NiSource Rate Hike Approved – Analyst Blog

Diversified utility NiSource Inc. (NI) announced that its subsidiary Columbia Gas of Pennsylvania Inc. has reached a settlement with Pennsylvania Public Utility Commission to increase gas rates, which will become effective from October 1, 2010. On January 28, 2010, the company had filed a request with the commission to increase the base rate by $32 million annually. However, the commission approved of a much lower increase in base rate.

 

The new rates, which were approved by the Utility commission, will impact residential, commercial as well as industrial consumers. The average residential customer using 72 hundred cubic feet (Ccf) of natural gas per month will now have to pay $87.14, up 2.58% from $84.95 previously. The commercial consumer using an average of 435 Ccf per month will have to pay $414.06 per month, a 1.6% increase from $407.43 paid earlier. Industrial customers using an average of 5,000 Ccf per month will see their monthly bills rise by 1.7% from $4315.62 to $4,390.10. 

 

The new rates will boost the total revenue at Columbia Gas of Pennsylvania Inc. by $12 million annually. Since 2008, the company has invested $165 million on infrastructure improvement to provide reliable, cost-effective natural gas to its consumers. The rate hike will provide additional funds to continue with its infrastructure enhancement projects.

 

As a condition of the rate hike settlement, the company will double the annual level of funding for its Emergency Repair Program to $500,000, which aims at repairing gas lines and heating equipment for eligible consumers.

 

The adjusted earnings of NiSource at the end of second-quarter 2010 were 13 cents a share compared with 2 cents a share in the year-ago period. The Zacks Consensus Estimates for third-quarter fiscal 2010, fiscal year 2010 and fiscal year 2011 are 5 cents, $1.21 and $1.27, respectively.

 

During the second quarter, another of NiSource’s subsidiaries, Columbia Gas of Maryland, hiked rates following approval from the commission. The new rates will increase the total revenue at the Maryland subsidiary by $1.7 million.

 

We believe the rate increase is a timely and positive decision, enabling NiSource’s subsidiary to invest in infrastructure upgrades and serve eligible homeowners in the repair of gas lines and heating equipment.

 

NiSource presently has a Zacks #3 Rank (short-term Hold recommendation) on the shares. We also maintain our “Neutral” recommendation on the company.

 

Based in Merrillville, Indiana, NiSource is engaged in natural gas transmission, storage and distribution, as well as electric generation, transmission and distribution.