BGE seeks to raise charge

Utility proposes increase for natural gas delivery

PSC to decide on proposal

Customers would pay nearly $50 more yearly

April 30, 2005|By Paul Adams | Paul Adams,SUN STAFF

Baltimore Gas & Electric Co. is seeking permission from state regulators to charge homeowners who use natural gas an average of nearly $50 more a year to offset higher delivery costs -- the first such increase in six years.

The proposed increase has more to do with the rising price of gasoline and employee health care for the utility than the rising price of gas heating Maryland homes.

BGE, a subsidiary of Constellation Energy Group, has asked state regulators for permission to raise rates on its 620,000 natural gas customers because of rising costs for everything from employee health care to gasoline for its 1,600 trucks, which use 3 million gallons of fuel a year.

BGE officials said yesterday that average homeowners would see a $4 per month increase on the natural gas portion of their bills, which equates to an increase of nearly 5 percent.

Commercial businesses would be hit with a 6.6 percent increase under the plan, which must be approved by the Maryland Public Service Commission.

Gas customers won't see an immediate increase. A typical rate case before the PSC takes up to seven months. And it's common for the regulatory panel to reduce the size of the increase after taking testimony from consumer groups and conducting its own analysis.

As proposed, the increase would generate $53 million in new revenue annually for the company and represent the first such increase since 1999, the company said.

The rate increase applies only to the delivery charge customers pay to receive natural gas in their homes or businesses and is separate from the price paid for the gas itself.

The two charges show up as separate line items on customer bills.

BGE customers have become used to bigger utility bills in recent years. Natural gas prices have skyrocketed in the past five years as supplies have failed to keep pace with demand.

Those price increases, which are not controlled by BGE, are passed on to customers based on a formula established by the state commission.

By contrast, the company has to go before the PSC to recover increased delivery costs, which usually account for a fraction of a customer's bill.

Wayne Harbaugh, BGE's manager of pricing and regulatory services, said that since 2000, employee health-care costs have risen 32 percent and the cost of fuel for the company's service trucks has climbed 77 percent.

The price of steel used to manufacture natural gas pipe mains has climbed 88 percent, and the plastic pipes that lead to customer homes have become more expensive along with the price of oil used in their manufacture.

Add to that the $278 million in capital expenses the company has incurred since 2000 and the $5.5 million spent complying with the new Sarbanes-Oxley regulations on corporate disclosures, Harbaugh said.

"Those are just some of the examples of cost increases that we've experienced since 2000," he said.

Delivery charges aside, those who heat their homes and cook with natural gas can expect prices to continue their upward climb, industry experts say.

In its March report on the natural gas price outlook, the U.S. Department of Energy forecast spot prices approaching $7 per thousand cubic foot.

By contrast, the price per thousand cubic foot before 2000 was in the $2 to $3 range, said Dave Costello, an economist with the Energy Information Administration, the Energy Department's statistical arm.

Domestic producers are struggling to meet demand. Supplies from Canada, which once handily fulfilled rising U.S. demand, are no longer increasing, Costello said.

"It now seems more volatile," he said. That's not likely to change in the near term, he said.

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