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Peoples TWP wants rate hike of almost 30%

| Wednesday, May 1, 2013, 1:11 a.m.

The Peoples TWP natural gas company has proposed a rate change that will cost the average residential customer nearly 30 percent more.

The company has asked the Pennsylvania Utility Commission to allow a base rate increase of $18.7 million. If the request is approved, the average residential customer, who Peoples TWP says uses 84 thousand cubic feet (Mcf) of gas a month, will see their monthly bill go from $79.22 to $101.71, according to spokesman Barry Kukovich.

That's an increase of a 28.4 percent.

By comparison, the Consumer Price Index for the Pittsburgh area rose 2.6 percent from the second half of 2011 to the second half of 2012, the Bureau of Labor Statistics.

Kukovich said an average commercial customer, which uses about 200 Mcf each month, will see their bill go from $208.53 to $219.70 — a 5.4 percent increase.

He also said the bill for the average industrial customer would increase 3.4 percent.

Kukovich attributes the increases to cost of “taking out old pipeline and replacing it with modern pipeline. It's expensive to do that, but it's too important safety-wise not to do it,” he said.

“The pipeline we're going after is unprotected bare steel,” he said. “Most of it was installed in the World War II era. It needs to be replaced.”

Kukovich said the company has to replace about 950 miles of pipeline and plans to replace, at most, 35 miles a year.

“If we'd be replacing pipe in a downtown business area, it takes a lot longer than in a rural area,” Kukovich said. “It all depends when and where we have to replace it.

“This project will most likely take decades.”

Kukovich said he doesn't expect the new rates to start showing up on the 62,000 customers' bills until next January, if they're approved by the state.

Summer increase

However, consumers could start seeing higher bills as early as this summer, according to Joe Gregorini, Peoples TWP vice president of rates and regulatory affairs.

Gregorini said the company could implement a 1 percent to 3 percent increase under a new Pennsylvania law that allows utility companies to start charging customers to recoup expenses for infrastructure improvements, while their rate increase is being considered by the PUC.

“This is the first time utility companies are allowed to ask for ‘cost recovery' for infrastructure replacement,” Gregorini said. “Water companies have had this available to them for years.”

The charge, officially known as Distribution Improvement System Charge, or DISC, can be charged to customers only until a rate hike is approved.

Jennifer Kocher, the press secretary for the PUC, said that companies applying to implement DISC have to meet certain requirements.

“They have to have a long-term improvement plan approved and have to had a rate case in the last five years,” she said.

DISC is audited annually to make certain that money collected goes to the designated projects, Kocher said.

Kocher said she believes many gas companies will revamp their infrastructure in the near future, but it remains to see how they'll pay for it.

“We're going to see a lot of companies (in the state) making an effort to replace that pipeline, because of how old it is,” she said. “But, it depends on how they want to pay for that pipeline. Whether they use the DISC, or a rate increase, or pay for it from within.

“There is an definitely an increased interest on replacing infrastructure in the state.”

R.A. Monti is a freelance writer.

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