Rates for customers of NW Natural will increase by 1.28 percent or $8.7 million a year effective Nov. 1, 2012, following a preliminary decision by the Oregon Public Utility Commission. The Commission will issue a final order later this week that will detail the rationale behind the decisions.
On December 31, 2011 Northwest Natural Gas Company submitted a general rate increase request to the Oregon Public Utility Commission to increase rates by 6percent or $43.7 million.
Major decisions of the Commission reducing the company's request:
· Return on Equity: NW Natural requested 10 percent, Commission awarded 9.5 percent.
· Pension: removes approximately $22 million from proposed rate base (represents about $4.5 million in rates per year).
· Mid-Willamette Valley Feeder: Disallowed $8.1 million for the Monmouth Reinforcement phase; and $13.5 million for Perrydale to Monmouth phase. These phases were not shown to be prudent at this time.
"This was an extremely complex and difficult case to resolve. However, I am confident this decision strikes a fair balance between the needs of customers and the company," Commission Chair Susan Ackerman said. "This modest increase will likely be more than offset by a drop in wholesale natural gas prices that will also take effect Nov. 1, 2012." (Commission will issue the Purchased Gas Adjustment decision Oct. 31, 2012)
Items driving the modest increase include pipeline and system safety inspections, maintenance, repairs, incident response and pensions.
It is NW Natural's first general rate case since 2002. General rate cases examine all of the elements involved in acquiring and delivering natural gas to customers. NW Natural provides gas to approximately 601,901 customers in Oregon.
The order includes settlement agreements that resolve the following issues:
· That a number of capital projects will be included in the company's rate base, subject to provisions that ensure the costs of those projects are known and measurable and that the projects are being used to benefit ratepayers.
· That the company will continue to use a number of rate mechanisms for the time being, including decoupling, WARM, and the SIP (System Integrity Program) mechanism, with some adjustments.
Rate of Return 7.7 percent
Return on Equity 9.5 percent
Capital structure 50 percent equity 50 percent long-term debt
Super Fund Clean Up Costs
The Commission also approved a mechanism to address clean-up expenses related to legacy manufactured gas plant operations in the Portland Harbor site. Customers will not see their rates change for this item until the Commission completes a prudency review of environmental costs in the deferred account.