NiSource Inc. (NI - Free Report) announced that its unit — Columbia Gas of Maryland, Inc. — has filed for a rate hike with the Maryland Public Service Commission (PSC), requesting an annual revenue increase of $6.5 million.
If the new rate is approved by the commission without any alteration, it will increase the average total bill by 15.17% to $89.43 from $77.65 for a residential customer who purchases 70 therms of gas per month. As hike proceedings generally take around seven months to complete, the company expects these proposed rates to be effective from December 2020.
The total bill for a commercial customer, who purchases 250 therms of gas per month, will increase 11.26% from $256.23 to $285.09. Rates for a small industrial customer purchasing 3,980 therms of gas per month will increase 4.65% from $2,534.42 to $2,652.35.
If the new rates are approved by the commission it will generate enough fund for the company to continue with its upgrade and replacement of the underground natural gas distribution pipelines as well as increase resilience of its services.
Over the last decade, Columbia Gas has invested nearly $170 million to strengthen its distribution systems in Maryland. NiSource is working on long-term utility infrastructure modernization program. In 2019, it invested nearly $1.9 billion across the gas and electric utilities. The company will make capital investments of nearly $1.7-$1.8 billion in 2020 to upgrade its aging infrastructure.
Other utilities are also planning to invest on a long-term basis. NextEra Energy (NEE - Free Report) has well-chalked plans to invest $50-$55 billion in different projects, which were extended from the 2019 through 2022. For 2020-2024 time frame, WEC Energy (WEC - Free Report) plans to invest $15 billion. Evergy (EVRG - Free Report) plans to invest $7.6 billion in the 2020-2024 time period.
Was The Rate Filing Necessary?
Utility companies are generally regulated and look forward to rate hikes at periodic intervals to recoup the amount invested to upgrade and strengthen infrastructure. NiSource has a 100% regulated utility business model and more than 75% of the company’s capital expenditures start providing returns within 12 months of investment.
Moreover, the company is more focused to enhance its safety, service and system reliability to cope with the novel coronavirus crisis. To assist its customers who are in financial distress due to the coronavirus outbreak, it has suspended shutoffs for nonpayment for residential and commercial customers. In this backdrop, the rate hike filing was is quite essential, as it will generate additional funds for the company to carry on with its infrastructure strengthening activities.
Zacks Rank & Price Performance
NiSource currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 12 months, shares of the company have lost 20.5% compared with the industry’s decline of 8.5%.
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