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State regulators conditionally approve Cascade Natural Gas settlement, revenue increase

Docket Number: UG-210755

Conditions address equity and customer impact concerns

LACEY, Wash. - Today the Washington Utilities and Transportation Commission conditionally approved a settlement agreement between UTC staff and Cascade Natural Gas, authorizing a $7.2 million revenue increase.

The 5.81% increase is significantly lower than the company’s original request of 11.1% or $13.7 million, and lower than the settlement’s terms which would have allowed a revenue increase of $10.7 million. In its order, the commission found that the settlement agreement as proposed was not fair, just, reasonable, equitable, and sufficient. The commission reduced the revenue requirement and required conditions to address concerns around capital structure and equity, among others.

A typical residential natural gas customer using 54 therms a month will pay $1.51 more, for an average monthly bill of $55.59.

Settling parties have seven days to accept or reject the Commission’s conditions to the settlement. If they accept the conditions, the change in customer rates approved in the order will go into effect on Sept. 1.

Commission decision

When evaluating a settlement, the commission must determine whether the agreement follows state law, is in the public interest, and whether the agreement resolves the issues of the case.

In approving the settlement, the commission imposed several conditions, including updating Cascade’s capital structure from an equal split to 47% equity and 53% long-term debt to reflect changes in company debt, which results in an authorized 6.85% rate of return.

In addition, because recent state law requires the commission to consider equity when evaluating public interest, including the distribution of benefits and cost burdens to customers and long-term environmental impacts, the commission addressed how it will consider equity in its public interest analysis.

In its order, the commission outlined how it will now include equity in its public interest considerations going forward so that “ the Commission’s decisions do not continue to contribute to ongoing systemic harms, we must apply an equity lens in all public interest considerations going forward. Recognizing that no action is equity-neutral, regulated companies should inquire whether each proposed modification to their rates, practices, or operations corrects or perpetuates inequities.”

The commission found that the settlement did not address the impacts that this revenue increase would have on low-income customers.

To address these and other concerns, the commission approved portions of the settlement and added requirements that Cascade must make changes to its Washington Energy Assistance Fund program to reach more customers needing bill assistance. These include changes in income eligibility, reviewing funding levels, and establishing a customer outreach program to better connect customers with available assistance.

The commission also clarified that when requesting future changes to customer rates, Cascade must submit customer bill impacts that show both the percentage increase to rates by customer type, and the dollar amount per month for the average residential customer.
The commission received 11 public comments about this issue, all opposed.

Background 

In September 2021, Cascade Natural Gas submitted a rate increase request of $13.7 million or 11.1% to the UTC. Cascade limited its request to major items including capital additions that came into service since the beginning of the company’s last rate case, and wage increases that went into effect in 2021.

On March 15, 2022, UTC staff announced a full settlement agreement with the company, reducing the requested increase to $10.7 million or 8.64%. Offsetting the revenue increase, the settlement also included a $3 million reduction related to how the company calculated the depreciation of its assets in 2021. Over time, as facility and plant investments age and their value decreases, the amount utilities can recover for those investments from customer rates also decreases.

The Energy Project, the Alliance of Western Energy Customers, and the Public Counsel Section of the Attorney General’s Office — who participates in UTC proceedings on behalf of customers — all opposed the settlement agreement.

Kennewick-based Cascade Natural Gas Corporation serves almost 200,000 residential and business customers in 68 communities throughout the state, including Aberdeen, Bellingham, Bremerton, Kennewick, Longview, Moses Lake, Mount Vernon, Walla Walla, Wenatchee, and Yakima. 

The UTC is the state agency that regulates private, investor-owned electric and natural gas utilities in Washington. It is the commission’s responsibility to ensure regulated companies provide safe and reliable service to customers at reasonable rates, while allowing them the opportunity to earn a fair profit.

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Editor's note: All documents, including the commission order and settlement agreement, are available in the docket search on the UTC's website www.utc.wa.gov

 

Topic(s)
Energy