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National Fuel seeks hike of 7.2% in gas delivery rates

National Fuel Gas Co. is seeking a 7.2 percent increase in its delivery rates – the first since 2007 – in a proposal that would raise an average residential customer’s monthly bill by about $5.75 a month, the Amherst-based utility said Thursday.

National Fuel said that it needs its first rate increase in nine years to speed up its program to replace aging steel and iron pipes that are prone to leak and upgrade its computer systems.

The plan would increase the amount that an average residential customer pays to have natural gas delivered to a home or apartment by roughly $69 a year – from an average of about $80 a month to about $86.

The proposal will be reviewed over the next 11 months by the state Public Service Commission, which is likely to make changes to it and reduce the size of the rate increase that National Fuel is seeking.

The proposal would not take effect until April 2017. It would generate an additional $41.7 million in revenue a year from all types of customers, raising overall revenues for National Fuel by 7.9 percent.

Karen L. Merkel, a National Fuel spokeswoman, noted that the company is the only major utility in New York that has not increased its rates since 2007. The company is seeking only a one-year rate agreement because of the risks of rising interest rates and higher inflation, she said. “We have some of the lowest delivery rates among natural gas utilities in New York State,” Merkel said.

The delivery rates make up only a portion of a National Fuel customer’s monthly bill. The rate increase would not affect the cost of the natural gas that consumers purchase either from the utility or from an energy marketing company. The utility sells its gas to consumers at cost, while energy marketers offer a variety of pricing plans for their customers.

Because natural gas prices have plunged due to rising output from new shale gas wells that have been drilled in Pennsylvania and elsewhere, the average residential customer’s total bill, including energy and delivery costs, has dropped steeply since 2008, when it averaged $1,734. Even with National Fuel’s proposed rate hike, the utility estimated that the average customer would pay a total of $1,029 during a year with normal weather – a drop of 41 percent since 2008, when heating costs peaked.

In its plan submitted to the PSC on Thursday, National Fuel is proposing to replace 110 miles of older steel and wrought iron pipe that runs beneath the region’s streets and through its neighborhoods, up from the 95 miles that it plans to replace this year. Five miles of the pipe that would be replaced under National Fuel’s proposal would be high-pressure and large-diameter utility main lines. In all, National Fuel has about 1,978 miles of steel or iron pipes throughout its New York service territory, Merkel said.

The company has spent an average of $34 million a year since 2007 to upgrade its pipes and other infrastructure. About 20 percent of its utility main lines currently are made of steel or iron, while about 11 percent of its smaller, service lines are of the older variety.

National Fuel also is proposing to upgrade its computer system and expand its programs to help low-income consumers pay their bills. The proposal would make the $12.50 monthly discount available to participants in its Residential Assistance Service program for eight months, up from the current five months, while also offering an annual waiver of reconnection charges for low-income customers who had their gas service shut off for not paying their bills.

The company also is proposing to extend its pilot program to extend its natural gas service into rural parts of its service territory. That program, which runs for 10 years, has been centered in Wilson and in Richmond, Ontario County, Merkel said.

The pilot program currently aims to add natural gas service for 221 households in Wilson and 585 in Richmond, Merkel said. The proposed rate increase would extend the program to seven additional communities, including Clarence, with a target of adding gas service to 284 households.

The proposed pilot program could be expanded to about a dozen communities.