Virginia Natural Gas customers to see their bills increase

Virginia Natural Gas received state regulators' approval Tuesday for its first rate increase in 15 years.

Residential customers will pay $3.47 more per month on average, depending on their usage, an increase of about 5 percent. That's more than half the $6.27 monthly increase VNG initially requested.

The increase approved by the State Corporation Commission represents a settlement among the gas company, a group of its industrial customers, the commission's staff and the Virginia attorney general's office, which represents state consumers. The agreement allows the company to collect an additional $14.4 million a year - about half the amount it sought in its initial filing to the commission in February.

Beginning Oct. 1, VNG was allowed to impose that requested increase on an interim basis while awaiting state approval. The company will refund customers for the difference between that increase and the approved rate, plus interest, for October through January.

Refunds will average $12 to $14 for each residential customer, said John Cogburn, VNG's director of regulatory affairs. They will show up in bills as of Feb. 1, the same time that the new rates take effect, he said.

VNG, with headquarters in Virginia Beach, serves more than 275,000 Hampton Roads customers. Its base rates hadn't changed since 1996.

In its request filed in February, VNG asked to raise rates to collect an additional $25.1 million per year - about $15.6 million of it to pay for construction costs for an underwater pipeline, known as the Hampton Roads Crossing, between the Peninsula and South Hampton Roads.

The increase applies mostly to VNG's delivery rates, covering its costs to operate pipelines and distribute gas to customers, plus a profit, or return on its investment. The company currently earns a return on investment of 10.9 percent.

Under the rate settlement, the company agreed to lower its return to 10 percent, which means it will make less profit on its investment in Hampton Roads Crossing, Cogburn said.

"In the current economic and market conditions, that's a rate that allows us to continue operating a safe and reliable system," he said. "It's not out of line with what our peers are getting in the current market."

Delivery charges include a flat rate, which will rise from $9.78 per month to $11 for residential customers. The interim rate increase that VNG imposed in October brought the flat delivery charge to $14.25. The increase also applies to the portion of delivery charges that vary based on customers' gas usage.

Natural gas usage is measured in hundred cubic feet, or Ccf. Average usage for a VNG residential customer is 620 Ccf per year, or 51.6 Ccf per month.

A small portion of the rate increase will show up in VNG's gas supply charges, which reflect the company's costs to buy fuel. It passes those costs to customers with no markup for profit and can adjust them quarterly to reflect changes in wholesale fuel prices.

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com