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Higher bills from Peoples Natural Gas coming down the line

| Thursday, Jan. 31, 2013, 1:07 a.m.
Joe Gregorini, vice-president for rates and regulatory affairs at Peoples TWP Natural Gas Co. examines a piece of corroded iron pipe from part of a high pressure gas line that was replaced. Recovering the costs of line replacement will be a quicker and easier process under a new state law that went into effect Jan. 1.

Customers of Peoples Natural Gas Co. will see costs increase for infrastructure improvement on their bills sooner rather than later.

Under Act 11, a state law signed by Gov. Tom Corbett last February, utility companies can attempt to recoup their costs for putting in new lines and other infrastructure without seeking an overall rate increase.

People's sister company, Peoples TWP LLC — formerly T.W. Phillips — is considering going through the same process to allow Peoples TWP to do the same thing, a spokesman said.

Jennifer Kocher, Pennsylvania Public Utility Commission (PUC) press secretary, said when a utility replaced deteriorating lines and infrastructure, it paid for the improvements up front. Then it had to file for a rate increase to recoup the cost of the improvements from its customers.

Kocher said that process could take as long as nine months before a decision was reached and cost a utility as much as $1 million in legal fees.

The new law now allows all utilities to file for a distribution system improvement charge (DSIC), which applies only to the cost of infrastructure improvements. That can be decided in one to two months.

She said until the new law was enacted, only water companies could recoup their costs that way.

“The idea is to give the utility more cash flow so they can continue to do the work,” Kocher said.

Joe Gregorini, Peoples vice president for rates and regulatory affairs, said natural gas bills are in two parts: one for the cost of the gas and the other for procuring it. He said Act 11 caps the rate of recovery at 5 percent of the non-gas portion of the bill each month. A simpler way to figure it, he said, is taking half of that percentage, or 2.5 percent, and applying it to the entire bill.

He said the average monthly Peoples residential gas bill is $78, so 2.5 percent of that comes to about $1.95.

He emphasized that would be at the maximum allowed, but the actual rate billed likely would be lower.

“The other option is to file a costly base rate increase,” Gregorini said. “Based on the DSIC, it will be a much more gradual approach (for consumers).

“What we are allowed to recover is the depreciation on that investment and the rate of return,” he said. “We don't get dollar-for-dollar recovery on every infrastructure expense we incur.”

Gregorini said the company submitted a five-year, long-range infrastructure plan on Jan. 23, which is required before a DSIC can be filed. He said company officials are putting the finishing touches on the DSIC and expect to file it by the end of the week.

“The customer has a right to file a formal complaint, but the issues are so much narrower with the DSIC than it is for the base rate case,” he said, noting that it applies only to infrastructure costs.

“We are putting in pipeline at an unprecedented rate and that has to be paid for, so we have to do this,” said Barry Kukovich, spokesman for Peoples.

He said the company replaced nearly 50 miles of pipeline last year.

“We replaced all our cast iron lines,” he said. “Cast iron is generally the oldest pipe that a company will have in its system.”

Expediting reimbursement of those costs, Kukovich said, allows utilities to move ahead with replacing other deteriorating lines, which can pose hazards to consumers and Peoples employees.

He said the company now will be replacing steel pipe with the same plastic pipe used to replace the iron lines.

“Plastic pipe, being flexible, you don't have to worry about the freeze-thaw cycle, you don't have to worry about rust,” he said.

Tom Yerace is a staff writer for Trib Total Media. He can be reached at 724-226-4675 or tyerace@tribweb.com.

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