MPUC Approves Northern Utilities’ Targeted Area Build-Out Program

Northern Utilities (d/b/a Unitil) recently received Maine Public Utilities Commission approval for a pilot Targeted Area Build-Out (TAB) program in Saco, Maine. The purpose of Unitil’s TAB program is to remove the barrier of large contribution in aid of construction (CIAC) payments that new gas customers face when converting to natural gas and allow Unitil to build out its gas distribution network incrementally in targeted areas to serve new customers that are located off the main gas line.

New Unitil customers are typically required to make significant (in the thousands of dollars) CIAC payments to fund the expansion of service to a new area. Under the TAB program, customers located in specifically defined geographic areas of Saco will pay a monthly TAB surcharge for a ten-year period rather than a larger, upfront CIAC payment. The TAB surcharge is designed to recover expansion costs over time from those customers that benefit from the expansion. The TAB program will allow Unitil to expand its existing Saco distribution network with approximately nine miles of new mains in four TAB areas over the next three years, representing an investment of approximately $5.4 million in new mains and services.

In approving the TAB program, the Commission explained that the “TAB surcharge is a method of amortizing the traditional CIAC in utility infrastructure buildout so that an otherwise larger upfront one-time payment covering utility capital investment to build or extend gas infrastructure by the utility is spread across multiple billing of smaller amounts” and that the TAB program is a “novel approach that may encourage a higher rate of conversion to natural gas in Unitil’s service territory.” However, the Commission specified that in approving the program it made no determination regarding the recoverability of TAB-related costs in a future base rate case proceeding, leaving the ratemaking treatment undecided if or until Unitil seeks to include any such costs in its base rates.