MORGANTOWN – Parties involved in one of two Hope Gas rate hike cases this week offered alternative proposals ranging from a reduced hike to no hike at all.
The case they’re commenting on is Hope’s annual Pipeline and Expansion Program – PREP – application. PREP program charges are authorized in state code for “cost recovery of projects to replace, upgrade, and expand natural gas utility infrastructure that are deemed to be just and reasonable and in the public interest.”
Hope filed the case with the Public Service Commission in May. Under its proposal, residential customers would see rate increases ranging from $1.62 to $2.06 per month.
PSC Utilities Analyst Nathan Crouch proposed a lower rate schedule for Hope’s various customers. He told the PSC that utilities staff recommends several adjustments that lower Hope’s revenue requirements.
Hope’s PREP rates cover two programs: its General Program for its core distribution system and its Gathering Program for gathering facilities. Crouch said staff calculations reflect lower figures for both than Hope provided in its proposal.
Crouch said staff also recommends that the PSC not approve Hope’s proposal to resurrect its customer service piping program for a three-year pilot. Customer piping runs from a connection point to the main gas line to the customer’s meter. The customer is typically responsible to cover the cost of replacing this line.
In its pilot, Hope proposes to cover these costs for 28,277 customers acquired in its recent purchases of other companies. Hope first tried this pilot program from 2015-2018, when the PSC terminated it.
Crouch said staff opposes resurrecting it because it “shifts the cost recovery for the customer service line from the individual customer historically responsible for the customer service line to all customers resulting in an unnecessary additional rate increase for utility investments” contemplated under state rules.
“Every customer should be responsible for the installation of their own service lines subject to the company’s inspection and approval,” he said.
Hope’s proposed residential PREP rate increases are: existing Hope customers, $2.06 (2.4%); former Peoples Gas, $2.03 (2.58%); former Southern Public Service Company, $1.62 (2.92%); former Standard/Bazzle Gas, $1.80 ( 2.6%); former Consumers Gas, $1.70 (2.45%).
Crouch proposes these residential rate increases instead: existing Hope customers, $1.46 (1.70%); former Peoples Gas, $1.44 (1.83%); former Southern Public Service Company, $1.15 (2.07%); former Standard/Bazzle Gas, $1.28 (1.85%); former Consumers Gas, $1.20 (1.74%).
Ronald G. Stalnaker, president of Stalnaker Energy, testified to the PSC on behalf of the Producers Issues Committee of the Gas and Oil Association of WV.
He said Hope’s projected costs to replace some existing lines are excessive. Hope estimates costs at $133.64 to $260.78 per foot. But Stalnaker Energy recently installed new plastic line at $4.61 per foot. Hope’s lower estimate is 28 times higher.
“I do not know what is driving Hope’s extremely high replacement costs,” he said, “but the fact that they are so high suggests to me that Hope should find a different entity or process to undertake these projects.”
C.I, McKown II, president and owner of C.I. McKown & Son, also testified on behalf of the committee. He told the PSC that Hope’s proposed PREP rate hikes plus proposed hikes for producers – Production Gathering and Aggregation Services, PGAS – in its separate base rate case could affect producers who feed gas into Hope’s system.
If the PSC approves the hikes in the base rate case, he said, “There would be wide-spread shutting in of wells, and many producers would go out of business altogether.”
Unlike Hope, which has a “captive” customer base, he said, producers operate in a commodity market with no pricing power. Increased costs from Hope will affect the level of production.
He said Hope’s gathering PREP program should not be changed until the effects of the base rate case are clear, and the rates in that case should be far lower than what Hope is proposing. And Hope’s current PREP surcharge for producers should remain unchanged.
David Dismukes, a consulting economist, testified on behalf of PSC’s Consumer Advocate Division.
He also said Hope’s PREP budget for its gathering program should remain unchanged. That’s partly because Hope has said it has no way of measuring the performance of its gathering system investments.
“The commission should recognize this is a very serious deficiency since such information is important in setting investment priorities and reducing the risk of inefficient capital investment that could be borne entirely by ratepayers,” he said.
And this proposed hike is coming at the same time as the proposed hikes in the base rate case – which will strand production investments and harm West Virginia’s economic activity. “It would be prudent for the Commission to wait until the conclusion of the base rate case before making any significant changes in PREP gathering rates.”
Dismukes also discusses and opposes Hope’s customer pipeline proposal. While Hope argues that the huge number of new customers will need to replace their service lines, the program would still improperly shift the cost burden to other customers, contrary to PSC rules.
In Hope’s base rate case, filed in early May, residential customers would see an impact varying based on whether the customer was already served by Hope or by one of the six companies it acquired in 2023 and 2024. The proposed monthly rate increase would range from $21.10 to $33.74.
