National Fuel Gas : Requests First Base Delivery Rate Increase Since 2016 for New York Customers

National Fuel Gas Distribution Corporation (National Fuel or the Company) filed a proposal today with the New York Public Service Commission (PSC) to increase base delivery rates for its New York customers, the Company's first since 2016. The proposed rate increase is necessary for National Fuel to continue providing safe natural gas delivery and comprehensive customer service while supporting a reliable and resilient energy system for western New York.

The proposed delivery rate increase would raise the bill of an average residential customer on budget billing using 85 hundred cubic feet (ccf) of gas by $11.31 per month to $93.98, or by 13.7%. If approved, the proposed base rate increase is expected to take effect on Oct. 1, 2024, ahead of next winter's 2024-2025 heating season.

Like most businesses and utilities across the state, National Fuel has been experiencing significant increases in its operating costs. These increases are driven principally by the need to continue investing in upgrades that improve system reliability and reduce emissions, and by the impact that severe inflation has had on the essential labor, goods, and services necessary to continue to provide service and operate the Company's system in a safe manner. Since the 2016 rate case, National Fuel has invested $375 million in system safety, modernization and the replacement of more than 770 miles of pipeline in New York.

National Fuel's request is only the second time in the last 15 years that the Company has sought an increase in its base delivery rates in New York. Most utilities file a rate increase request every 3 years with delivery charge increases typically occurring annually. National Fuel's rates have consistently been among the lowest in New York and also the entire Northeast U.S., according to information published by the Energy Information Administration (EIA).

In its proposal, National Fuel is seeking an increase in its annual base rate delivery revenues of $88.8 million, which will result in a net delivery revenue increase of 27.6% and a total revenue increase of 11.1%. Any request to change delivery rates, which recover the costs of operating and maintaining National Fuel's pipeline distribution system, requires PSC authorization after a formal, nearly one-year detailed regulatory review. The final impact on customer bills will not be determined until the PSC makes its decision sometime next year.

According to National Fuel Gas Distribution Corporation President Donna L. DeCarolis, "We are proud of our long-standing record as a low-cost, responsive customer service provider and our ability to effectively contain expenses and operate an efficient utility system that provides essential heat to nearly 90% of Western New Yorkers.

For almost two decades, with diligent cost management and careful planning, we have held base delivery rates largely flat while consistently investing in pipeline safety and system modernization. With winter's extreme weather fast approaching, families and businesses need weather-resilient energy and no other energy source can compare with National Fuel's service reliability rating of more than 99.99%."

"The Company's rate request follows significant, persistent inflationary pressures that have increased our labor, materials and service costs," said DeCarolis. "This increase will enable National Fuel to continue to maintain a safe, reliable and affordable natural gas system for Western New York customers, while investing in innovation and programs that support the State's energy goals."

National Fuel's rate filing proposes several initiatives and programs that will advance the Company's long-term decarbonization strategy consistent with the goals of New York's Climate Leadership and Community Protection Act (CLCPA). The outcome of this rate review will set the course for how National Fuel will continue to make progress in system reliability improvements and carbon reduction efforts included within its Long-Term Plan, which was required by the PSC, to meet the emissions reduction objectives of the CLCPA. The Plan promotes energy efficiency, hybrid gas and electric heating systems and the use of low and no-carbon alternative fuels through the existing natural gas delivery system.

"Over the last 15 years, National Fuel customers have consistently realized significant savings in their home winter heating season bills due to lower natural gas supply costs and nearly steady delivery charges," DeCarolis explained. "Going forward, we expect that National Fuel's customers will continue to benefit from our proximity and access to lower-cost natural gas supplies being produced in the Appalachian region of Pennsylvania, Ohio and West Virginia. And even with the proposed increase, we expect our delivery rates will continue to be among the lowest in New York."

This rate increase will enable National Fuel to:

• Continue to invest in system safety, reliability, and GHG emissions reductions. Since 2017, the Company has accelerated the removal and replacement activity to average more than 110 miles of pipe per year. As a result, it is on track to achieve a 90% reduction in GHG emissions by 2035.
• Address the impacts of inflation, added investment in the Company's workforce and the rising cost, goods and services essential to providing safe and reliable service. The extremely competitive and challenging labor market which has emerged since the pandemic, coupled with the high inflationary environment, has led to significant upward cost pressures for both internal and external contracted workforces utilized by the Company; and
• Implement elements of National Fuel's 20-year Long-Term Plan, as required by the PSC, and pursue decarbonization actions that can advance CLCPA goals, including:
  • a hybrid heating pilot program to understand the impacts of residential heating and cooling electrification. The pilot will gauge upfront consumer costs associated with retrofitting existing residences as compared to full electrification;
  • the development of a gas demand response pilot program aimed at reducing peak day requirements and customer consumption as a potential means to reduce the capacity of natural gas required on the Company's system by attempting to shift or eliminate customer usage during constrained peak periods, which typically occur during the coldest days and hours of the year;
  • direct Research, Development & Demonstration funding toward projects that advance decarbonization actions and technologies;
  • two separate pilot programs relating to renewable natural gas and certified natural gas that will help decarbonize the Company's gas supply;
  • expand the workforce complement to implement these complex initiatives and be successful in the Company's evolving role in the energy transition.