State regulators have approved a rate increase less than what Roanoke Gas Co. sought and implemented last year on an interim basis, leading to refunds of $30 to $40 for the average residential customer.
In an order late Friday afternoon, the State Corporation Commission approved an overall increase of $7.25 million a year in Roanoke Gas’s base rate, which amounts to a 4.5% hike in the monthly bill of a customer who uses 5.5 dekatherms of natural gas.
Roanoke Gas had asked for an increase of nearly 11%, which it began imposing on an interim basis Jan. 1, 2019.
The average home customer will pay about $2.36 a month more than they did before the interim increase took effect. Customers will be refunded the difference from the higher interim rate depending on their consumption and duration of service.
The refunds will appear as credits to customer bills once they are approved by the SCC, which could take a month or two, according to Paul Nester, president of Roanoke Gas. Former customers due a refund will receive checks.
During a yearlong regulatory review of the rate increase, Roanoke Gas’ involvement in the controversial Mountain Valley Pipeline took a high profile.
Opponents argued that there was no need for the company to purchase gas from the 303-mile pipeline, and that the investment of a sister company, RGC Midstream, as a 1% partner in the joint venture would lead to higher rates for customers. Roanoke Gas officials, however, said the pipeline was needed to meet demand — a position the SCC agreed with.
The decision to build two gate stations, in Franklin and Montgomery counties, to connect with the pipeline “was reasonable and prudent in order to provide additional capacity to meet Roanoke’s public service obligations,” the commission said in its 24-page decision.
A dozen reasons were listed in support of that finding, including the lack of reasonably comparable alternatives and the need for natural gas to spur economic development in Franklin County, which is largely unserved by Roanoke Gas.
“I don’t think it’s gray at all,” Nester said. “We were very happy with the clarity and strength of the language.”
Although the commission found a need for the gate stations, it ruled that their cost of about $2.5 million should not be borne by the rate increase. The facilities will not serve customers until the pipeline is completed, the SCC found, so Roanoke Gas should defer their costs to “potential future recovery.” That could involve another increase in the company’s base rate, which covers the cost of repairing, upgrading and operating the system of pipes used to deliver natural gas to homes and businesses.
During a public comment period last year, nearly 300 people weighed in. Most were opposed to tapping into Mountain Valley, which has generated strong opposition in Southwest Virginia, in part because of widespread environmental problems.
“The record in this case is devoid of any analysis whatsoever of the value to Roanoke’s customers of a fourth source of supply,” an attorney for Appalachian Mountain Advocates, which represented the Sierra Club as an intervenor in the case, wrote in SCC filings.
Roanoke Gas currently is supplied by the Columbia Gas and East Tennessee pipelines. A tank that stores liquefied natural gas in Roanoke County is used as a reserve supply for the company’s approximately 62,000 customers in the Roanoke and New River valleys.
Last summer, an SCC staff analysis questioned whether demand for natural gas in the region was strong enough to justify an investment in Mountain Valley. But after two days of testimony, a hearing examiner found the gate stations to be “prudent” and recommended a rate increase of $6.7 million. The full three-member commission approved a $7.25 million increase.
Construction of the pipeline, meanwhile, is stalled. A venture of five energy companies has run into multiple problems controlling erosion from burying a 42-inch diameter pipeline on steep slopes, and three sets of federal permits were struck down or suspended after legal challenges from environmental groups.
Mountain Valley says it plans to have the permits restored in time to complete the pipeline by late this year.