Witnesses clash over gas rates

Witnesses clash over gas rates

April 14th, 2010 by Andy Sher in Politics State

NASHVILLE -- A regulatory expert clashed with a Chattanooga Gas Co. attorney Tuesday on the second day of hearings by the Tennessee Regulatory Authority regarding the utility's request to change how it charges customers for natural gas use.

Louisiana State University economist David Dismukes, a witness for the state attorney general's Consumer Advocate and Protection Division, sharply criticized Chattanooga Gas' request to switch over to a rate structure the company says encourages conservation and energy efficiency.

Dr. Dismukes characterized proposals known as "decoupling" or "straight fixed-variable," adopted in more than a dozen states, as simply "trends and fads" that benefit utilities more than consumers.

WHAT'S NEXT

The Tennessee Regulatory Authority will hold further hearings on the Chattanooga Gas Co.'s rate restructuring and rate increase proposals. Regulators face a May 24 deadline when it comes to making a ruling.

"They reduce incentives to go in and manage risks, and they shift those entirely to customers," said Dr. Dismukes, who also questioned energy-saving programs and promotions Chattanooga Gas is promising to offer to its Chattanooga and Cleveland, Tenn., customers.

Chattanooga Gas attorney J.W. Luna, a former state Environment and Conservation commissioner, took issue during cross examination, charging Dr. Dismukes' contentions were so much "gobbledygook" in his view.

"My witness totally disagrees with what you said," Mr. Luna said.

Dr. Dismukes contends some states such as New Jersey and Washington are starting to re-evaluate recently approved rate changes similar to those Chattanooga Gas now seeks.

But Mr. Luna cited a recent Massachusetts case where decoupling was adopted. He pointed out that Dr. Dismukes had testified against the move.

Chattanooga Gas officials and their experts argue that under Tennessee's current rate structure, the for-profit company has no incentive to push conservation measures because its expenses for fixed costs such as distribution as well as company profits are included in the price.

The company has two proposals. One, a "decoupling," plan would separate natural gas consumption from the company's revenue requirements so the utility will be encouraged to help consumers cut their overall consumption. The company would charge a set fee, regardless of how much gas is sold.

The other proposal, known as a "straight-fixed variable" plan, would better reward customers who reduce their gas consumption.

Dr. Dismukes said the amounts of money lost for energy conservation are relatively small and can be addressed by less comprehensive changes.

On Monday, state Sen. Andy Berke, D-Chattanooga, told TRA directors he favored the company's proposal in some form, noting incentives need to be changed to "ensure that it (the company) is instead able to engage in environmentally sensitive techniques without harming its shareholders."

But Sen. Berke said he was not getting involved in the company's accompanying request to also boost current rates by $2.2 million and allow the company to recover another $745,000 in legal expenses from another regulatory proceeding.

The Consumer Advocate office, meanwhile, argues that regulators actually should cut company charges by $300,000.

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