Rate freeze, refunds on tap for area National Fuel customers

Gov. Andrew M. Cuomo announced the approval of a joint proposal that includes a rate freeze for Western New York customers of the National Fuel Gas Distribution Corp. starting immediately through Sept. 30, 2015.

The customer-friendly joint proposal also requires the utility to refund $5.5 million to customers and provide $2 million to fund home-weatherization projects and a furnace replacement program for low-income customers in the Buffalo region.

“This agreement is an outstanding victory for ratepayers in Western New York,” Cuomo said. “Our state’s consumers deserve utilities that work with their best interests in mind, and I applaud all parties involved in this agreement for coming together to deliver refunds a rate freeze for residents and businesses in the area.”

In addition to the rate freeze, the joint proposal adopted today by the State Public Service Commission provides National Fuel Gas’ 481,679 residential customers a one-time refund. Most of the company’s commercial and industrial customers will also get refunds. In all, approximately $1.77 million would be refunded to non-residential customers, and $3.73 million to residential customers. The new rate agreement covers 516,386 customers in total.

In early 2013, the Commission found that rates being charged to National Fuel’s customers might be higher than necessary. As a result, the Commission directed a full examination of the company’s rates. Following hearings, the Commission ordered that the corporation’s rates be made temporary subject to refund. Over the course of 2013, parties engaged in further discovery and participated in settlement discussions. This effort culminated in today’s adoption of the joint proposal.

In addition to the rate freeze and funding programs for low-income customers, the joint proposal provides an additional $12.50 per month discount for eligible low-income customers during winter heating months; funding a new pilot gas expansion program; improving gas safety metrics; increasing financial risk for shareholders for failing to meet performance standards; establishing a collaborative to investigate expanding a low-income gas supply program; increasing spending on removal of leak prone pipe by $8.2 million annually; and providing $1 million annually in rates to support economic development in Western New York.

The joint proposal also addresses both past and potential future excess earnings. For past excess earnings, it requires the company to establish and fund a $7.5 million deferred credit account for the benefit of ratepayers within 30 days following the issuance of the Commission’s order. This account would be allocated equitably among service classes on the basis of delivery revenues, net of commodity, and would be used to provide the refunds described above. In addition, $2 million would be used to fund home weatherization and furnace replacement programs for low-income ratepayers.

The joint proposal also establishes a gas safety performance mechanism comparable to those that the Commission has put in place for other gas utilities. The mechanism will require National Fuel Gas to increase its annual target for replacement of older, leak-prone pipe by nearly 20 percent.