MARK C MORROW ESQUIRE DOCUMENT FOLDER · Bethlehem Steel Corporation Carpenter Technology...
Transcript of MARK C MORROW ESQUIRE DOCUMENT FOLDER · Bethlehem Steel Corporation Carpenter Technology...
COWMONWEALTH OF PENNSYLVAi PENNSYLVANIA PUBLIC UTILITY COMMISSION P.O. BOX 3265, HARRISBURG, PA 17105-3265
ISSUED: October 9, 2001
MARK C MORROW ESQUIRE UGI UTILITIES INC - GAS DIVISION P O BOX 858 VALLEY FORGE PA 19482-0858
DOCUMENT FOLDER
IN REPLY PLEASE REFER TO OUR FILE
R-00016376 R-00016376C0001
Pennsylvania Public Utility Commission; Office of Consumer Advocate; Office of Small Business Advocate; Alcoa; Appleton Papers, Inc.; Armstrong World Industries; Bethlehem
Steel Corporation; Carpenter Technology Corporation; Mount Joy Wire Corporation; R. R. Donnelley & Sons, Co.; Stroehmann Bakeries, Inc.; v. UGI Utilities, Inc. - Gas Division
TO WHOM IT MAY CONCERN:
Enclosed is a copy of the Recommended Decision of Administrative Law Judge Ky Van Nguyen.
An original and nine (9) copies of signed exceptions to the decision, if any, MUST BE FILED WITH THE SECRETARY OF THE COMMISSION IN ROOM B-20, NORTH OFFICE BUILDING, NORTH STREET AND COMMONWEALTH AVENUE, HARRISBURG, PA OR MAILED TO P.O. BOX 3265, HARRISBURG, PA 17105-3265; a copy in the hands of the Office of Special Assistants, Room 210; and a copy in the hands of each party of record no later than October 26, 2001 by 4:30 P.M. 52 Pa. Code § 1.56(b) cannot be used to extend the prescribed period for the filing of exceptions or reply exceptions.
Replies to exceptions, if any, must be served on the Secretary of the Commission, in the manner described above, no later than October 31, 2001 by 4:30 P.M. as well as served upon the parties. A certificate of service shall be attached to the filed exceptions.
Exceptions and reply exceptions shall obey 52 Pa. Code 5.533 and 5.535, particularly the 40-page limit for exceptions and the 25-page limit for replies to exceptions. Exceptions should be clearly labeled as "EXCEPTIONS OF (name of party) - (protestant, complainant, staff, etc.)".
Any reference to specific sections of the Administrative Law Judge's Recommended Decision shall include the page number(s) of the cited section of the decision.
Parties are also requested, i f possible, to provide the Commission's Office of Special Assistants with a copy of exceptions/reply exceptions on a computer disk, 3 1/2" in size, in either Word Perfect (Version 5.0 or 5.1) or ASCII format.
Very truly yours,
James J. McNulty Secretary
Enclosure Certified Mail Receipt Requested law
See attached list for additional parties of record.
BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION
Pennsylvania Public Utility Commission
Office of Consumer Advocate
Office of Small Business Advocate
Alcoa
Appleton Papers, Inc.
Armstrong World Industries
Bethlehem Steel Corporation
Carpenter Technology Corporation
Mount Joy Wire Corporation
R. R. Donnelley & Sons, Co. F Q L D E R
Stroehmann Bakeries, Inc.
v.
UGI Utilities, Inc. - Gas Division
R-00016376
R-000163 76C0001
Intervenors
DOCUMENT
7e
RECOMMENDED DECISION
Before KY VAN NGUYEN
Administrative Law Judge
I. HISTORY OF THE PROCEEDINGS
On May 1, 2001, under Section 1307(f) of the Public Utility Code, 66 Pa.
C.S. §1307(1), UGI Utilities, Inc. - Gas Division (UGI or Company) filed the Preliminary
Supporting Information required by 52 Pa. Code §53.64 for the Company's annual
Purchased Gas Cost (PGC) filing. On June 1, 2001, the Company filed its PGC tariff
together with supporting computations and the written testimony of witnesses. The tariff
addendum proposes a decrease of $ 1.10/Mcf in the current cost of purchased gas for
PGC(l) rates of $9.2134/Mcf1 and a decrease of $1.6017/Mcf for PGC(2) rates of
SS.SOie/Mcf,2 to become effective March 15 2001. In this filing, the Company is seeking
to recover $1,607,399 of interest on the undercollection of ($21,474,864).
On June 21, 2001, a telephonic prehearing conference was held in
Philadelphia. In-person hearings were scheduled for August 3, 7 and 8, 2001. The
Office of Trial Staff (OTS), the Office of Consumer Advocate (OCA), the Office of
Small Business Advocate (OSBA), a group of UGI's Industrial (UGII) Customers, and
Stroehmann Bakeries, Inc. (Stroehmann) participated in the prehearing conference. At
the prehearing conference, UGII's Petition to Intervene was granted and a ruling on
Stroehmann's Petition to Intervene was deferred to permit UGI to file an Answer. Also,
the Company identified UGI Exhibit 1, which consists of Book 1 and Appendix A and
Book 2 containing prefiled testimony and information about filing requirements
(Prehearing Conference N.T. 16, 17).
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The PGC(l) rates consist of Rate R (Residential), Rate GL (Gas Light), and Rate N (Small Commercial & Industrial).
The PGC(2) rates consist of Rate BD (Business Development), Rate BD-L (Business Development - Large), Rate CIAC (Commercial and Industrial Air Conditioning), and the Total Space Conditioning (TSC) option of Rates R and N. See UGI Exhibit 1, Book 2, Prefiled Testimony, pp. 3-5.
By Order dated July 6, 2001, Stroehmann was permitted to intervene, as a
large volume customer, receiving transportation and related services from UGI.
On June 13, 2001, the OCA and Stroehmann filed written direct testimony.
On June 19, 2001, UGI filed a Motion to Strike the written testimony of Stroehmann's
witness William E. Bennis, which raises the legality of UGI's System Access Fee (SAF).
UGI argued that the SAF, originated in a base rate proceeding, should be raised in a base
rate proceeding and that a review of rate structure would involve the Commission in a
line item ratemaking which is generally prohibited.
On July 20, 2001, OTS filed a letter in support of UGFs Motion to Strike.
On July 30, 2001, OCA and Stroehmann filed answers to UGI's Motion to
Strike. Stroehmann argued that UGI's SAF is a cost of gas under the new definition of
Section 1307(h), that, as such, it should be reviewed in a 1307(f) proceeding, and that
prohibitions against line item ratemaking are not applicable in Section 1307(f)
proceedings. OCA supported the striking of Mr. Bennis' testimony.
By Order dated August 1, 2001, UGI's Motion to Strike was denied, the
reason being that if UGI's SAF proves to be illegal, UGI should not be allowed to collect
an illegal fee, be the fee established in a base rate case or a 1307(f) proceeding.
No public input hearings were scheduled because the public interest in the
proceedings was not substantial.
In anticipation of the parties' reaching a partial settlement, all the hearing
scheduled in Philadelphia and Harrisburg on August 3, 7 and 8, 2001 were cancelled. On
August 3, 2001, the parties agreed that the record in this matter can be established by the
stipulated admission of the following documents:
1. UGI Exhibit 1, which is described above.
2. The written direct and surrebuttal testimonies of William E. Bennis
submitted on behalf of Stroehmann.
3. The written rebuttal testimony of OTS witness Michael J. Gruber.
4. The written rebuttal testimony of UGI witness Paul J. Szylcman.
These documents, at the parties' request, will be admitted into the record.
On August 14, 2001, UGI submitted a Stipulation in Partial Settlement of
Section 1307(f) Rate Investigation, which is intended to be, subject to updates and the
resolution of the issues raised by Stroehmann, the Parties' Settlement of the case.
Attached to this Partial Settlement are:
Appendix A, which sets forth the proposed PGC(l) and PGC(2)
rates.
Appendices B, C, D and E, which are statements in support of the
Settlement submitted by UGI, OTS, OCA and OSBA, and
Appendix F, which is a letter from the UGI's Industrial Intervenors
(UGIII) indicating that they do not oppose this Stipulation.
II
UGI, Stroehmann, OCA and OTS filed their briefs as scheduled; others
reserved their rights to file theirs.
On September 14, 2001, UGI filed a Petition for Permission to File a
Supplemental Reply Brief. Attached to this Petition is UGI's Supplemental Reply Brief.
On September 17, 2001, Stroehmann filed an Answer opposing UGI's Petition.
II . TERMS OF THE SETTLEMENT
The relevant provisions of the Partial Settlement, as contained in the
Proposed Stipulation in Partial Settlement of Section 1307(f) Rate Investigation, may be
summarized as follows:
A. Effective December 1, 2001, UGFs PGC(l) rate and PGC(2) rate shall be
$6.7302/Mcf and $5.3088/Mcf, respectively. The calculations of these rates are set forth in
Appendix A.
B. In next year's PGC filing, UGI shall propose to add the following
reverse migration rider language to its tariff (which will have an effective date of
December 1,2002):
"Customers who have received transportation service from the Company for at least twelve consecutive months and who transfer to service under Rate R, GL, N, BD or CIAC shall not be charged the associated PGC Gas Cost Adjustment for a period of twelve months."
Also, in next year's PGC filing UGI shall address the issue of how it may apply the
migration and reverse migration riders for period of less than twelve months under
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appropriate circumstances, and in addressing this issue UGI may consider billing system
costs and capabilities.
C. For the twelve month PGC year commencing December 1, 2001 (the
"PGC 2001 Year"), any PGC quarterly filing shall recover actual experienced over/under
collections (actual monthly results compared to monthly projections from annual PGC
filing) on an annual basis, while projected over/under collections for the remaining
months of the PGC period (due to projected changes in gas costs) may be recovered on
either an annual basis or on a remaining life basis over the remaining portion of the PGC
2001 Year. Moreover, UGI shall indicate in any future annual PGC filing if it intends to
modify this methodology on a prospective basis.
D. UGI shall use a revised December 2000 undercollection beginning
balance of $19,201,408.
E. UGI shall, in its compliance filing in this case, equalize the
weighting factors applied each month to supplier refunds and over/under collections for
the purpose of determining interest amounts.
F. UGI's compliance filing in this case shall be updated to reflect actual
results and updated projections for gas costs, and UGI shall file a complete revised
Schedule C in support of its support of its compliance filing at the time this filing is
made.
G. For the PGC year beginning December 1, 2001 and ending
November 30, 2002, UGI will share off-system sales margins derived from PGC assets
on a before tax basis in the following manner:
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First $240,000 - credited to PGC
$240,001 - $320,000 - retained by UGI
above $320,000 - shared 75% (PGC) and 25% (UGI)
H. In computing its PGC rates in this proceeding, UGI shall use a
projected Interruptible Revenue Credit (IRC) amount of $8.6 million.
