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Attorney General Coakley to Columbia Gas: "Fly Coach"

Columbia Gas, whose service area includes Stoughton, is seeking to pass "unnecessary" costs, like $100K in corporate jet travel, on to ratepayers as part of proposed $29.2 million rate increase; AG’s office instead seeks $27.9 million rate dec

Attorney General Coakley to Columbia Gas: "Fly Coach"

The following is a press release from the office of Massachusetts Attorney General Martha Coakley:

Massachusetts Attorney General Martha Coakley’s Office is opposing a proposed $29.2 million rate increase by Columbia Gas after an investigation revealed that the company is seeking to pass millions in unnecessary costs, including more than $100,000 in corporate jet travel, on to Massachusetts ratepayers.

Bay State Gas Company, doing business as Columbia Gas of Massachusetts, which provides natural gas service to approximately 295,000 customers across Massachusetts, including Stoughton, has filed a proposed rate increase of $29.2 million. In a brief filed Tuesday with the Department of Public Utilities (DPU), the AG’s Office recommends that the utility company not only be denied the increase, but instead cut its rates by $27.9 million.

“Columbia Gas’ request for a rate increase simply doesn’t pass the ‘common sense test,’” AG Coakley said. “Columbia Gas received a significant rate increase in 2009, and they still have yet to follow through on the upgrades they promised to deliver with those funds. Now they are back seeking to pass more unnecessary costs on to ratepayers. If their executives want to fly on corporate jets, they can do it on their shareholders’ dime, not at the expense of Massachusetts ratepayers.”

Columbia Gas has received a significant rate increase from the DPU –$19 million in 2009 – as well as other favorable terms that the company claimed it needed to safely replace leak prone pipes.  Despite those increases, the AG’s investigation revealed that the company’s frequency of pipeline replacement was actually slower after the DPU approved the rate hike.

AG Coakley’s Office also claims that Columbia Gas knowingly failed to disclose to the DPU that it had received permission from the Internal Revenue Service to change its tax accounting, which resulted in a $19 million tax refund. As a result, the 2009 rates set by the DPU were higher than warranted, costing customers $2.2 million per year in overcharges since 2009 – totaling $6.6 million today.

According to the AG’s investigation, Columbia Gas also failed to control other costs, such as charging ratepayers for “luxurious indulgences,” such as the lease of a Hawker 800XP executive jet and the chartering of other jets, a lavish expense that cost ratepayers an average $6,354 per passenger per flight. AG Coakley requests in the brief that Columbia Gas limit recovery of airplane travel, and that ratepayers only be required to reimburse coach service for airplane flights.

AG Coakley’s Office also found that Columbia Gas has been transferring significant revenues from its regulated operations to its parent holding company, NiSource, Inc., and to other unregulated affiliates.  Despite historically low interest rates, Columbia Gas declined to refinance long-term debt that it owes the NiSource Finance Corporation, a finance subsidiary of NiSource, Inc.

The AG’s Office argues that NiSource’s charges for accounting, finance, information technology and other administrative services are unreasonable, because they have increased Columbia Gas’ administrative costs to a level approximately 280 percent higher than the Massachusetts utility average.

The DPU must issue a ruling on Columbia Gas’ rate hike request by November 1, 2012.

Bay State Gas Company d/b/a Columbia Gas of Massachusetts currently provides retail natural gas distribution service to approximately 295,000 residential, commercial, and industrial customers in three divisions in 72 cities and towns in the Springfield, Brockton (including Stoughton), and Lawrence areas.  The parent holding company, NiSource, Inc. is headquartered in Merrillville, Indiana, and its affiliates are engaged in natural gas transmission, storage, and distribution in Indiana, Ohio, Kentucky, Pennsylvania, Maryland, and Virginia.

Assistant Attorneys General Joseph W. Rogers, John J. Geary, Ronald J. Ritchie, Charlynn Hull, and Nathan Forster of the Attorney General’s Office of Ratepayer Advocacy handled this case.

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