Bay State Gas files rate redesign settlement.

WESTBOROUGH, Mass.--(BUSINESS WIRE)-- Nov. 9, 1995--Bay State and four parties filed a settlement yesterday requesting Massachusetts Department of Public Utilities (MDPU) approval of an agreement relating to a proposed rate redesign case that was initially filed with the MDPU on April 14, 1995.

The Company expects the MDPU to act on the request by December 15, 1995 and, if approved, the new rates would become effective on January 1, 1996.

The four parties joining Bay State in the settlement include the office of the Attorney General for the Commonwealth of Massachusetts, the Massachusetts Division of Energy Resources, Enron Capital & Trade Resources Group, and Utilicorp United, Inc. (d/b/a Broad Street Oil & Gas Company). Two intervenors that did not support the settlement were the Massachusetts Oilheat Council and Texas-Ohio Gas, Inc.

"Our rate redesign accelerates the unbundling of transportation services on our local distribution system. This will increase competition on our system, which we believe will lead to lower prices for our customers. In addition, an exciting aspect of our settlement is that we have also included a pilot residential unbundling program, which could be the first such program in New England," said Joel L. Singer, Bay State's Chief Operating Officer.

Bay State's Rate Redesign Objective

"The focus of our rate redesign is to introduce new rates that more closely reflect the actual costs associated with serving different customer classes," said Carol Churchill, Manager, Public Affairs. "In addition, it also will improve the ability of other gas suppliers to utilize our distribution system."

"Approximately 100 of our largest customers, for instance, are buying unbundled transportation service from Bay State, and separately purchasing the nonregulated natural gas commodity," Churchill continued. "Bay State will now be able to offer unbundled services to all commercial and industrial customers along its distribution system, and in the future, we can envision offering similar services to residential customers."

Transportation Service Enhancements

According to Churchill, certain components of the proposed rate redesign will soon make unbundled transportation service from Bay State more attractive to a much larger group of customers:

1. Bay State would offer a supplemental gas supply service during the entire winter period to meet the peak demands of commercial and industrial heating customers. The availability of supplemental service from Bay State will make it easier for heating customers to purchase the unbundled, nonregulated natural gas commodity directly from their suppliers of choice to meet their 'base load' energy needs, just as large customers with relatively stable gas usage patterns have been able to do for the past few years.

2. To help guard against supply shortfalls during the coldest days when gas marketers may be unable to guarantee gas deliveries, Bay State would offer commercial and industrial customers an attractively priced 'needle peaking' service.

3. The settlement also includes a provision for a pilot program that would allow some residential customers to purchase natural gas from their suppliers of choice and unbundled transportation service from Bay State.

Churchill continued that although the proposed rate redesign is `revenue neutral' to Bay State, the new rates will become crucial to the company's ability to continue to attract new customers and to increase revenues in the future -- without relying on frequent rate increases. Bay State has had only two rate increases in the past 11 years.

Impacts on Residential Customers

"The proposed rate changes will not result in significant gas bill increases for the majority of customers," said Churchill. "Assuming the Department of Public Utilities approves our rate redesign settlement as filed, the impact on residential heating customers will range from a decrease of $2 per month (3%) for a customer using 850 therms per year to an increase of $2 per month (2%) for a customer using 1,510 therms per year. Lower gas supply costs, however, will reduce these customer bill impacts by about $4 per month (7%) and $8 per month (8%), respectively," she said. The impact of the rate redesign on residential nonheating customers will range from an increase of $0.50 per month (4%) for a customer using 64 therms per year to an increase of $1 per month (4%) for a customer using 288 therms per year, according to Churchill. Lower gas supply costs, however, would reduce the proposed impacts on residential nonheating customers' bills by less than $1 per month (between 2% and 5%).

Company Overview

Bay State Gas Company operates in three distinct, but related energy business segments -- Local Transportation, Energy Products & Services, and Energy Ventures. As New England's largest independent gas distributor, Bay State's Local Transportation business serves 287,000 customers in Massachusetts, New Hampshire, and Maine. The company's Energy Products & Services segment offers energy commodities (such as natural gas, propane, etc.) and a wide variety of related equipment and services. In addition, the company invests in Energy Ventures, which today include MASSPOWER, the Portland Natural Gas Transmission System (PNGTS), Wells LNG, and KBC Energy Services.

CONTACT: Bay State Gas, Westborough

Carol Churchill, [phone]