III. FINDINGS OF FACT-
I . Stroehmann is a firm transportation customer on UGI's system
receiving service under Rate LFD. It does not purchase natural gas from UGI, but rather
purchases it from natural gas suppliers who deliver the gas to UGI's system (Bennis'
Testimony, p. 2).
2. In 2000, Stroehmann paid over $57,000 to UGI in SAF payments.
As of July 2001, it paid $22,715 to UGI in SAF payments (Bennis' Testimony, p. 3).
3. The SAF is listed in the UGI tariff as a charge which is paid if
applicable. Other charges are also listed, such as the Customer Charge, the Capacity
Charge if applicable, the Delivery Charge and any Excess Take Charges (Szykman's
Rebuttal Testimony, p. 4).
4. The SAF is the difference between the UGI assigned or otherwise
assignable pipeline capacity charge and the UGI's weighted average cost of demand. It is
calculated by subtracting the cost of assigned or otherwise assignable capacity from the
Weighted Average Cost of Demand (WACOD), and is paid in addition to capacity charge
billing (Bennis' Testimony, pp. 4, 5; Szykman's Rebuttal Testimony, pp. 3-5).
5. The SAF is a method by which UGI equalizes the upstream pipeline
demand charges to the UGI Weighted Average Cost of Demand (WACOD) for its Rate
LDF and Rate DS customers. WACOD is determined by totaling all charges for
upstream pipeline demand and divided by the amount of throughput associated with that
demand (Gruber's Rebuttal Testimony, p. 2).
6. Each month, Stroehmann pays charges or fees associated with
delivery service, no notice service, excess requirement option service, pooling service,
and balancing service (Bennis' Surrebuttal Testimony, p. 4).
7 UGI has fully and vigorously represented the interest of its
ratepayers in proceedings before the Federal Energy Regulation Commission (FERC)
(Filing Requirements - UGI Exhibit No. 1, Book 1, Section 3).
8. UGI has taken all prudent steps necessary to negotiate favorable gas
supply contracts and to relieve the Company from terms in existing contracts with its gas
suppliers which are or may be adverse to the interest of its ratepayers (Filing
Requirements - UGI Exhibit No. 1, Book 1, Section 1).
9. UGI has taken all prudent steps necessary to obtain lower cost gas
supplies on both short-term and long-term bases from sources within and outside the
Commonwealth, including the use of gas transportation arrangements with interstate
pipelines (Filing Requirements - UGI Exhibit No. l,Book 1, Attachments l-A-1, 1-B-l,
l-B-2, l-C-l,and 2-A-l).
10. UGI has not withheld from the market or caused to be withheld from
the market any gas supplies which should have been utilized as part of a prudent least
ft
cost fuel procurement policy (Filing Requirements - UGI Exhibit No. 1, Book 1, Section
2-A).
11. UGI has fully and vigorously attempted to obtain less costly gas
supplies on both short-term and long-term bases from nonaffiliated interests (Filing
Requirements - UGI Exhibit No. 1, Book 1, Sections 1, 3 and 5).
12. UGI gas purchases from an entity that is or might be considered an
affiliated interest are consistent with a prudent least cost procurement policy (Filing
Requirements - UGI Exhibit No. l,Book 1, Section 13).
13. UGI or any entity that is or might be considered an affiliated interest
has not withheld from the market gas supplies which should have been utilized as part of
a prudent least cost procurement policy (Filing Requirements - UGI Exhibit No. 1, Book
1, Section 13).
IV. DISCUSSION
A. Tardy Brief and Burden of Proof
When a party fails to file a brief on time, a court's ability to sanction non
compliance is limited to suppressing the tardy brief or barring that party from argument.
Department of Transportation, Bureau of Driver Licensing v. Vogat, 112 Pa.
Commonwealth Ct. 515, 535 A.2d 750 (1988).
Because UGI did not file its Supplemental Reply Brief according to the
schedule, I will not consider its arguments.
Also in its Main Brief, UGI argued that the burden of proof is on
Stroehmann as the challenger of an existing rate.
Section 315 of the Code, 66 Pa. C.S. §315, in part, provides:
(a) Reasonableness of rates. - In any proceeding upon the motion of the commission, involving any proposed or existing rate of any public utility, or in any proceedings upon complaint involving any proposed increase in rates, the burden of proof to show that the rate involved is just and reasonable shall be upon the public utility . . .
According to Subsection (a) of Section 315 above, the utility has the burden
of proof to show that the existing rate is just and reasonable whether the challenger is an
intervenor or a complainant.
B. Legality of UGFs System Access Fee (SAF)
1. UGI's position
In its Main Brief, UGI made some inappropriate remarks that the rationale
for permitting Stroehmann to intervene and to file testimony on the SAF issue is correct,
but only in the abstract. These remarks should be.
UGI argued that the SAF is a Section 1308 rate established as part of a
Commission-approved settlement of UGI's 1995 base rate proceeding, and that, as such,
the rate should not be reviewed in a 1307 PGC proceeding. In that argument, UGI stated
that the SAF plays a dual role in providing credits to both the PGC and UGI's revenue
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requirement, that if the SAF does not recover gas costs, then the SAF cannot be
considered in a Section 1307(f) proceeding. It concluded that because the SAF does not
and cannot recover gas costs from Stroehmann, in view of the fact that Stroehmann
purchases no gas, and receives no capacity assignment, from UGI, it is inappropriate for
Stroehmann to challenge the SAF in a Section 1307(f) proceeding.
Second, UGI argued that Stroehmann seeks to eliminate the SAF which is
one component of Rate LDF (Large Firm Delivery) without any examination of other
elements of this rate or the overall reasonableness of UGI's rates and rate structure, and
that a review of UGI's SAF would constitute an unlawful line item ratemaking.
Third, the SAF does not violate the Natural Gas Choice and Competition
Act (the Gas Choice Act), the Act of June 22, 1999, P.L. 122, No. 21, 66 Pa. C.S.
§§2201-2212, because Section 2203(14) of this Act specifically authorizes a natural gas
distribution company (NGDC), such as UGI, to continue to provide natural gas services
to their customers under all existing tariff rate scheduled and riders, and policies or
programs, that nothing in Section 2204 would prohibit UGI from charging a SAF to
customers, such as Stroehmann. It is unreasonable to require UGI to design, as here, an
individual rate for Stroehmann that has chosen not to use any UGI capacity. Stroehmann
pays for LDF rate in exchange for UGFs gas distribution service.
Fourth, it argued that if it were determined erroneously that the SAF is
unlawful or unreasonable, Stroehmann's request for a refund must be rejected. The SAF
is a Commission-approved rate and may only be changed prospectively. Cheltenham &
Abington Sewerage Co. v. Pa. PUC, 344 Pa. 366, 25 A.2d 334 (1942). (UGI's Main
Brief, pp. 8-21).
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In its Reply Brief, UGI rejected that the SAF is discriminatory under
Section 1304 of the Code. It argued that Stroehmann's argument was never developed on
the record, and that to show unlawful rate discrimination, a customer must show both an
unreasonable burden on one rate class and an unreasonable preference to another rate
class. Pennsylvania Retailers' Associations v. Pa. PUC, 440 A.2d 1267 (Pa.
Commonwealth Ct. 1982). Stroehmann has made no such showing in this proceeding
(UGI's Reply Brief, pp. 7, 8).
2. Stroehmann's position
Stroehmann argued that UGI's SAF is a mechanism used by UGI to
allocate and recover demand costs equally among its customers by ensuring that all
customers pay the weighted average cost of demand to UGI. Under the Gas Choice Act,
UGI can recoup such costs when it actually assigns capacity at the contractual rate.
Therefore, UGI's SAF, which sought to recover these costs at a level in excess of the
contracted-for rate, 66 Pa. C.S. §2204(d)(l), must be eliminated, considering the fact that
UGI incurs absolutely no upstream demand costs on behalf of Stroehmann.
UGI is not the supplier of last resort for Stroehmann under Section
2207(a)(1) of the Gas Choice Act. This section requires a natural gas distribution
company to serve as a supplier of last resort for "residential, small commercial, small
industrial, and essential human needs customers." However, Stroehmann, as an LFD
customer, is neither a small commercial nor a small industrial customer. In UGI's
restructuring proceeding, the Commission approved UGI's proposed definition of
obligation of a supplier of last resort to extend service to customers who consume 4,000
Mcf per year or less. Stroehmann does not fall within this definition either. Stroehmann
already pays UGI a separate fee in exchange for Excess Requirement Option service.
The SAF would constitute Stroehmann's double payment for service it receives.
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In addition to being an illegal gas cost recovery mechanism under
the Gas Choice Act, the SAF, as it applies to only two of several transportation delivery
customer classes, results in unreasonably discriminatory rates in violation of Section
1304 of the Code. UGI only charges the SAF to two classes: rate class LFD and DS
(Delivery Service).
Finally, it argued that the SAF is a wholly inequitable and anti-competitive
fee. An examination of other related tariff charges reveals that Stroehmann, in fact,
receives absolutely no service or anything of value in exchange for its SAF payments.
Ultimately, using the SAF to require customers to pay the weighted average cost of
demand ~ even though they do not purchase any capacity - greatly reduces any benefit of
a competitive market (Stroehmann's Main Brief, pp. 5-16).
In its Reply Brief, Stroehmann emphasized that the language of Section
2204(d)(]) of the Gas Choice Act identifies only one method by which UGI may assign
or transfer responsibility for upstream pipeline capacity costs by assigning those contracts
to its suppliers or customers, and that UGI and OTS failed to identify a single benefit
which Stroehmann receives in return for paying UGI the SAF each month (Stroehmann's
Reply Brief, pp. 4-10).
3. OCA's position
In Pa. PUC v. UGI Utilities, Inc. - Gas Division, Docket No. R-00943064
(Pa. PUC November 30, 1994), having realized that the allocation of low cost capacity to
transportation customers and higher cost capacity to PGC (1) customers violated the least
cost gas procurement requirements of the Code, OCA proposed a "weighted average
cost" proposal for allocating interstate pipeline capacity among all customers. But, the
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Commission rejected OCA's proposal at that time and held that this issue should be
examined in a base rate proceeding. As a result of that ruling, the parties took up the
issue the next year in UGI's 1995 base rate case. And the SAF then became a key
component of a compromise for the allocation of interstate pipeline capacity costs.
Further, in UGI's most recent restructuring proceeding, no parties, which
included transportation customers and marketers, opposed the SAF. Therefore,
eliminating the SAF in this proceeding would upset the balance struck by the parties in
the settlement of UGI's last base rate proceeding (OCA's Main Brief, pp. 3-6).
In its Reply Brief, OCA argued that Section 2204(d) only pertains to
customers who take an assignment of capacity for a natural gas distribution company
(NGDC), that Stroehmann, by its own admission, does not take an assignment from UGI,
and that, therefore, Stroehmann's reliance on this Section is misplaced. OCA also
concurred with OTS that the elimination of the SAF for all LFD and DS customers would
result in LFD and DS customers not paying their fair share of demand costs and in those
costs being shifted to PGC customers (OCA's Reply Brief, pp. 1-4).
