The District of Columbia's consumer advocate recomended yesterday that Washington Gas Light Co.'s rates be cut by $3.2 million rather than raised by $18.8 million as the company has requested.
The rate increase is not needed because Washington Gas already is earning adequate profits, D.C. People's Counsel Brian Lederer said in testimony filed with the D.C. Public Service Commission.
The PSC's staff, however, recommended an $11.3 million rate increase, based on its analysis of the Washington Gas application.
The gas company, PSC staff and people's counsel disagreed over how much profit the utility ought to be able to make on its investment in facilities to serve customers in the District. Washington Gas asked for a 12 3/4 percent return on its investment; the PSC staff recommended 11.7 percent; and Lederer suggested no more than 11 percent.
Lederer said the stock market provides evidence that Washington Gas is in good financial health and does not need higher rates. Washington Gas stock is selling for more than its book value at a time when the vast majority of utility shares are going for less than the value of the company's assets, he said.
Washington Gas Vice President Edward Smallwood said the price of the stock reflects not the profitability of the business of selling natural gas but the prospect of profits from a gas well in Oklahoma drilled by a WGL subsidiary.
Smallwood said D.C. customers have been subsidized by Washington Gas customers in neighboring states because of low rates in the District.
Lederer urged the PSC to cut back the gas company's plan to invest $18.8 million in new facilities in the District and urged the company to cancel a contract to buy synthetic natural gas.