Utility is undecided about seeking a rate increase after Lawrence-area disaster
The head of the utility responsible for the Sept. 13 Merrimack Valley gas disaster said the company has not decided whether to seek rate increases to recover some of its costs, hoping to instead deflect those expenses onto insurance carriers.
But Joe Hamrock, chief executive of Columbia Gas’s parent company, NiSource, said the utility has identified a $300 million insurance plan that should cover one large expense: the $220 million it spent to replace 43 miles of underground supply pipeline damaged by the disaster.
“We believe the property insurance is designed to cover this, and so we’re focused on that right now,” Hamrock said in an interview, adding that “we haven’t made any type of determination about customer or a rate proceeding related to that . . . we’re going to the property insurance on the front end of that.”
NiSource also has a separate $800 million liability insurance plan. So far, total losses have topped $1.1 billion, and Hamrock said NiSource expects to provide an update on losses next week, when it reports quarterly earnings
The loss estimates do not include any fines or penalties that NiSource may be hit with, or judgments and settlements from civil lawsuits filed by victims. Hamrock said the company is engaged in discussions with the parties over the lawsuits.
Hamrock reiterated the company’s commitment to the restoration, and said it’s working to minimize the effects of the disaster and cleanup as it moves to wrap up the last of the work.
“When we first recognized the impact and the scope and scale of the event that happened last September, it was clear that our reputation was going to rest on how we responded,” Hamrock said. “It’s not about the financial impact, it’s not about insurance, or any of those factors. It’s about understanding the needs, and making sure we meet those.”
Thousands of residents of Lawrence, North Andover, and Andover were affected by the disaster, which was caused by over-pressurization of the underground network of gas pipes. That set off more than 120 fires and explosions across the regional system; one person was killed, and two dozen people were injured.
Hamrock said he expects the National Transportation Safety Board to soon issue a report on the disaster. The federal agency has issued preliminary findings that a Columbia Gas engineer failed to relocate a critical pressure sensor in plans for pipe-replacement work being done in the area, meaning that a key safety feature was not in place when the gas was turned back on. The surging gas overwhelmed the local supply system, triggering the explosions and fires.
“We have the same objectives as them,” Hamrock said of the NTSB. “To get to the root causes, make sure we completely understand that, put in place whatever measures are necessary, and then share that with the industry.”
Hamrock joined Pablo Vegas, NiSource president of gas utilities, and Mark Kempic, who will take the helm of Columbia Gas of Massachusetts on May 1, in an interview with the Globe to outline the company’s next phase of restoration.
“We shouldn’t say all of the work’s behind us; there’s a lot of work in front of us ,as well,” Hamrock said. “I think the longer term on this is rebuilding trust and rebuilding confidence, and that doesn’t happen just by getting heat and hot water back.”
Hamrock noted Columbia Gas has enhanced its safety measures, such as by installing shut-off valves that would automatically disconnect service when improper gas levels are detected. In March, NiSource announced the creation of an independent quality review board to oversee implementation of a “safety management system” across NiSource’s footprint in seven states.
He also welcomed US Senator Edward Markey’s proposed legislation requiring enhanced safety measures for the gas industry, saying the company has already implemented some proposals, such as a requiring professional engineers to sign off on major construction projects. But he cautioned against over-regulation, saying utilities can adopt best practices on their own based on effective measures in other industries.
Columbia is trying to finish all of its repair and replacement work by August, before the one-year anniversary of the disaster. That includes new appliances for some 900 customers who received temporary fixes to get them through the winter.
The company is also about halfway done repairing lawns and landscaping that were damaged during construction, and Vegas said Columbia is negotiating with Lawrence, Andover, and North Andover about fixing roads and parks. O’Connell South Common, a park in Lawrence, for instance, was damaged by the roughly 100 trailers that were used for temporary housing for displaced residents.
The utility said it directly handled nearly 25,000 claims, paying more than $100 million already, including $31 million to businesses. Of the claims that were filed, the company has settled 97 percent, Kempic said.
Lawrence Mayor Dan Rivera, one of Columbia’s toughest critics since the disaster, said the utility is still too slow to respond to claims and complaints.
“I think they’re still making us jump through hoops,” Rivera said, adding that Lawrence needs a faster response from Columbia so it can begin its own repair work.
“We are not done, and we have a whole construction schedule to get through,” he said.