4. OTS position
UGI's SAF is a tariff charge which equalizes demand costs of the entire
system with the UGI Weighted Average Cost of Gas demand for Rate LFD, such as
Stroehmann, and Delivery Service customers so that no customer is disadvantaged by
another customer not paying its appropriate share.
OTS argued that Stroehmann viewed the SAF as an attempt by UGI to
allocate capacity costs to Stroehmann when it does not receive any assignment of, or use
any, capacity by UGI, either directly or through a supplier. Stroehmann believes that this
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capacity cost allocation through the SAF is not permitted under the Gas Choice Act. 66
Pa. C.S. §2204(d)(l). But this Section of the Gas Choice Act only addresses those
circumstances in which UGI does assign capacity costs to its customers. It does not
address the Stroehmann situation where a large transportation customer contracts with a
party other than UGI for capacity. Nothing in Section 2204(d)(1) would preclude the
application of UGFs SAF to Stroehmann. Later, in UGFs restructuring filing, which
postdated the passage of the Gas Choice Act, no party objected to the retention of the
SAF. See UGI's Restructuring Filing, at Docket No. R-00994786 (Pa. PUC June 29,
2000).
Further, rate design issues, such as the SAF, are properly addressed in the
context of a base rate proceeding, rather than a 1307(f) proceeding. Pa. PUC v. UGI
Corporation, 68 Pa. PUC 204, 206 (1988).
Finally, Stroehmann has failed to provide any concrete evidence indicating
that the SAF has acted to defeat competition. Rather, the SAF, which has been in effect
for six years, should properly be viewed as a cost of doing business and has in no way
been shown to have impeded Stroehmann's ability to search out and purchase other
sources of gas supply (OTS' Main Brief, pp. 6-13).
In its Reply Brief, OTS argued that Stroehmann's opposition to the Partial
Settlement should be disregarded because it has no standing to object to it, that the record
does not support Stroehmann's claim of unreasonable rate discrimination under Section
1304 of the Code, and that the request for the elimination of the SAF is overbroad (OTS'
Reply Brief, pp. 6-14).
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5. UGII's position
UGII did not file a Main Brief, but chose to file a Reply Brief. They argued
that they agreed with many of the arguments raised by Stroehmann about the absence of a
factual or policy basis for the SAF, but that several of the UGII members in this
proceeding were signatories to the 1995 settlement in Pa. PUC v. UGI Utilities, Inc. -
Gas Division. Docket No. R-00953297, and that they should honor their settlement
commitment. It also argued that the existence of the 1995 settlement in and of itself does
not constitute a bar to Stroehmann's challenge in this proceeding and that UGI is not the
Supplier of Last Resort because it does not have obligation to act for customers using
over 4,000 Mcf a year (UGII's Reply Brief, pp. 1-4).
Recommended position
Section 1307(h) of the Code, 66 Pa. C.S. §1307(h), in pertinent part,
provides as follows:
(h) Definition. - As used in this section, the terms "natural gas costs" and "gas costs" include the direct costs paid by a natural gas distribution company for the purchase and the delivery of natural gas to its system in order to supply its customers. Such costs may include . . . all charges, fees, taxes and rates paid in connection with such purchases, pipeline gathering, storage and transportation . . . "Natural gas" and "gas" include natural gas, liquefied natural gas, synthetic natural gas and any natural gas substitutes.
The SAF is a fee that is paid in connection with pipeline gathering storage
and transportation. As such, it falls squarely within the definition of Section 1307(h) as a
cost of gas. Unlike take-or-pay costs and customer assistance program expenses, which
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were adjudicated non-gas costs, UGI Utilities v. Pa. PUC, 673 A.2d 43 (Pa.
Commonwealth Ct. 1996), the SAF is a cost relating to the acquisition of gas. The fact
that Stroehmann purchases no gas, and receives no capacity assignment, from UGI, is not
relevant to the determination of whether the SAF is a gas cost within the ambit of a
1307(f) proceeding.
UGFs line-item-ratemaking argument is based on the proposition that the
SAF is a base-rate revenue reflected in a Section 1308 base rate proceeding, rather than a
purchased gas cost, which may be reviewed in a Section 1307(f) proceeding. But I have
determined that the SAF is a purchased gas cost and, therefore, the prohibitions against
line item and retroactive ratemaking are inapplicable here. UGI Utilities v. Pa. PUC,
supra.
UGI cited Cheltenham & Abington S. Co. v. Pa. PUC, 344 Pa. 366, 25
A.2d 334 (1942) for the proposition that the SAF is a Commission-approved rate, that it
may only be charged prospectively, and that, as such, retroactive refunds of the SAF are
not permitted. This proposition is all the more reason for reviewing the SAF in this
proceeding. I f the SAF is found to be illegal, why is UGI allowed to collect that fee
when no retroactive refunds are permitted? The legality or lawfulness of a fee is
paramount and overrides all concerns.
Section 2204 of the Gas Choice Act, in pertinent part, provides as follows:
(d) Release, assignment or transfer of capacity. -
(1) A natural gas distribution company holding contracts for firm storage or transportation capacity,... on the effective date of this chapter,... may at its option release, assign or otherwise transfer such capacity or Pennsylvania supply, in whole or part, associated with those contracts on a
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nondiscriminatory basis to licensed natural gas suppliers or large commercial or industrial customers on its system.
(3) Such release, assignment or transfer shall be at the applicable contract rate, for such capacity or Pennsylvania supply and shall be subject to applicable contractual arrangements and tariffs. The amount so released, assigned or transferred shall be sufficient to serve the level of the customers' requirements for which the natural gas distribution company has procured such capacity determined in accordance with the natural gas distribution company's tariff or procedures approved in its restructuring proceedings.
Subsection (d)(1) of this Section gives a natural gas distribution company
(NGDC) an option to release, assign or transfer its firm storage or transportation capacity;
but Subsection (d)(3) requires the cost of release, assignment or transfer of such capacity
to be determined by applicable contractual arrangements and tariffs. While the right to
release, assign or transfer is discretionary with an NGDC, the cost of release, assignment
or transfer of capacity must be based on contractual arrangements and tariffs. The
language of this capacity cost is mandatory.
I f UGI's SAF is intended to be the capacity cost, the SAF would be
inconsistent with this mandate and in violation of these subsections. A careful reading of
UGI's tariff indicates that the SAF is only one of the many charges required to be paid by
UGI's customers. Appearing on the monthly rate table, alongside the disputed SAF, are
the Customer Charge, the Capacity Charge if applicable, the Delivery Charge and any
Excess Take Charges. The SAF is separate and distinct from the capacity cost.
Here, neither Stroehmann nor Stroehmann's marketers, receive any
assignment of UGI upstream capacity. But the fact that Stroehmann is a firm
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transportation customer on UGI's system to have natural gas delivered from UGI's city
gate to Stroehmann's burner tip,3 justifies the imposition of UGI's SAF on Stroehmann.
Nothing in the Gas Choice Act prohibits this imposition.
As indicated by OTS, UGI's SAF's purpose is to equalize demand costs of
the entire system with the UGI Weighted Average Cost of Gas demand, so that no
customer is disadvantaged by another customer not paying that customer's appropriate
share. OCA, in its Main Brief, mentioned a brief history of the relationship between the
SAF and the Weighted Average Cost. The weighted average cost proposal stemmed
from OCA's challenge of UGI's allocation of low cost interstate pipeline capacity to
transportation customers. Pa. PUC v. UGI Utilities, Inc. - Gas Division, DocketNo. R-
00943064 (Pa. PUC November 30, 1994). The Commission rejected OCA's proposal at
that time and the issue was examined in UGI's 1995 base rate case. And the allocation of
interstate pipeline costs among customers was specifically addressed through the
implementation of the SAF, which results in a weighted average cost allocation for
interstate pipeline capacity costs. The resolution seems reasonable and in the public
interest.
3 It is appropriate to provide an overview of the components of the gas industry. Traditionally, producers extracted the gas and sold it at the wellhead to a pipeline company. Pipelines then transported the gas where it was produced to areas of demand. And local gas distribution companies (LDCs) accepted the gas at the City gate and distributed it through its local mains to residential and industrial users. In many respects, local distribution companies have been the most stable of these components. In Order No. 636 (1992) the Federal Energy Regulatory Commission (FERC) took steps in restructuring the natural gas industry, moving to open-access transportation. It is now functionally separated into production, transportation, and distribution. Industrial and large commercial customers, such as Stroehmann, can purchase gas directly from producers or independent brokers or marketers (marketers generally act as agents for end users and arrange for supply or transportation or both for them) and arrange for the LDC to transport their gas from the city gate to their burner tip. Re Gas Transportation Tariffs, 169 PUR4lh212(Pa. PUC May 13, 1996).
19
9 i
It is noted that in Re Gas Transportation Tariffs. 169 PUR 4 t h 212 (Pa. PUC
May 13, 1996), the Commission reiterated one of several ftmdamental principles that
retail customers should not bear demand-related costs which are properly allocable to
transportation customers.
UGI's SAF is an existing Commission-approved rate and, as such, UGI is
authorized to continue charging that rate under 66 Pa. C.S. §2203(14).
C. Partial Settlement
In part, Section 1318 of the Public Utility Code, 66 Pa. C.S. §1318,
provides as follows:
§1318. Determination of just and reasonable natural gas rates
(a) General rule. - In establishing just and reasonable rates for those natural gas distribution utilities with gross intrastate operating revenues in excess of $40,000,000 under section 1307(f)... No rates for a natural gas distribution utility shall be deemed just and reasonable unless the commission finds that the utility is pursuing a least cost fuel procurement policy, consistent with the utility's obligation to provide safe, adequate and reliable service to its customers. In making such a determination, the commission shall be required to make specific findings which shall include, but need not be limited to, findings that:
(1) The utility has fully and vigorously represented the interest of its ratepayers in proceedings before the Federal Energy Regulatory Commission.
(2) The utility has taken all prudent steps necessary to negotiate favorable gas supply contracts and to relieve the utility from terms in existing contracts with its gas suppliers
20
which are or may be adverse to the interests of the utility's ratepayers.
(3) The utility has taken all prudent steps necessary to obtain lower gas supplies on both short-term and long-term bases both within and outside the Commonwealth, including the use of gas transportation arrangements with pipelines and other distribution companies.
(4) The utility has not withheld from the market or caused to be withheld from the market any gas supplies which should have been utilized as part of a least cost fuel procurement policy.
It is uncontradicted that the Findings of Fact Nos. 7-13 indicate that UGI
has pursued a least cost procurement policy which has served to minimize its customers'
costs without sacrificing its ability to provide safe, adequate and reliable service. Such a
policy, of necessity, requires it to pursue the lowest practical level of gas prices consistent
with adequate supply, availability, reliability and flexibility, and thereby construct a
supply line of product that will not only insure security for UGI's core markets, but also
do so at lowest gas cost.
About the issues raised in this case, I find that the parties' resolution of
them is also in the public interest.
