Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, March 29, 1994 TAG: 9403290160
SECTION: BUSINESS PAGE: C-8 EDITION: METRO
SOURCE: By GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Medium
SCC Hearing Examiner Howard Anderson Jr. has recommended that the 3.4 percent rate increase requested by the gas company a year ago be cut by a little more than half to 1.6 percent. The original request would give the utility an additional $1.3 million a year in revenue; Anderson's recommendation would provide $630,000.
The company put the new rates in effect Sept. 1 subject to a refund, a practice allowed under SCC rules.
The new rates increased the average residential customer's monthly gas bill $1.61, the SCC said. Under Anderson's recommendation, that would be reduced to 66 cents. If the three-member commission ultimately agrees, Roanoke Gas would refund the difference, with interest, to its 41,000 customers.
The SCC's adoption of Anderson's recommendation wouldn't cause Roanoke Gas any operating problems, said John Williamson III, vice president for rates and finance. It will, however, start the company thinking sooner about filing another rate-increase request, he said.
The SCC's final decision on the rate request is expected later this spring. Williamson said the SCC could make its decision sooner if Roanoke Gas decides not to challenge any of Anderson's conclusions.
Anderson based his recommendation on his determination that the company should be allowed an annual rate of return on the stockholders' stake in the company of between 10.5 percent and 11.5 percent. The company is currently allowed a rate of return on common equity of between 11.25 and 12.25 percent.
The recommendation for a lower rate increase did not come as a surprise to the company.
In an interview last fall, Williamson said he expected the SCC to reduce the company's allowed rate of return because of declining interest rates. The SCC had been reacting to interest rates by cutting the rates of return for the state's other utilities about 1 percent, he said.
At a hearing in October, the company scaled back its request to $813,000, Williamson said. At the same hearing, the SCC's staff revised upward what it thought the company was due from $450,000 to $508,000 after the company pointed out some accounting errors, he said.
After the hearing, the company had hoped it would be granted $650,000, Williamson said. ``We were disappointed with $630,000; we would've liked ... a little more.''
If Roanoke Gas files for another rate increase this summer, it will probably be ``pretty small,'' he said.
The company has a $3.5 million annual building program. Of that, $1.5 million goes toward replacing old cast-iron lines with plastic pipe. The money spent on replacing pipe doesn't generate new revenue for the company, Williamson said.
by CNB