National Fuel Gas Co.'s delivery rates will rise by 2 percent in May after state regulators on Thursday granted the Amherst natural gas utility its first rate increase in nine years.
The $5.9 million rate hike approved by the state Public Service Commission was 86 percent less than National Fuel had requested last year and more than $3 million less than a state administrative law judge had recommended when he proposed in January that the delivery charge increase be dramatically reduced.
Because delivery charges make up only a portion of the total bill that National Fuel's residential customers pay – the other part is the actual cost of the natural gas, which is passed along to consumers at cost – the total impact of the increase on a typical customer will be about $1.10 a month. That's an overall increase of about 1.4 percent, including natural gas costs.
"This decision will provide National Fuel Gas with sufficient revenues for it to supply safe and adequate service at just and reasonable rates," said Gregg C. Sayre, the PSC's interim chairman, in a statement. "It will increase funding for assistance to low-income customers at a time when other low-income funding sources are significantly threatened."
National Fuel, which originally sought a 15 percent hike in delivery rates, said some portions of the PSC's rate decision were "problematic" and criticized the commission for setting new rates that allow it to earn a lower return than most utilities across the state and across the country, despite its cost-saving efforts to become more efficient in recent years.
"As a leader in utility safety and customer service, with gas costs and rates among the lowest across New York, and with robust low-income payments to help its payment-challenged customers, we believe the state PSC should fairly recognize the truly efficient utilities that provide exemplary safety and customer service performance," said Carl M. Carlotti, the president of National Fuel's utility business.
The rate increase will go into effect on May 1. An average customer's bill, including natural gas costs, will rise to $80.66 per month, up from $79.55. The 15 percent delivery rate increase that National Fuel originally sought in April 2016 would have increased an average customer's bill by about $5.75 a month.
National Fuel said its cost-saving and efficiency improvements had reduced its operating and maintenance expenses by nearly $10 million a year. The company said it also had invested more than $400 million into its New York utility system since 2008.
The company said the return that PSC is allowing National Fuel to earn from its utility operations, set by the commission at 8.7 percent of its equity, is less than the 9 percent return that every other comparable utility in the state can earn. Utilities across the country typically are allowed to earn returns that are even higher than 9 percent, the company said.
Reducing the company's allowed rate of return allowed the PSC to trim $12 million from National Fuel's rate increase request, the commission said.