The parties have agreed that the Company agreed to propose in next year's
PGC filing certain tariff language to implement a reverse migration rider. This tariff
revision is needed to insure that former transportation customers, who have not
contributed to over/undercollections of purchased gas costs in the preceding 12-month
period, do not share in the purchased gas cost adjustment related to that period. It also
agreed to address the issue of how it will apply the migration and reverse migration riders
21
for periods less than 12 months. In doing this, it may consider billing system costs and
capabilities (OTS Statement in Support, pp. 2, 3).
The Company also agreed to amortize over/undercollections on an annual
basis instead of compressing them into the remaining months of the PGC period. This
methodology will minimize price volatility created by such compression and eliminate
any cost shifting from heating to non-heating customers (OCA Statement in Support, p.
4).
The Company agreed to use a revised December 2000 undercollection
balance from $24,881,899, as shown in Schedule C, p. 4, of its filing to $19,201,408, an
error of about $5.68 million. This adjustment benefits PGC customers in that their
undercollection is reduced by $5.68 million. It also agreed to equalize the weighing
factors applied each month to supplier refunds and over/undercollections for the purpose
of determining interest amounts, which equalization also benefits PGC customers (OTS
Statement in Support, p. 3).
For the PGC period beginning December 1, 2001, UGI will share off-
system sales margins (sales to end-users outside the service territory) derived from PGC
assets on a before tax basis. It would credit the first $240,000 o f f system sales margins
through its PGC mechanism, retain them when the margins are between $240,001 and
$320,000, and share them when margins are above $320,000 on a 75% (PGC)/25% (UGI)
basis. This sharing mechanism should result in a larger credit to the PGC from off-
system sales margins and provide the company with sufficient incentive to increase the
level of margins derived from off-system sales (OCA Statement in Support, pp. 4, 5).
This incentive program is both reasonable and consistent with least cost planning.
22
Finally, the Company has agreed to increase the projected IRC credit from
$7.1 million in its filing to $8.6 million.
It is noted that the Commission's approval of a voluntary automatic rate
adjustment mechanism might be revoked at any time following notice and hearing, if the
Commission determined that the rates produced by the adjustment mechanism were
unjust or unreasonable. Natural Fuel Gas Distribution Corp. v. Pennsylvania Public
Utility Commission. 81 Pa. Commonwealth Ct. 148, 473 A.2d 1109(1984).
V. CONCLUSIONS QF LAW
1. UGI is pursuing a least cost fuel procurement policy, consistent with
its obligation to provide safe, adequate and reliable service to its customers.
VI. ORDER
THEREFORE,
IT IS RECOMMENDED:
1. That the Petition to File a Supplemental Reply Brief by UGI
Utilities, Inc. - Gas Division is denied because it is not timely filed.
2. That the System Access Fee of UGI Utilities, Inc. - Gas Division
has not violated the National Gas Choice and Competition Act. 66 Pa. C.S. §§2201-
2212.
23
3. That the Stipulation in Settlement of Section 1307(f) Rate
Investigation be and is hereby approved.
4. That the Commission authorize UGI Utilities, Inc. - Gas Division to
file a tariff or tariff supplement as set forth in Appendix A to the Stipulation in Settlement
of Section 1307(f) Rate Investigation, with a decreased PGC1 rate of $6.7302/Mcf and a
decreased PGC2 rate of $5.3082/Mcf for service rendered on and after December 1}
2001.
5. That, in next year's PGC filing, UGI Utilities, Inc. - Gas Division
shall add to its tariff the following reverse migration rider language, which become
effective on December 1, 2002:
"Customers who have received transportation service from the Company for at least twelve consecutive months and who transfer to service under Rate R, GL, N, BD or CIAC shall not be charged the associated PGC Gas Cost Adjustment for a period of twelve months."
6. That, in next year's PGC filing, UGI Utilities, Inc. - Gas Division
shall address the issue of how it may apply the migration and reverse migration rides for
periods of less than 12 months.
7. That, for the 12-month PGC year commencing on December 1,
2001, UGI Utilities, Inc. - Gas Division shall amortize over/undercollections over a 12-
month period.
24
8. That UGI Utilities, Inc. - Gas Division shall use a revised December
2000 undercollection beginning balance of $19,201,408.
9. That UGI Utilities, Inc. - Gas Division shall use a revised December
2000 undercollection beginning balance of $19,201,408.
10. That UGI Utilities, Inc. - Gas Division shall, in its compliance
filing, equalize the weighting factors applied each month to supplier refunds and
over/undercollections for the purpose of determining interest amounts.
11. That for the PGC year beginning on December 1, 2001 and ending
on November 30, 2002, UGI Utilities , Inc. - Gas Division shall share off-system sales
margins derived from PGC assets and before-tax basis in the following manner:
First $240,000 $240,001 -$320,000 above $320,000
credited to PGC retained by UGI shared 75% (PGC) and 25% (UGI)
11. That UGI Utilities, Inc. - Gas Division shall use a projected
interruptible revenue credit amount of $8.6 million to compute its PGC rates.
12. That the Commission terminate and mark closed the records at
Docket Nos. R-00016376 and R-00016376C0001.
Date
KY VAN NGUYEN [ / Administrative Law Judge
25
BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION
PENNSYLVANIA PUBLIC UTILITY COMMISSION
UGI UTILITIES, INC. GAS DIVISION
DocketNo. R-00016376
STIPULATION IN PARTIAL SETTLEMENT OF SECTION 1307(f) RATE INVESTIGATION
TO THE HONORABLE KY VAN NGUYEN, ADMINISTRATIVE LAW JUDGE:
I. INTRODUCTION
UGI Utilities, Inc. - Gas Division ("UGI"), the Office of Trial Staff ("OTS"), the Office
of Consumer Advocate ("OCA"), and the Office of Small Business Advocate ("OSBA"), parties
in the above-captioned proceeding (hereinafter collectively referred to as the "Parties"), hereby
join in this Stipulation In Partial Settlement Of Section 1307(f) Rate Investigation
("Stipulation"), and hereby request that the Administrative Law Judge (the "ALJ") and the
Pennsylvania Public Utility Commission ("Commission"): (1) approve this Stipulation; (2)
authorize UGI to file a tariff supplement for service rendered on or after December 1, 2001, that
implements, subject to updates and tariff modifications traditionally performed on December 1,
the rates set forth in Appendix A hereto, adjusted to the extent necessary to reflect the resolution
of the issue raised by Stroehmann Bakeries, Inc. ("Stroehmann"); and (3) make all associated
findings required by Sections 1307(f) and 1318 of the Public Utility Code, 66 Pa. C.S. 1307(f)
1
and 1318. As fully set forth and explained below, this Stipulation resolves all issues among the
Parties in this proceeding.
UGI has two PGC rates. The PGC(l) class is comprised primarily of the residential and
small commercial customers of UGI. The PGC(2) customer class is comprised primarily of firm
high load factor contractual commercial and industrial customers.
The rates set forth in Appendix A hereto provide for a decrease of $ 2.4832/mcf from the
PGC(l) Rates of UGI currently in effect, thereby reducing UGI's PGC(l) rate from $ 9.2134/mcf
to $ 6.7302/mcf. Appendix A also provides for a S 2.9934/mcf average decrease in UGI's
PGC(2) rate1, thereby decreasing UGI's PGC (2) rate from $ 8.3016/mcf to $ 5.3082/mcf. These
calculations incorporate data for experienced over/under collections and supplier refunds through
March 31, 2001, and projected under collections through November 30, 2001.
Attached as Appendices B, C, D and E hereto are statements in support of the Stipulation
submitted by UGI, OTS, OCA and OSBA. Attached as Appendix F hereto is a letter from the
UGI Industrial Intervenors ("UGIII") indicating that they do not oppose this Stipulation.
II. BACKGROUND
In support of this Stipulation, the Parties state as follows:
1. UGI, being a natural gas distribution company with gross intrastate annual
operating revenues in excess of $40 million, is authorized by the provisions of Section 1307(f) of
the Public Utility Code, and the Commission's gas cost recovery regulations at 52 Pa. Code
An average increase is stated because Rate BD PGC(2) will include a demand charge of $ 15.34/DCR and a commodity charge of $ 4.6133/mcf for the recovery of purchased gas costs. The stated average rate reflects the effective volumetric rate based upon PGC(2) usage. See Schedule B, p 2.
53.61 - 53.68, to make armual purchase gas cost ("PGC") filings proposing gas rate
modifications to reflect increases or decreases in its natural gas costs.
2. On May 1, 2001, UGI provided the Commission with the profiling information
required by 52 Pa. Code 53.64(c) and 53.65.
3. On June 1, 2001, in accordance with the schedule for Section 1307(f) filings
established by the Commission, UGI submitted its 2001 PGC filing to the Commission, with
proposed modifications to UGI's Gas Tariff Pa. P.U.C. No. 5, to become effective December 1,
2001. This filing proposed a $l.l'0/mcf decrease in the Company's PGC(l) rate of $9.2134/mcf
and a decrease of $1.6017/mcf in its PGC(2) rate of $8.3016/mcf.
4. UGI also filed the direct written testimony of its supporting witnesses with its
PGC filing.
5. On May 11, 2001, the OCA filed a formal complaint. On May 16, 2001, UGI
filed an answer to the OCA's formal complaint.
6. On May 22, 2001, a notice of appearance was filed by counsel for the OTS.
7. On May 30, 2001, the OSBA filed a notice of intervention in UGI's PGC
proceeding.
8. On June 11, 2001, the UGIII filed a Petition to Intervene that was not opposed by
any party.
9. On June 20, 2001 Stroehmann filed a petition to intervene.
10. On June 21, 2001, a prehearing conference was conducted. At this prehearing
conference, the Petition to Intervene of UGIII was granted, but a ruling on the petition to
intervene of Stroehmann was deferred to permit UGI to file an answer to it.
0 •
11. In a Prehearing Order dated June 22, 2001, a procedural schedule was established
that required the opposing parties to file their direct testimony on July 13, 2001, the submission
of written rebuttal testimony on July 27, 2001 and the submission of written surrebuttal
testimony by August 1, 2001. Hearings were scheduled for August 3, 7 and 8, 2001.
12. On June 29, 2001 UGI filed its answer to the petition to intervene of Stroehmann.
13. In an Order Granting Petition For Leave To Intervene dated July 6, 2001,
Stroehmann was permitted to intervene.
14. On July 13, 2001, written direct testimony was submitted by the OCA and
Stroehmann. OTS provided notice that they would not be filing written direct testimony since
they had reached a tentative settlement with UGI.
15. On July 19, 2001, UGI filed a motion to strike the written direct testimony of
Stroehmann witness William E. Bennis.
16. On July 20, 2001, OTS filed a letter in support of UGI's motion to strike.
17. On July 25, 2001, UGI submitted a letter to the presiding Administrative Law
Judge indicating that a tentative settlement had been reached between all parties to the
proceeding other than Stroehmann.
18. On July 27, 2001, UGI and OTS submitted written rebuttal testimony to the
written direct testimony of Stroehmann witness Bennis.
