Description
Washington Gas Light (WGL) filed a petition to Maryland's Public Service Commission (PSC) to increase gas distribution base rates by $40 million. As part of this filing, WGL proposed to transfer $43 million from a capital tracker mechanism into base rates. The actual costs of the completed projects being proposed for transfer to rate base were consistently well above initial pre-construction estimates-on average 56 percent. OPC wanted to assess the prudency of WGL's investment activities by evaluating its project management procedures.
Service Provided
Our staff submitted direct and oral testimony on behalf of OPC on WGL's project management procedures and recommended denial of $4.3 in plant additions due to excess costs. We eventually advised OPC through settlement negotiations that resulted in tariff increase of just $27 million, 33 percent below the requested amount, and an agreement to develop improved project cost variance procedures.DHInfrastructure identified that WGL lacked any specific procedures for addressing cost variances and documenting when a project scope change was identified. Based on the finding that absent such procedures the Company had not met its burden to demonstrate cost overruns had been incurred prudently, we recommended that more than $4.3 million in capital costs be disallowed. We subsequently advised OPC through settlement negotiations that resulted in tariff increase of just $27 million, 33 percent below the requested amount, and an agreement to develop improved project cost variance procedures.