My name is Ami Morita. I am an attorney representing the New Jersey Division of the Ratepayer Advocate. The Division of the Ratepayer Advocate represents the interests of all utility customers, including residential, small business, commercial and industrial ratepayers. The Division is also a party in every case where New Jersey utilities seek changes in their rates or services. The Ratepayer Advocate gives customers a voice in setting long-range energy, water and telecommunications policy that will affect utility services for many years to come.

Elizabethtown Gas Company ("Elizabethtown" or the "Company") is a gas utility which provides natural gas utility services to more than 252,000 customers located Hunterdon, Mercer, Middlesex, Morris, Sussex, Union and Warren Counties.
In October the Board authorized Elizabethtown to provisionally increase its rates by approximately 17.3% on November 1, 2000 and also provisionally granted the Company the authority to increase its rates 2% per month through April. These increases are being implemented through the Company’s Flexible Pricing Mechanism ("FPM") in its Levelized Gas Adjustment Clause ("LGAC"). The Flexible Pricing Mechanism is designed to adjust the cost of gas in the LGAC in order to reflect changes in the market price and to reduce over- and under-collections. It is applicable to customers in the following rate classes: Residential Service ("RS"), General Service ("GS"), Economic Development Service ("EDS"), Heating, Cooking, Water Heating, and other use ("MFS"), Large Volume Demand Service ("LVD") , Cogeneration Service ("CSF") and Interruptible Service ("IS"), and Standby Service ("FTS" and "GTS").

The Company has requested that it be allowed to increase rates 2% per month through July, and to resume the 2% increases, in December 2001 on a subject to refund basis. In the current proceeding the Board is reviewing the provisional rates to determine whether they should become permanent and, further, whether the Company should be allowed to continue to adjust its rates monthly and for how long. Elizabethtown has also requested that the Board change its current policy and allow the Company to collect interest on gas cost under-recoveries.

Based on the Company’s current forecast of natural gas prices and including 2% monthly increases through April 2001, the average annual bill for a residential heating customer using 1200 therms of gas per year will increase from $993.60 in October to $1281.48, an increase of $287.88, which is approximately 29%. The average bill for a residential transportation customer, one who buys gas from a supplier other than Elizabethtown, would not change.

By Order dated October 26, 2000 in Docket No. GM00030158, the Board approved the sale by Elizabethtown of certain real property located in Woodbridge, New Jersey. In that Order, the Board directed the parties to address the issues related to the ratemaking treatment of the approximately $5.6 million gain realized on the Woodbridge Property in the LGAC proceeding before the Office of Administrative Law.

Ratepayer Advocate Review

The Ratepayer Advocate has reviewed the data provided by Elizabethtown in this proceeding as well as information on the subject of gas cost increases from industry publications and the commodity markets. We have presented our own position to the Board through filed testimony at evidentiary hearings, in which we agreed to a 17.3% increase effective November 1, 2000 as well as monthly 2% increases through April 2001, but opposed resumption of these increases in December 2001. Instead, we proposed two limited increases, if necessary, in autumn 2001 and winter 2001, subject to prior Board review and approval.

We have reviewed the Company’s gas purchasing policies and its implementation of its hedging policy, recommending that the Company maximize its hedging program to maintain price stability. We also recommended that the Board retain its current interest policy, which denies utilities interest on under-recoveries.

Further, we are in the process of discovery to determine the proper ratemaking treatment for the Woodbridge property proceeds. In our investigation of this matter, the Ratepayer Advocate is focusing on the reasonableness of the Company’s proposal to retain up to 100% of the net gain from the property.

In these proceedings, as in all proceedings in which the Ratepayer Advocate participates, the ratepayers’ best interests are our primary concern. We previously recommended to the Board a number of customer service measures to mitigate the impact of the escalating gas costs. These include bill inserts which provide information about energy assistance programs, including eligibility standards and greater flexibility in negotiating extended payment plans. We also advocated more extensive consumer education efforts to inform consumers about available programs including conservation programs to reduce their energy usage. In these proceedings we reviewed the Company’s efforts in these areas and will address to the Board our recommendations regarding Elizabethtown’s outreach efforts. As always, the Board of Public Utilities will have the ultimate decision regarding these and all other utility matters in New Jersey.

The purpose of this public hearing is for you, the customer, to voice your opinion, relate your experiences and offer comments about the Company’s filing. This hearing is being transcribed, and your comments will become part of the official record in this case. The judge will instruct you to give your name and address before you speak. It is important that you express your views, as they become part of the record on which the Board of Public Utilities will make its decision. The Board needs to hear from consumers directly what the impact of these increased rates will have on your budgets and your ability to pay. The Ratepayer Advocate also wants to hear your views. We strongly encourage your participation, which will help us evaluate the Company’s proposal.

We know that you may have concerns about the proposed changes in your utility rates. I am available tonight, on behalf of the Ratepayer Advocate, to discuss your concerns, as are representatives of the Board’s Staff. We will be available to meet with you and answer questions at the conclusion of tonight’s public hearing.

On behalf of the Ratepayer Advocate, I would like to thank you for attending this evening.

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