19. On July 30, 2001, OCA and Stroehmann filed answers to UGI's motion to strike
the testimony of Stroehmann witness Bennis. OCA's answer supported the striking of Mr.
Bennis' testimony.
20. In an order dated August 1, 2001, UGI's motion to strike was denied.
21. Throughout this proceeding all parties, including Stroehmann, explored the
possibility of settlement in accordance with the Commission's Rules of Practice at 52 Pa. Code
5.231. As a result of such settlement discussions, the Parties have reached agreement on the
stipulated terms set forth in Sections III, IV and V, below.
I I I . GENERAL PROVISIONS OF SETTLEMENT
22. The Parties agree that, subject to updates and the resolution of the issues raised by
Stroehmann, the rates for recovery of purchased gas costs of UGI should be revised, effective
December 1, 2001, to reflect the rates set forth in Appendix A hereto. Specifically, the PGC(l)
rate shall be $ 6.7302/mcf. The average PGC(2) rate shall be $ 5.3082/mcf.
23. The Parties have also agreed to the following:
a. Reverse Migration Rider - In next year's PGC filing UGI shall propose to
add the following reverse migration rider language to its tariff (which will have an
effective date of December 1, 2002):
"Customers who have received transportation service from the Company
for at least twelve consecutive months and who transfer to service under
Rate R, GL, N, BD or CIA C shall not be charged the associated PGC Gas
Cost Adjustment for a period of twelve months. "
b. Application of Migration or Reverse Migration Riders to periods of less
than Twelve Months - In next year's PGC filing UGI shall address the issue of how it
may apply the migration and reverse migration riders for periods of less than twelve
months under appropriate circumstances, and in addressing this issue UGI may consider
billing system costs and capabilities.
c. Quarterly Filings - For the twelve month PGC year commencing
December 1, 2001 (the "PGC 2001 Year"), any PGC quarterly filing shall recover actual
experienced over/under collections (actual monthly results compared to monthly
projections from annual PGC filing) on an annual basis, while projected over/under
collections for the remaining months of the PGC period (due to projected changes in gas
costs) may be recovered on either an annual basis or on a remaining life basis over the
remaining portion of the PGC 2001 Year. Moreover, UGI shall indicate in any future
annual PGC filing if it intends to modify this methodology on a prospective basis.
d. " Adjustment of Prior Undercollection Balance - UGI shall use a revised
December 2000 undercollection beginning balance of $ 19,201,408.
e. Supplier Refunds - UGI shall, in its compliance filing in this case,
equalize the weighting factors applied each month to supplier refunds and over/under
collections for the purpose of detennining interest amounts.
f. Update of Compliance Filing - UGI's compliance filing in this case shall
be updated to reflect actual results and updated projections for gas costs, and UGI shall
file a complete revised Schedule C in support of its compliance filing at the time this
filing is made.
g. Sharing of Off System Sales Margins derived from PGC Assets - For the
PGC year beginning December 1, 2001 and ending November 30, 2002, UGI will share
off-system sales margins derived from PGC assets on a before tax basis in the following
manner:
First $240,000 - credited to PGC
$240,001 - $320,000 - retained by UGI
above $320,000 - shared 75%(PGC) and 25%(UGI)
h. IRC Credit Projection - In computing its PGC rates in this proceeding,
UGI shall use a projected IRC credit amount of $8.6 million.
m 24. With the revisions and agreements set forth above, all parties have agreed to settle
this proceeding in its entirety.
IV. STANDARDS AND FINDINGS
This proceeding is a consolidation of two reviews that the Commission is required to
undertake pursuant to Sections 1307 and 1318 of the Public Utility Code. Under Section
1307(f), the Commission, after hearing, must determine what portion of gas costs UGI may
recover for a previous 12-month period under the standards set forth in Section 1318. In
addition, because UGI has filed a tariff proposing a new rate effecting a change in its natural gas
costs, the Commission must determine whether the specific findings of Section 1318 can be
made. This is a requirement which must precede Commission approval of the Company's
proposed rates. The historic period reviewed in the proceeding is the twelve-month
reconciliation period ending March 31, 2001. The new tariff rate is intended to become effective
December 1,2001.
ft
A. Historic Reconciliation Period Standards
With respect to UGFs gas purchases and gas purchasing practices during the twelve
month historic reconciliation period ending March 31, 2001, all Parties agree and request the
Commission to find that UGI has met the standards set forth in Section 1318 of the Public Utility
Code, as required by Section 1307(f)(5) of the Public Utility Code, as to all historic period
purchased gas costs. All parties request that the Commission find, pursuant to Section 1307(f)(5)
of the Public Utility Code, and based upon the evidence presented by the parties in this case, that,
during the twelve-month period ended Month 31, 2001, UGI met the requirements of Section
1318 of the Public Utility Code by pursuing a least-cost fuel procurement policy, consistent with
its obligation to provide safe, adequate and reliable service to its customers.
B. Projected Period Findings
With respect to the twelve-month period beginning December 1, 2001, which is the
period of time during which the proposed rates contained in this Stipulation would be in effect,
all Parties agree and request the Commission to find that UGI has satisfied each of the standards
for a least cost procurement policy set forth in Section 1318 of the Public Utility Code, including
the standards set forth in Sections 1318(a)(1), 1318(a)(2), 1318(a)(3), 1318(a)(4), 1318(bXl),
1318(b)(2) and 1318(b)(3), based upon the evidence of record in this proceeding concerning
UGI's purchasing policies. Nevertheless, it is expressly understood and agreed that such
findings, relating to the rates to become effective December 1, 2001, are made solely for the
purpose of setting prospective rates, and shall be subject to further review in an appropriate
future proceeding. This Section of the Stipulation, Section IV.B., is not intended to limit or
prevent any party from challenging projected gas purchases that actually have been made and
future gas purchasing practices that have been implemented; or from reviewing whether these gas
purchases and gas purchasing practices have, in fact, complied with the standards of Section
1318.
If, in an appropriate future proceeding, gas purchases and gas purchasing practices
relating to the period December 1, 2001 through November 30, 2002 are challenged, the
Commission's findings made pursuant to Section IV.B. of this Stipulation shall pose no bar to
the examination of such purchases and practices including, but not limited to, disallowance of, or
reductions to, such costs during the one-year period commencing December 1, 2001.
The parties also agree that future examination of the gas costs relating to the period April
1, 2000, through November 30, 2001, to determine whether UGI's experienced and projected gas
purchases and gas purchasing practices complied with the standards set forth in Section 1318 of
the Public Utility Code, 66 Pa. C.S. 1318, shall be permitted, and that the Commission's
adoption of the findings under Section IV.B. of this Stipulation shall not be construed to limit or
prevent any disallowance or reduction of such costs.
V. CONDITIONS OF STIPULATION
1. This Stipulation is conditioned upon the Commission's approval of the terms and
conditions contained herein without modification, addition or deletion, except as may be required
to reflect the resolution of the Stroehmann system access fee issue. I f the Commission fails to
approve, by December 1, 2001, the rates contained in Appendix A, as modified to reflect updates
and tariff modifications traditionally performed on December 1, and except as modified to reflect
the resolution of the Stroehmann system access fee issue, effective for service rendered on and
after December 1, 2001, then any of the Parties may elect to withdraw from this Stipulation and
may proceed with litigation. This Stipulation is proposed by the Parties to settle certain issues in
the instant proceeding and is made without any admission against, or prejudice to, any position
which any Party may adopt during any subsequent litigation of this proceeding.
2. It is understood and agreed among the Parties that this Stipulation is the result of
compromises by all Parties, and does not necessarily represent the position(s) that would be
advanced by any party in the event this proceeding were to be litigated fully.
1. The Stipulation is being presented only in the context of this Section 1307(f)
proceeding in an effort to resolve certain outstanding issues in a manner which is fair and
reasonable. The Stipulation reflects compromises on all sides, and is presented without prejudice
to any position any of the parties may have advanced and without prejudice to the positions any
of the parties may advance in the future on the merits of the issues.
2. Except as provided in section V . l . hereof, all parties agree to fully support the
terms and conditions of the Stipulation during further litigation in this proceeding.
3. This Stipulation may be executed in counterparts.
WHEREFORE, the Parties, by their respective counsel, respectfully request as follows:
4. That Administrative Law Judge Ky Van Nguyen and the Commission approve
this Stipulation, including all terms and conditions thereof:
5. That the Commission, after resolution of the Stroehmann system access fee issue,
enter a final order consistent with this Stipulation which: (a) finds that there is sufficient evidence
in the record for this Commission to make the findings referenced in Sections IV.A. and IV.B. of
this Stipulation; and (b) sets forth the findings referenced in Section IV.A. and IV.B. of this
Stipulation.
10
this Stipulation; and (b) sets forth the findings referenced in Section IV.A. and IV.B. of this
Stipulation.
6. That the Commission enter a final order, consistent with this Stipulation, (a)
approving the proposed rates contained in Appendix A hereto, as modified to reflect updates and
tariff modifications traditionally performed on December 1 and the resolution of the Stroehmann
system access fee issue, and (b) directing UGI Utilities, Inc. - Gas Division to file a final tariff
implementing such rates for gas service rendered by UGI on and after December 1, 2001.
7. That the Commission, after the resolution of the Stroehmann system access fee
issue, terminate and mark closed its inquiry and investigation at Docket No. R-00016376, and
the formal complaint proceeding of the Office of Consumer Advocate.
Respectfully submitted.
Stephen J. iCeene, Esquire Office of Consumer Advocate 555 Walnut Street Forum Place, 5* Floor Harrisburg, PA 17120
Angela T.jJones, Esqui Office ofSmall BusinessXdvocate 1102 Commerce Building 300 North Second Street Harrisburg, PA 17101
Kandace F. Melillo, Prosecutor Office of Trial Staff Pennsylvania Public Utility Commission P.O. Box 3265 Harrisburg, PA K7105
Mark C. Morrow UGI Corporation P.O. Box 858 Valley Forge, PA 19482
Counsel for UGI Utilities, Inc. - Gas Division
Dated: August 13,2001
11
CERTIFICATE OF SERVICE
I hereby certify that I have this day sen'ed true and correct copies of the document on the person, listed below in the manner indicated, in accordance with the requirements of § 1.54 (relating to service by a participant).
