suggestions and reject others.
What agreement did Suburban and the PUCO staff reach?
On May 23, 2019, PUCO staff and Suburban reached an agreement that would allow Suburban to increase rates for natural gas distribution service. In the agreement the parties recommended the increase be phased in over three years, the first year a $1.1 million increase, the second year, a $364,000 increase and the third year a $246,000 increase. The percentage increase for year one is 6.3%, for year two 1.8% and year three 1.2%. Additionally, the agreement recommends a rate of return of 7.26%.
How did the Commission rule?
On Sept. 26, 2019, the Commission adopted the settlement agreement with no changes.
How will this affect a customer’s bill?
Suburban’s average residential customer monthly fixed base distribution rate in year one will increase $4.64.
Does the PUCO consider public opinion?
The PUCO held a local public hearing to allow the public the opportunity top express their views regarding the company’s application in Delaware on April 18, 2019.
Consumers may also submit comments online at or by mail addressed to the Public Utilities Commission of Ohio, 180 E. Broad St., Columbus, OH 43215. Correspondence should include the case number 18-1205-GA-AIR.
What happens next?
An evidentiary hearing will convene on July 10 where interested parties may provide expert testimony in support or opposition to the agreement.
The PUCO commissioners will make the ultimate decision. The Commission is not bound by the agreement and may accept, reject or modify the stipulation based upon the case record.
How can I learn more about the rate case?
Suburban’s application and the case record can be viewed online by visiting the case docket for 18-1205-GA-AIR.
If you would like to know more about the PUCO or have utility-related questions or concerns, contact the PUCO at (800) 686-PUCO (7826) or visit us online at www.PUCO.ohio.gov.