The State Corporation Commission was told yesterday that the average household gas customer, and not just small users, should benefit from proposed changes in Washington Gas Light Company's rate structure.
Terry Spellane, president of the Dale City Civic Association, told the three member commission that the company's proposed reduction from $9.40 to $6, in the fixed monthly system charge for customers using less than 1,000 therms of gas annually was too limited. A therm is a measurement of heat.
"We do not understand why this 1,000 therm point was chosen," Spellane said. "If, as WGL says, the average homeowner used between 1,200 and 1,300 therms, it is quite clear that the opportunity of being billed at the $6 rate is beyond the reach of most WGL's residential customers."
But a company representative testified that extending the discount broadly would be impossible - because the company would then fail to earn the additional money it is seeking in its rate increase request.
The testimony came on the opening day of the commission's consideration of WGL's request for a $8.3 million. 8.5 percent Virginia rate increase that would raise the average monthly bill for a home heated by gas from $39.93 to $43.66 a month. The request comes on top of a $4.8 million. 1.9 percent increase that went into effect in April.
The company has 167,000 customers in northern Virginia, 153,000 of them residential.
Edmund Smallwood, WGL's assistant vice president for rates and regulatory affairs, testified that while monthly charges would go up for most of these customers under the proposed rates, about 35,000 small residential customers - those using less than 1,000 therms - would actually experience a decrease in rates.
For example, the bill of a gas heating customer using 900 therms in a year would be reduced from $336.42 to $334.44 - about $2. The bill of a customer using only 500 therms would drop from $224.50 to $209.80.
Smallwood said that a customer who used gas to heat water and nothing else would use 300 therms a year - but would not get the decrease in his rate unless the customer was classified as using gas to heat a house. It is only gas heat customers who qualify for the less than 1,000-therm "small volume discount" that the company is proposing.
The comapny is proposing it. Smallwood said, because if found that the smaller customers suffered disproportionately from the last rate increase when some of their monthly bills rose by 20 percent or more.
By the same token, he said, average households using 1,200 to 1,300 therms annually benefited disporportionately at the same time - that is the smaller users ended up footing some of the bill for the average users.
Therefore, Smallwood argued. Spellane's idea of charging average users less this time around would not work. He said that when there is a rate increase that users must pay for, and one group of users pays less, and another group has to pay more, if average users pay less, Smallwood said, then it would be "too large a benefit for too large a number of customers."
The company asked for this rate increase so it could earn its authorized profit of 9 percent - the rate of return on investment in facilities, capital provided by investors who buy WGL stocks or bonds. The company has asked that his rate be increased to 9.25 percent in Virginia as it has been in Maryland and the District.
Small volume discounts similar to the one proposed here are now also under consideration by regulatory agencies in Maryland and the District. In Maryland, the reduction in the system charge for less than 1,000-therm residential customers would be from $8 to $5 payable each month. And in the District from $8 to $5 payable nine months of the year.
The system charge in Virginia is paid nine months of the year also, meaning that this component of a customer's bill is missing in the summer months. Smallwood said this leads customers to complain in the fall when the charge is resumed before cold weather sets in, and in the spring when the charge is continued after cold weather is gone.
The system charge, found on customer gas bills in all three local jurisdictions now, represents part of the company's fixed costs. The other part of the bill, the consumer or energy charge, is for gas actually used.
WGL's recent change to this two part charge system replaced a system where customers paid a minimum amount monthly for a certain amount of gas, plus an additional amount that decreased as more and more units of gas were used.
The new system is thought to encourage savings because customers pay the same for each unit of gas no matter how much gas is used. But it has led to other problems of structuring rates equitably - as yesterday's testimony indicated.