VIA HAND DELIVERY
Charles Hoffman, Esquire Kandace F. Melillo, Esquire Office of Trial Staff PA Public Utility Commission Commonwealth Keystone Building 400 North Street, 2nd Floor West Harrisburg, PA 17105-3265
Alan C. Kohler, Esquire Mark S. Stewart, Esquire Wolf, Block, Schorr and Solis-Cohen 212 Locust Street, Suite 300 Harrisburg, PA 17101
Angela T. Jones, Esquire Office of Small Business Advocate Suite 1102, Commerce Building 300 North Second Street Harrisburg, PA 17101
Pamela C. Polacek, Esquire McNees, Wallace & Nurick 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108-1166
Stephen J. Keene, Esquire Zachary M. Rubinich, Esquire Office of Consumer Advocates 555 Walnut Street 5th Floor Forum Place Hamsburg, PA 17101-1923
VIA FIRST CLASS MAIL
The Honorable Ky Van Nguyen Administrative Law Judge Pennsylvania Public Utility Commission 1302 Philadelphia State Office Building 1400 West Spring Garden Street Philadelphia, PA 19130
Brian Kalcic Excel Consulting 225 S. Meramec Avenue Suite 720-T St. Louis, MO 63105
Date: August 14, 2001
Jerome D. Mierzwa Consultant Exeter Associates Inc. 12510 Prosperity Drive, Suite 350 Silver Spring, MD 20904
Richard A. Baudino J. Kennedy and Associates, Inc. 570 Colonial Park Drive, Suite 305 Roswell, GA 30075
Michael W. Hassell
l-HA/95550.1
APPENDIX A
0 •
UGI UTILITIES., — GAS DIVISION COMPUTATION OF THE PURCHASED GAS COST RATE (PGC 1 ) APPLICABLE TO RATES : R;GL; & N.
EFFECTIVE DECEMBER 1,2001 COMPUTATION YEAR ENDING NOVEMBER 30 ,2002.
SCHEDULE A. ( SETTLEMENT PROJECTION )
Cl - PROJECTED COST ($) $231,908,983
S1 - PROJECTED SALES (mcf):
C1/S1 - PROJ. COST PER MCF
IRC - INTER. REVENUE CREDIT
NGSC - NATL GAS SUPPLY CHARGE
E1 -EXPERIENCED COST ($)
E1/S1 - EXPERIENCED COST PER MCF (OR GAS COST ADJUSTMENT)
34,792,029
$6.66558
($0.27211)
$6.3935
$11,714,032
$0.3367
PGC (1) =( GCA + NGSC) . PGC(1)=( GCA + NGSC ) i
PGC(1) (DECREASE)
RESIDENTIAL HTG % DECREASE
12.1.01 - (PROPOSED) CURRENT
$6.7302 $9.2134
($2.4832)
-18.6%
UGI UTILITIES., - GAS DIVISION
COMPUTATION OF THE PURCHASED GAS COST RATE (PGC 2 ) APPLICABLE TO.RATES : BD & CIAC
EFFECTIVE DECEMBER 1,2001 COMPUTATION YEAR ENDING NOVEMBER 30 ,2002.
C2 - PROJECTED COST ($) $1,400,344
S2 - PROJECTED SALES (mcf): 254,557
C2/S2 - PROJ. COST PER MCF $5.5011
IRC - INTER. REVENUE CREDIT ($0.27211)
NGSC - NATL GAS SUPPLY CHARGE $5.2290
E2 -EXPERIENCED COST ($) - $20,159
E2/S2 - EXPERIENCED COST PER MCF $0.0792 (OR GAS COST ADJUSTMENT)
PGC (2) =( GCA + NGSC ) @ 12.1.01 - (PROPOSED ) $5.3082 PGC (2) =( GCA + NGSC ) @ CURRENT $8.3016
PGC (2) DECREASE ($2.9934)
SCHEDULE B ( SETTLEMENT PROJECTION )
APPENDIX B
BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION
PENNSYLVANIA PUBLIC UTILITY COMMISSION
v.
UGI UTILITIES, INC. - GAS DIVISION Docket No. R-00016376
STATEMENT OF UGI UTILITIES, INC. - GAS DIVISION IN SUPPORT OF THE
STIPULATION IN PARTIAL SETTLEMENT OF SECTION 1307(f) RATE INVESTIGATION
UGI Utilities, Inc. - Gas Division ("UGI") hereby submits its Statement in Support of the
Stipulation in Partial Settlement of Section 1307(f) Rate Investigation ("Stipulation"). UGI
believes that the Stipulation is in the best interest of UGI and its ratepayers, and is therefore in
the public interest.
BACKGROUND
UGI, being a natural gas distribution company with gross intrastate annual operating
revenues in excess of $40 million, is authorized by the provisions of Section 1307(f) of the
Public Utility Code, 66 Pa. Code 1307(f), and the Commission's Gas Cost Recovery Regulations
at 52 Pa. Code §§53.61 - 53.68, to make annual purchase gas cost ("PGC") filings proposing gas
rate modifications to reflect increases or decreases in its natural gas costs. On June 1, 2001, UGI
submitted its 2001 PGC filing to the Commission. This filing proposed a $1.10 decrease to
UGI's PGC(l) rate of $9.2134/Mcf, and a decrease of $0.1.6017/Mcf to UGI's PGC(2) rate of
$8.3016/Mcf.
On or about May 11, 2001, UGI received a formal complaint from the Office of
Consumer Advocate ("OCA"), which UGI answered on May 16, 2001.
On May 22, 2001, counsel for the Office of Trial Staff ("OTS") filed a notice of
appearance.
On May 30, 2001, the Office of Small Business Advocate filed a notice of intervention.
On June 11, 2001, the UGI Industrial Intervenors ("UGIII") filed a petition to intervene
that was granted on June 21, 2001.
On June 20, 2001 Stroehmann Bakeries, Inc. ("Stroehmann") filed a petition to intervene
that UGI answered on June 29, 2001. Stroehmann's petition was granted on July 6, 2001.
Following extensive discovery and the conduct of settlement negotiations, all the parties
in this proceeding other than Stroehmann ("Parties") reached agreement on all issues.
TERMS OF SETTLEMENT
The Parties have agreed that subject to the resolution of the Stroehmann system access
fee issue, updates and any other annual tariff modifications traditionally performed as of
December 1, the rates for recovery of the purchase gas costs of UGI should be revised, effective
December 1, 2001, to reflect the rates set forth in Appendix A of the Stipulation. Specifically,
the PGC(l) rate shall be set at $6.7302/Mcf, and the average PGC(2) rate shall be set at
$5.3082/Mcf.
The Parties have also agreed to the following terms:
a. Reverse Migration Rider - In next year's PGC filing UGI shall
propose to add the following reverse migration rider language to its tariff (which will
have an effective date of December 1, 2002):
"Customers who have received transportation service from the Company
for at least twelve consecutive months and who transfer to service under
Rate R, GL, N, BD or CIAC shall not be charged the associated PGC Gas
Cost Adjustment for a period of twelve months. "
b. Application of Migration or Reverse Migration Riders to periods of less
than Twelve Months - In next year's PGC filing UGI shall address the issue of how it
may apply the migration and reverse migration riders for periods of less than twelve
months under appropriate circumstances, and in addressing this issue UGI may
consider billing system costs and capabilities.
c. Quarterly Filings - For the twelve month PGC year commencing
December 1, 2001 (the "PGC 2001 Year"), any PGC quarterly filing shall recover
actual experienced over/under collections on an annual basis, while projected
over/under collections may be recovered on either an annual basis or on a remaining
life basis over the remaining portion of the PGC 2001 Year. Moreover, UGI shall
indicate in any future annual PGC filing i f it intends to modify this methodology on a
prospective basis.
d. Adjustment of Prior Undercollection Balance - UGI shall use a revised
beginning balance of $ 19,201,408.
e. Supplier Refunds - UGI shall, in its compliance filing in this case,
equalize the weighting factors applied each month to supplier refunds and over/under
collections for the purpose of determining interest amounts.
f. Update of Compliance Filing - UGI's compliance filing in this case shall
3
be updated to reflect actual results and updated projections for gas costs, and UGI
shall file a complete revised Schedule C in support of its compliance filing at the time
this filing is made.
g. Sharing of Off System Sales Margins derived from PGC Assets - For the
PGC year beginning December 1, 2001 and ending November 30, 2002, UGI will
share off-system sales margins derived from PGC assets on a before tax basis in the
following manner:
First $240,000
$240,001 - $320,000 -
above $320,000
credited to PGC
retained by UGI
shared 75%(PGC) and 25%(UGI)
h. IRC Credit Projection - In computing its PGC rates in this proceeding,
UGI shall use a projected IRC credit amount of $8.6 million.
Each of these agreements resolves a dispute fairly and without the cost, expense and
uncertainty associated with litigation. UGI accordingly supports the Stipulation fully, and urges
the presiding Administrative Law Judge and the Commission to approve the Stipulation without
modification.
Respectfully submitted,
Dated: August 13, 2001
Mark C. Morrow
Counsel for UGI Utilities, Inc. Gas Division
APPENDIX C
€> APPENDIX C
BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION
PENNSYLVANIA PUBLIC UTILITY COMMISSION
v.
UGI UTILITIES, INC.—Gas Division (1307(f)) proceeding)
Docket No. R-00016376
STATEMENT IN SUPPORT OF THE
OFFICE OF TRIAL STAFF
TO ADMINISTRATIVE LAW JUDGE KY VAN NGUYEN:
The Office of Trial Staff (OTS) of the Pennsylvania Public Utility
Conunission ("Commission") respectfully requests that the terms and conditions of
the foregoing Stipulation In Partial Settlement Of Section 1307(f) Rate
Investigation ("Stipulation") be approved by Administrative Law Judge Ky Van
Nguyen and the Commission. This request is based upon OTS' conclusion that the
proposed Stipulation is in the public interest, as stated therein and as supported by
consideration of the following factors:
1. On June 1, 2001, UGI Utilities, Inc.-Gas Division ("UGI" or "the
Company") submitted its 2001 Purchased Gas Cost (PGC) filing to the
Pennsylvania Public Utility Conunission (Commission), with proposed
modifications to UGFs Gas Tariff Pa. P.U.C. No. 5, to become effective
December 1, 2001.
2. A Prehearing Conference was held regarding UGI's filing on
June 21, 2001, with Administrative Law Judge Ky Van Nguyen (ALJ Nguyen)
presiding. At this Prehearing Conference, a procedural schedule was established.
3. The parties explored the possibility of settlement, in accordance with
the Commission's Rules of Practice at 52 Pa. Code §5.231. After extensive
discussions, and after completion of discovery, all parties, with the exception of
Stroehmann Bakeries, Inc. (Stroehmann), reached the foregoing Stipulation with
respect to their issues. The system access fee issue raised by Stroehmann is the
only issue remaining for litigation.
