AUGUSTA — The city has filed to intervene in a Maine Natural Gas rate increase case now before the state Public Utilities Commission out of concern it could have a large effect on local ratepayers.

City Manager William Bridgeo said a PUC staff recommendation that the costs of Maine Natural Gas’ ongoing expansion into the Augusta area not be shared with ratepayers statewide, as the company had proposed, but potentially be funded only by Augusta-area ratepayers, could increase dramatically the costs for Maine Natural Gas users in the city.

“It’s clear the (city) council is unanimously objecting to this concept of Augusta ratepayers exclusively bearing the costs of Maine Natural Gas’ expansion,” Bridgeo said.

Bridgeo said the rate increase, as first proposed to the PUC, was projected to increase the rates of Maine Natural Gas ratepayers statewide by about $500 a year after its three-year phase-in period. But if the company’s costs of expanding in Augusta are funded only by Augusta ratepayers, not spread among ratepayers statewide, Bridgeo said, the increase for those Augusta ratepayers would be “way more” than $500 a year.

The company’s proposal would increase delivery rates, which make up about a third of a typical customer’s total bill, by 62 percent over the next three years

The PUC staff, in its analysis of the case, suggested the costs of Maine Natural Gas’ expansion in the Augusta area should not be borne by ratepayers statewide. Instead, the staff said the commission should consider having the costs of that expansion funded by either Augusta-area ratepayers, or Maine Natural Gas shareholders or both.

Maine Natural Gas had proposed a statewide rate increase, needed in part, company officials said, to help cover the costs of its past, ongoing and future expansion into the Augusta area.

Dan Hucko, manager of corporate communications for Maine Natural Gas parent company Iberdrola USA, which also owns Central Maine Power Co., said Maine Natural Gas has recovered the costs for all its past system expansions into areas including Freeport, Bath and Brunswick from its entire customer base, not just customers served by those expansions. He said Augusta should be no different.

“The costs to expand, maintain and grow our system in the Kennebec Valley should not be treated any differently,” Hucko said. “Our proposed rate increase will recover those investments, plus the expenses needed for the growth and continued safe operation of the entire system, and keep our company financially viable. These increases should be equally distributed since all of our customers will receive equal benefits.”

Hucko said it is entirely appropriate the city would intervene in Maine Natural Gas’ rate case before the PUC, especially since a growing number of its customers are in Augusta. He said the firm looks forward to working with the city and all other parties to reach a fair and equitable outcome.

In the PUC staff’s analysis, which contains recommendations for commissioners to consider when they decide the case, the staff notes the commission could set separate rates for Augusta-area customers and customers in the rest of the state. Augusta-area customers would be responsible for paying, through higher gas delivery rates, for a portion of the cost of the company’s expansion in the Augusta area.

Staff members said they think Maine Natural Gas imprudently spent more money than its initial plans indicated it would in expanding in Augusta, in part in an effort to beat competitor Summit Natural Gas of Maine.

The staff report said commissioners could “disallow” some of Maine Natural Gas’ costs of expanding in Augusta it deems to be “imprudent,” leaving those costs to be covered not by ratepayers but by shareholders of the company. The staff presented the commission with multiple options for apportioning those costs.

Hucko said Maine Natural Gas disagrees with the characterization that some of the company’s decisions to rush to expand in Augusta were imprudent. He noted the firm had a contractual obligation to supply gas to MaineGeneral Medical Center’s then-new regional hospital in north Augusta by Nov. 1, 2013.

“We developed our schedules to hit that date, and we did,” Hucko said.

He said the company hasn’t raised its rates since 2011; hasn’t had a return on equity, or a profit, of more than 3 percent since 2009; lost money in 2013; and needs a rate increase to earn a reasonable profit and stay viable while it continues to invest and grow its network of pipes safely.

Big gas users, including the state of Maine and MaineGeneral, negotiated contracts that lock gas delivery prices in place, so they won’t be affected by the rate increase request. Bridgeo noted that means Augusta residential and small business owners who use gas could be forced to pay for a disproportionate share of the cost of the expansion into the area.

City councilors voted unanimously last week after an executive session to intervene in the rate case, which gives the city the right to participate and testify in the case.

Harry Lanphear, administrative director of the PUC, said the case probably would be decided by the commission by the end of November.

“I absolutely think we should intervene on behalf of Augusta residents,” At-Large Councilor Dale McCormick said. “To think Augusta residents could, all of a sudden, be on the hook alone for something called an imprudent investment by a private company that has stockholders is beyond reasonable. We should stick up for ourselves.”

Bridgeo noted customers who switched to natural gas in central Maine made substantial investments to do so. Converting from oil to gas can be a roughly $10,000 expenditure if an entirely new system is installed, and the oil burner is taken out, which would make it costly to convert back to oil or another fuel.

Stephen Langsdorf, city attorney, said the rate case is already underway; but as a municipality, the city still has the right to intervene. However, he warned the city needs to act quickly. The city’s petition to intervene was submitted to the PUC on Friday, the day after the council vote to do so.

No members of the public attended a June 18 public witness hearing in Brunswick held by the PUC to take comment in the rate case. Public comment still can be made, however, on the commission’s website by entering Docket Number 2015-00005.

The city’s intervention in the case comes on the heels of the settlement last month between the city and Central Maine Power Co. in which CMP agreed to make a one-time, $95,000 payment to be used to reduce electricity rates throughout its service area and to prohibit CMP officials from accompanying Maine Natural Gas representatives on sales calls. That settlement ended a case, filed by the city, alleging CMP improperly used ratepayer resources to help win customers for Maine Natural Gas.

Bridgeo said some councilors initially expressed some hesitancy about getting involved in another PUC proceeding involving Iberdrola, so soon after concluding the previous case. However, he said councilors agreed to intervene in the current proceeding at least to object to the possibility of Augusta ratepayers being saddled with higher rates than those of the rest of the state, and to stay informed as the case proceeds.

Keith Edwards — 621-5647

[email protected]

Twitter: @kedwardskj

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