Monday, November 09, 2009

Con Edison Seeks 16.6% Natural Gas Delivery Rate Increase from Residential Heating Customers

In a Friday, November 6, 2009 filing with the PSC, Con Edison quietly filed new tariffs, testimony, and exhibits in support of a natural gas rate increase designed to yield increased revenue of $160.76 million. No press release, customarily accompanying past rate case filings, was posted at the Con Edison website as of November 10.

Con Edison's Petition in support of the new rates says the following items are drivers behind its claimed need for increased revenue from its customers:
  • $37 million of the total request is due to increased pension and other retirement benefits
  • $21 million is due to expiration of one-time credits from the sale of real property on First Avenue that had temporarily depressed rates;
  • $14 million is due to increased operating and maintenance expenses due to street excavation, higher uncollectible expenses, salaries and wages;
  • $30 million in increased property and other taxes;
  • $26 million is sought to raise the return on shareholders' equity investment from 9.7% to 10.8%;
  • The balance of the $160 million increase ($62 million), and the largest single element of the rate increase, is due to future plans to spend an additional $300 million per year for new capital expenditures. This would require higher rates designed to achieve a recovery of increased invested capital, through higher allowances for depreciation, plus a return on the shareholders' equity, plus the increased operations cost to install the new facilities.
Unless modified by the PSC, the new gas rates would raise total charges paid by consumers of all customer classes for Con Edison "delivery" service from $1.92 billion to $2.08 billion, or 8.4% overall. Some customer classes would see higher or lower increases than the average overall increase.

The last page of the last exhibit to Con Edison's Petition discloses that the new rates would increase natural gas delivery rates for residential heating customers by 16.6%.

As with any major rate increase, the PSC will suspend the effective date and conduct an investigation and hearings, and may, of course, modify the newly filed rates. PSC-approved new rates would likely take effect on October 1, 2010.

The utility also proposes to spread the increase over three years, raising rates each year for three years so as to achieve the same financial result for the company. This would be achieved if a "Joint Proposal" for a three year settlement can be developed in the course of confidential negotiations with the PSC and rate case intervenors, as has been past practice.

The "delivery" rates are in addition to the cost of natural gas or "commodity" supplied, which has declined this year. Futures markets, however, are currently signalling that natural gas costs may be up by more than 50% from current charges in late 2010 - early 2011. Higher gas "commodity" rates along with any "delivery service" rate increases approved by the PSC could result in significantly higher gas bills for heating customers in the winter of 2010 - 2011.

Any increase would add to the hardships faced by Con Edison's low and fixed income residential customers.

N.Y. Post, Nov. 11, 2009 -- Con Ed readies ga$ attack :
Con Ed is seeking to raise the price of gas for residents by 6 percent a year for three years, saying skyrocketing costs have left the utility in the hole, according to recently filed documents.

In the filings with the state Public Service Commission, Con Ed says it must make up for a shortfall of more than $160 million and is seeking permission from the board to raise residential gas prices 6 percent annually beginning in October 2010.

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