5. The benefits of this Stipulation include the following:
a. UGI has agreed to revise its rates, subject to updates and the
resolution of the Stroehmann issue, to reflect a PGC(l) rate of $6.7302/mcf, in lieu
of the proposed PGC(l) rate of $8.1134/mcf, and a PGC(2) rate of $5.3082/mcf, in
lieu of the proposed PGC(2) rate of $6.6999/mcf. These rates reflect a decrease of
$2.4832/mcf from the PGC(l) rates currently in effect, and an average decrease of
$2.9934/mcf in UGI's PGC(2) rate.
b. In next year's PGC filing, UGI has agreed to propose certain
agreed-to tariff language to implement a reverse migration rider, effective
€» December 1, 2002. This tariff provision is needed to ensure that former
transportation customers, that have not contributed to over/undercollections of
purchased gas costs in the preceding twelve-month period, do not share in the
purchased gas cost adjustment related to that period.
c. Also, in next year's PGC filing, UGI has agreed to address
the issue of how to apply the migration and reverse migration riders for periods of
less than twelve months, and, in so doing, it may consider billing system costs and
capabilities.
d. UGI has agreed to adjust its prior undercollection balance
(December 2000 beginning balance) from $24,881,899, as shown in Schedule C,
page 4, of its filing, to $19,201,408, to correct for a $5.68 million error. This
inures to the benefit of PGC customers, in that their undercollection balance is
reduced by $5.68 million. UGI has also agreed to equalize the weighting factors
applied each month to supplier refunds and over/undercollections for the purpose
of determining interest amounts, which also benefits PGC customers.
e. In its quarterly filings, UGI has agreed to recover the actual
experienced over/undercollections on an annual basis, consistent with the
methodology used by other local distribution companies in Pennsylvania.
f. UGI will file an updated compliance filing to reflect actual
results and updated gas cost projections, and will file a complete revised Schedule
C with its compliance filing, to aid the parties in detennining compliance with the
Commission's Final Order.
g. UGI has agreed to credit PGC customers with the first
$240,000 in off-system sales margin derived from PGC assets on a before tax
basis, with UGI benefiting from sales above the $240,000 threshold. This reflects
an increase from the PGC 2000 settlement, which credited only the first $180,000
to PGC customers, with UGI benefiting in sales above the $180,000 threshold.
6. Acceptance of this Stipulation will avoid the time and expense of
litigating those issues resolved herein among the parties. This could include cross-
examination of witnesses, and the filing of main briefs, reply briefs, exceptions,
reply exceptions and appeals on the subject matter of this Stipulation.
7. Furthermore, as demonstrated herein, this Stipulation resolves issues
in a manner that is consistent with the public interest. The parties acknowledge
that this Stipulation shall not prejudice future positions on any issue, except as set
forth herein.
WHEREFORE, for all the foregoing reasons, the Office of Trial
Staff respectfully requests that Administrative Law Judge Ky Van Nguyen and the
Commission approve the foregoing Stipulation In Partial Settlement Of Section
1307(f) Rate Investigation.
Respectfully submitted.
Kandace F. Melillo Prosecutor
Charles F. Hoffrnan Chief Prosecutor Office of Trial Staff
Pennsylvania Public Utility Commission P.O. Box 3265 Hamsburg, PA 17105-3265
Dated: August 13, 2001
APPENDIX D
BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION
PENNSYLVANIA PUBLIC UTILITY COMMISSION
v.
UGI UTILITIES, INC. - GAS DIVISION
Docket No. R-00016376
OFFICE OF CONSUMER ADVOCATE'S STATEMENT IN SUPPORT OF
STIPULATION IN PARTIAL SETTLEMENT OF SECTION 1307(f) RATE INVESTIGATION
I. BACKGROUND
On May 1, 2001, pursuant to Sections 53.64 and 53.65 of the Commission's
Rules and Regulations, 52 Pa. Code §§ 53.64 and 53.65, UGI Utilities, Inc. - Gas Division
("UGI" or "Company") submitted the required prefiling information in support of its annual
reconciliation of purchased gas cost ("PGC") rates to the Pennsylvania Public Utility
Commission ("Commission"). On June 1, 2001, UGI made its definitive 2001 PGC filing with
proposed modifications to UGI's Gas Tariff Pa. P.U.C. No. 5, in accordance with the schedule
for 1307(f) filings established by the Commission. The Company filed its PGC tariff together
with supporting computations. The proposed PGC tariff would become effective on December
1, 2001. The Company's filing was assigned to the Office of Administrative Law Judge, and
was further assigned to Administrative Law Judge Ky Van Nguyen for investigation and
-1-
€> scheduling of hearings to determine whether UGI's gas costs comply with the standards set
forth in the Public Utility Code. On May 11, 2001, the Office of Consumer Advocate filed a
Formal Complaint with the Commission against the Company's proposed PGC rate. The
OCA filed its Formal Complaint in order to evaluate whether the Company's proposed
purchased gas cost rates and charges are consistent with a least cost fuel procurement policy
and do not result in rates and charges that are excessive, discriminatory or otherwise contrary
to Commission regulation or policy. UGI filed its Answer to the OCA's Formal Complaint on
May 16,2001.
A prehearing conference was held telephonically before ALJ Nguyen on June
21, 2001. During the prehearing conference, a procedural schedule for this proceeding was
established.
In accordance with the statutory mandate set forth in Sections 1307(f) and
1317 and 1318 of the Public Utility Code, 66 Pa. C.S. §§ 1307(f), 1317, 1318, the OCA has
reviewed the Company's purchasing policies and practices for natural gas supply for the 12-
month historic reconciliation period ending March 31, 2001. Specifically, the OCA's analysis
included an evaluation of the following issues:
(1) Reasonableness and prudence of historic period purchase gas costs and assessment of compliance with Commission Orders in previous 1307(f) cases;
(2) Reasonableness and accuracy of estimating gas costs during the interim and prospective periods covered by the Company's filing;
(3) Reasonableness and prudence of the Company's gas supply mix, including purchases of local gas supplies;
-2-
(4) Reasonableness and prudence of the Company's mix of demand entitlements, storage, and local production, to include an assessment of the reasonableness of the Company's estimate of design day requirements;
(5) Reasonableness and prudence of contracts with pipelines and suppliers in light of the changing regulatory framework;
(6) Assessment of the value of all reported refunds and attendant interest that the Company has received from suppliers;
(7) Reasonableness of the Company's allocation of purchased gas costs between customer classes and assessments of any other subsidies or unreasonable discrimination between customer classes;
(8) Reasonableness and prudence of the Company's use of capacity release, off-system sales, and interruptible sales and crediting of such revenues to PGC ratepayers;
(9) Reasonableness and prudence of the Company's standby sales, unbundled storage service, and balancing service provided to transportation customers;
(10) Reasonableness and prudence of the Company's inclusion of 25,000 dth per day of firm transportation capacity on Texas Eastern to allow UGI to meet the uniform hourly flow requirement set forth in the Texas Eastern tariff.
(11) Reasonableness and prudence of the Company's new and renewed capacity contracts.
Pursuant to the established procedural schedule, the OCA submitted the
prepared direct testimony of Jerome D. Mierzwa on July 13, 2001, addressing issues that the
OCA identified as areas of concem.
The parties to this proceeding subsequently entered into settlement negotiations,
which resulted in a Stipulation in Partial Settlement of Section 1307(f) Rate Investigation
("Partial Settlement") that resolves all contested issues in this case among the Company, the
Commission's Office of Trial Staff ("OTS"), the Office of Small Business Advocate ("OSBA"),
-3-
it
UGI Industrial Intervenors ("UGin") and the OCA. The Partial Settlement addresses the areas
of concem that the OCA presented in its testimony, and the OCA submits that the resolution of
those issues is in the public interest.
II. TERMS AND CONDITIONS OF THE PARTIAL SETTLEMENT
The Partial Settlement provides for a reduction in the PGC(l) rate from its
current level of $9.2134/Mcf to $6.7302/Mcf. This is a reduction of S2.4832/Mcf from the
current level. The PGC(2) rate will be reduced from its current level of $8.3016/Mcf to
$5.3082/Mcf. This is a reduction of $2.9934 from the current level. In addition, the Partial
Settlement provides that the Company will update its natural gas cost recovery levels at the time
of its compliance filing in this proceeding to reflect the most recent available actual results and
updated projections for gas costs. By updating its rates to include current data in its
compliance filing, recent decreases in wholesale gas prices will be reflected in rates.
The Company also agreed to address in next year's PGC filing the issue of how
it will apply the migration riders and reverse migration riders for periods of less than twelve
months.
The Company also agreed to amortize any over- or under-collections
experienced over a twelve month period instead of compressing them into the remaining months
of the PGC period. This will minimize price volatility created by such compression and
eliminate any shifting of these costs from heating customers to non-heating customers.
For the PGC period beginning December 1, 2001, UGI will share off-system
-4-
sales margins derived from PGC assets on a before tax basis in the following manner:
First $240,000 credited to PGC
$240,0014320,000 retained by UGI
above $320,000 shared 75% (PGC) and 25% (UGI)
This sharing mechanism should result in a larger credit to the PGC from off-system sales
margins and provide the Company with sufficient incentive to increase the level of margins
derived from off-system sales.
Finally, the Company has agreed to increase the projected IRC credit from
$7.1 million in its filing to $8.6 million.
-5-
III. CONCLUSION
For the foregoing reasons, the OCA submits that the terms and conditions of the
settlement agreement are in the public interest and the interest of UGFs ratepayers and should
be approved.
Respectfully submitted,
Office of Consumer Advocate 555 Walnut Street 5 lh Floor, Forum Place Harrisburg, PA 17101-1923 (717) 783-5048
Dated: August 14, 2001
*64895
Stephen J. Keene Senior Assistant Consumer Advocate
Counsel for: Irwin A. Popowsky Consumer Advocate
-6-
APPENDIX E
APPENDIX E
OFFICE OF SMALL BUSINESS ADVOCATE STATEMENT OF SUPPORT REGARDING
MEDIATED STIPULATION IN
Pennsylvania Public Utility Commission v.
UGI Utilities, Inc. - Gas Division (1307(f) Rate Investigation)
Docket No. R-00016376
The Office of Small Business Advocate ("OSBA"), one of the signatories to the Joint
Stipulation of Partial Settlement ("Joint Petition"), submits this statement of support regarding the
Joint Petition and requests its approval by the presiding Administrative Law Judge ("ALJ"), Ky Van
Nguyen, and the Commission.
Introduction
In compliance with the gas recovery regulations at 52 Pa. Code §§ 53.64(c) and 53.65, UGI
Utilities, Inc. - Gas Division ("UGI" or "Company") prefiled with the Commission on May 1, 2001
infonnation concerning proposed gas rate modifications to reflect decreases in its natural gas costs.
On June 1, 2001 UGI submitted its 2001 purchase gas cost filing to the commission with
modifications to its Gas Tariff Pa. P.U.C. No. 5 to become effective by December 1, 2001. The
filing proposed a $ 1.10/mcf decrease in the Company's PGC(l) rate and a $ 1.6017/mcf decrease in
its PGC(2) rate.
On May 11, 2001 the Office of Consumer Advocate ("OCA"), filed its Formal Complaint.
On May 16, 2001, UGI filed an answer to the OCA's Formal Complaint. On May 22, 2001, the
Office of Trial Staff ("OTS"), filed its Notice of Appearance in this proceeding. On May 30,2001,
the OSBA filed its Notice of Intervention in this proceeding. On June 11, 2001 the UGI Industrial
APPENDIX E
Intervenors ("UGIH"), filed a Petition to Intervene which was unopposed and subsequently granted.
