- The Washington Times - Wednesday, November 6, 2002

The parent company of Washington Gas is considering appealing a rate reduction ordered by the D.C. Public Service Commission, which could mean an increase in city residents' winter gas bills.

James H. DeGraffenreidt, president and chief executive of WGL Holdings Inc., said in a conference call yesterday that the commission's order to reduce rates by $7 million has hurt the company's third-quarter profits and offset annual earnings. The commission rejected a request to raise rates by $16 million.

The utility company posted a loss of $22.7 million (47 cents per share) for the fiscal fourth quarter that ended Sept. 30, which was 2 percent lower than a loss of $23.2 million (48 cents) a year earlier.

But its annual earnings dropped more than half to $39.1 million (81 cents) from $82.4 million ($1.75) last year, owing to the lower rates and warm winter.

"We will be working to change key elements of the recent District of Columbia order that looks to reduce rates even as it seems to anticipate the company's need to increase rates," Mr. DeGraffenreidt said.

The commission's order does not affect rate increases of $9.25 million for Maryland residents or $7.5 million for Virginia residents, which are set to begin in the middle of this month, Mr. DeGraffenreidt said.

Corporate spokesman Tim Sargeant said the company has been unable since 2001 to raise rates to offset the costs of operations and maintenance for customers.

"These aren't unique costs we're trying to cover, but ones that recur on a regular basis and are pushing the company to a negative return," Mr. Sargeant said.

But Elizabeth Noel, the D.C. People's Counsel, an independent city agency that represents utility consumers, said in a statement that the rate reduction was appropriate.

"Should Washington Gas decide to appeal, [the agency] will be standing before the D.C. Court of Appeals fighting for consumers and protecting the rate reduction," Ms. Noel said.

Ben Lieberman, a senior policy analyst for the nonprofit Competitive Enterprise Institute, said rates will likely increase for city consumers despite the reprieve.

"Utilities fight local governments on imposing higher rates all the time, and both sides have had their share of victory," he said. "It's going to depend on the circumstances of the gas company and how much they want to raise the prices, but the rates will probably go up anyway."

Washington Gas has 30 days from the date of the final rate order, which was Oct. 29, to file an application for reconsideration. After the commission issues another decision, the company has 60 days to challenge it before the D.C. Court of Appeals.

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