Washington Gas Light Co. said yesterday it will reduce bills to its 450,000 Washington-area residential natural gas customers by an average of $27 a year during the next two years.
The lower bills were made possible by a proposed settlement with Columbia Gas System of Wilmington, Del., which was accused by 71 gas companies in the East and Midwest of overcharging for natural gas supplied to distributors such as Washington Gas during the past three years.
Washington Gas is one of the largest beneficiaries of the settlement, proposed to the Federal Energy Regulatory Commission (FERC) yesterday by Columbia Gas System. Columbia agreed to reduce its gas prices to its customers such as Washington Gas for the next two years, a move that will cost the company nearly $1 billion.
In addition to the benefits to its residential customers, Washington Gas said its 110,000 commercial and industrial customers also would get a share of the $46 million in reduced costs the company will pass along under the settlement.
The savings should begin showing up on bills later this year, pending FERC approval of the settlement.
Washington Gas and Columbia Gas officials said they expected few problems with approval by FERC. Some agency staff members sat in on the negotiations between Columbia Gas and the gas companies.
"I don't have any reason to believe that FERC would be unfavorable to this settlement, mainly because it's almost unanimous among the parties involved," Washington Gas President Donald J. Heim said. "I would think it would be attractive to FERC."
"We're hopeful of quick and favorable approval," a Columbia Gas spokesman said.
Baltimore Gas & Electric Co., which gets a higher percentage of its gas from Columbia Gas than does Washington Gas, estimated that the settlement would save its residential customers an average of about $41 a year for the next two years.
"Our customers are the beneficiaries," Heim said. "Their bills are going to be less than they would have been, and I can't think of any better news to give them." The typical Washington Gas Light residential customer pays about $700 a year for gas, so the benefit of the settlement is equal to a reduction of about 4 percent.
"It's a good settlement for consumers," said Ed Rothschild, director of the Citizen/Labor Energy Coalition, a Washington-based consumer-advocacy group, one of many consumer groups that weighed in on the side of the utilities in the case. "I think from both points of view, from Columbia's point of view and the consumer's point of view, it's very good."
Under the terms of the settlement, Columbia Gas agreed to freeze its gas price for the next two years at $3.60 per thousand cubic feet, down from the current $4.07. Washington Gas and the other utilities that are parties to the settlement will pass that savings along to their customers in the form of lower bills.
"The dollars here will flow through directly to the customer, no question about that," Heim said. Washington Gas buys more than half of its gas supplies from Columbia Gas.
Heim said he hoped that the savings would keep Washington Gas from having to ask Virginia, Maryland or District regulators for higher rates over the next two years, but he couldn't guarantee that other cost factors would not lead his company to seek a rate increase before 1987.
"I can't say we're not going to have any more rate cases," he said.
Columbia Gas ran afoul of its utility customers beginning in 1982, when it bought huge supplies of high-priced gas as a hedge against future shortages. It passed these costs onto the gas companies, which complained in a series of cases before FERC that they were being overcharged. In a preliminary finding in the case, FERC ruled that Columbia Gas' actions showed "reckless disregard" for its customers.
Faced with the higher price of supplies from Columbia Gas, many of its customers began purchasing less expensive gas from other sources. Washington Gas, for instance, has begun buying large quantities of less-expensive gas on the spot market, in the process reducing its dependency on Columbia Gas to about 50 percent of its supplies from nearly 90 percent four years ago. Transco Energy Co. is the utility's other main gas supplier.
Washington Gas says that, by shifting its business away from Columbia Gas' high-priced fuel, it has saved customers about $31.5 million -- equivalent to roughly $18 a household -- over the past two years.