On June 20,2001, Stroehmann Bakeries, Inc. ("Stroehmann") filed a Petition to Intervene which was
granted by Order dated July 6, 2001. On June 21, 2001, a Prehearing Conference was conducted by
ALJ Ky Van Nguyen which established the following procedural schedule: (1) the filing of direct
testimony by intervenors on July 13, 2001; (2) submission of written rebuttal testimony by July 27,
2001; and (3) submission of outlined surrebuttal testimony by August 1, 2001. Hearings were
scheduled for August 3, 7, and 8, 2001.
Written direct testimony was filed by the OCA and Stroehmann on July 13, 2001. On July
19, 2001, UGI filed a Motion to Strike the direct testimony of the Stroehmann witness, William E.
Bennis. OTS filed a letter supporting the UGI Motion to Strike on July 20, 2001. On July 25, 2001,
UGI submitted a letter to ALJ Nguyen indicating a tentative partial settlement had been reached with
all parties excluding Stroehmann. UGI and OTS submitted written rebuttal testimony on July 27,
2001. On July 30,2001 the OCA and Stroehmann filed answers to UGFs Motion to Strike the direct
testimony of Stroehmann's witness with OCA supporting the Motion to Strike.
The Stipulation and the Public Interest
The OSBA is a party to the Stipulation that tlie Company, OCA and OTS have also agreed
to endorse. The Stipulation embodied in the Joint Petition is in the public interest for the following
reasons, among others:
1. The Company has agreed to decrease its rates. The PGC(1) rate for UGI Customers
is projected to decrease by $2.4832 /mcf to $6.7302/mcf . This PGC(l) rate is
applicable to small business customers and is significantly less than proposed initially
0
APPENDIX E
in the UGI filing. The OSBA believes that this significant decrease in rates is
appropriate and beneficial to small commercial customers.
2. The Company has also agreed to update it compliance filing to reflect the actual
results and an updated projection for gas costs. As prices have been declining, this
more up-to-date compliance filing will provide the most relevant decrease to pass on
to the consumer. The OSBA finds this proposal appropriate and beneficial to the
small business customer.
3. Commencing with the December 1,2001 quarterly filing, UGI has agreed to recover
any experienced over/under collection on an annual basis, while any projected
over/under collection may be recovered on either an annual basis or on a remaining
life basis over the remaining portion of the PGC 2001 Year.1 The OSBA finds this
methodology appropriate since it should result in less distortion of the seasonal
differences in gas prices.
4. UGI has agreed to accept the recommendation of OTS concerning the Reverse
Migration Rider language as well as the application of the Migration or Reverse
Migration Rider over a period of less than twelve months. These recommendations
are more easily explained to customer, eliminate confusion and provide more
equitable treatment to those who choose to switch from sales service to transportation
service. The consideration of switching within a twelve month period should prove
to deter any gaming of the system. The OSBA is hopeful, barring billing system
i The PGC 2001 Year is Ihe twelve month penod beginning December I , 2001.
3
•
APPENDIX E
difficulties, that the under twelve month concept of switching language can be
implemented. The OSBA believes that these considerations are appropriate and
beneficial to small commercial customers.
5. The resolution of this stipulation enables OSBA to conserve its resources and avoid
the uncertainties inherent in adversarial litigation. Additionally, the resolution of
these issues on such favorable terms are particularly beneficial to UGI's small
business customers.
Conclusion
For the reasons stated herein, and the reasons stated in the Stipulation itself, the Office of
Small Business Advocate believes that the adoption of the Stipulation is in the public interest, and
specifically in the interest of the small business customers of the UGI Utilities, Inc., - Gas Division.
The OSBA requests that the ALJ Ky Van Nguyen recommend and the Commission adopt the Partial
Settlement as the resolution of the issues raised in this matter.
Respectfully submitted,
A n g ^ T . Jones Assistant Small Busin&Ss Advocate
Dated: August j ^ ? , 2000 /3.
APPENDIX F
0 • f
M C N E E S W A L L A C E & N U R I C K L L C ATTORNEYS AT LAW
IOO PINE STREET P. O. BOX n e e
HARRISBURG. PA i 7 i o e - i i e 6 TELEPHONEI7!7! 2 3 2 - 8 0 0 0
FAX 17171237-5300
h t tp : / /www.mwn.com
ICAREN S. MILLER ORNER
DIRECT DIAL; (717) 237-5359
E-MAIL ADDRESS: [email protected]
August 14, 2001
The Honorable Ky Van Nguyen VTA FACSIMILE Administrative Law Judge AND FIRST CLASS MAIL Pennsylvania Public Utility Commission 1302 Philadelphia State Office Building 1400 West Spring Garden Street Philadelphia, PA 19130
Re: PA Public Utility Commission v. UGI Utilities, Inc. - Gas Division; Docket No. R-00016376
Dear Judge Nguyen:
The UGI Industrial Intervenors ("UGUI"), an intervenor in the above-referenced proceeding, submits this letter to indicate its non-opposition to the proposed Stipulation in Partial Settlement. UGIH intervened in this proceeding for the purpose of ensuring that the interests of large commercial and industrial customers receiving transportation service from UGI Utilities, Inc., would not be adversely impacted by the resolution of the proceeding. The Stipulation in Partial Settlement does not address issues that directly impact UGUI member transportation interests. Consequently, UGIH does not oppose, adoption of the Stipulation in Partial Settlement without modification.
Please feel free to contact us with any questions regarding this letter.
Very truly yours,
McNEES WALLACE & NURICK LLC
Karen S. Miller Omer
Counsel to the UGI Industrial Intervenors
KSMO c: James J. McNulty, Secretary (via first class mail)
Parties of Record
• COLUMBUS. OH • HAZLETON. PA • WASHINGTON. D.C. •
CERTIFICATE OF SERVICE
I hereby certify that I am this day serving a true copy of the foregoing document upon the
participants listed below in accordance with the requirements of Section 1.54 (relating to service
by a participant):
VIA FIRST-CLASS MAIL
David B. MacGregor, Esquire Morgan, Lewis & Bockius 1701 Market Street Philadelphia, PA 19103-2921
Stephen J. Keene, Esquire Office of Consumer Advocate 555 Walnut Street Forum Place - 5* Floor Harrisburg, PA 17101-1923
Angela T. Jones, Esqujre Office of Small Business Advocate Commerce Building - Suite 1102 302 North Second Street Harrisburg, PA 17101
Mark C. Morrow, Esquire UGI Utilities, Inc. - Gas Division PO Box 858 Valley Forge, PA 19482-0858
Jerome D. Mierzwa Exeter Associates, Inc. Suite 350 12510 Prosperity Drive Silver Spring, MD 20904
Mr. Richard A. Baudino J. Kennedy and Associates, Inc. 570 Colonial Park Drive, Suite 305 Roswell, GA 30075
Kandace Melillo, Esquire Office of Trial Staff Commonwealth Keystone Building 400 North Street, 2 n d Floor Harrisburg, PA 17120
Alan Kohler, Esquire Mark Stewart, Esquire Wolf, Block, Schorr and Solis-Cohen, LLP 212 Locust Street Suite 300 Harrisburg, PA 17101
Mr. Brian Kalcic Excel Consulting Suite 720-T, 225 S. Meramec Avenue St. Louis, MO 63105
Vicki Ebner, Vice President Marketing & Gas Supply UGI Utilities, Inc. - Gas Division 100 Kachel Blvd., Suite 400 P.O. Box 12677 Reading, PA 19612-2677
Karen S. Miller Omer
Dated this 14th day of August, 2001, at Harrisburg, Pennsylvania.
ALAN C KOHLER ESQUIRE WOLF BLOCK SCHORR & SOLIS-COHEN 212 LOCUST STREET SUITE 300 HARRISBURGPA 17101
MARK C MORROW ESQUIRE UGI UTILITIES INC - GAS DIVISION PO BOX 858 VALLEY FORGE PA 19482-0858
DAVID B MACGREGOR ESQUIRE UGI UTILITIES INC - GAS DIVISION MORGAN LEWIS & BOCKIUS 1701 MARKET STREET PHILADELPHIA PA 19103-2921
STEPHEN J KEENE ESQUIRE OFFICE OF CONSUMER ADVOCATE 5TH FLOOR FORUM PLACE 555 WALNUT STREET HARRISBURGPA 17101-1923
KANDACE F MELILLO ESQUIRE PENNSYLVANIA PUBLIC UTILITY COMMISSION OFFICE OF TRIAL STAFF PO BOX 3265 HARRISBURGPA 17105-3265
ANGELA T JONES ESQUIRE OFFICE OF SMALL BUSINESS ADVOCATE SUITE 1102 COMMERCE BUILDING 300 NORTH SECOND STREET HARRISBURGPA 17101
BRIAN KALCIC EXCEL CONSULTING SUITE 720-T 225 SOUTH MERAMEC AVENUE ST LOUIS MO 63105
DERRICK P WILLIAMSON ESQUIRE PAMELA C POLACEK ESQUIRE KAREN S MILLER-ORNER ESQUIRE MCNEES WALLACE & NURICK LLC 100 PINE STREET PO BOX 1166 HARRISBURGPA 17108-1166
R-00016376 Pennsylvania^fcblic U t i l i t y Commission v^^JGI U t i l i t i e s , Inc D i v i s i o n (1307F)
- Gas
VICKJ 0 ESNER VICE PRESIDENT -MARKETING & GAS SUPPLY UGI UTiLSJES INC - GAS DIVISION 100 KACJHEl>80ULEVARD SUITE 400 PO BOX 12677 READIWG PA 19612-2677
MARK C MORROW ESQUIRE UGI UTILITIES INC - GAS DIVISION PO BOX 858 VALLEY FORGE PA 19482-0858
DAVID B MACGREGOR ESQUIRE UGI UTILITIES INC - GAS DIVISION MORGAN LEWIS & BOCKIUS 1701 MARKET STREET PHILADELPHIA PA 19103-2921
STEPHEN J KEENE ESQUIRE OFFICE OF CONSUMER ADVOCATE 5TH FLOOR FORUM PLACE 555 WALNUT STREET HARRISBURGPA 17101-1923
KANDACE F MELILLO ESQUIRE PENNSYLVANIA PUBLIC UTILITY COMMISSION OFFICE OF TRIAL STAFF PO BOX 3265 HARRISBURGPA 17105-3265
ANGELA T JONES ESQUIRE OFFICE OF SMALL BUSINESS ADVOCATE SUITE 1102 COMMERCE BUILDING 300 NORTH-SECOND STREET HARRISBURGPA 17101
BRIAN KALCIC EXCEL CONSULTING SUITE 720-T 225 SOUTH MERAMEC AVENUE ST LOUIS MO 63105
DERRICK P WILLIAMSON ESQUIRE PAMELA C POLACEK ESQUIRE KAREN S MILLER-ORNER ESQUIRE MCNEES WALLACE & NURICK LLC 100 PINE STREET PO BOX1166 HARRISBURGPA 17108-1166
PAMEU POLACEK ESQUIRE MCNEES /ALLACE & NURICK LLC 100 PINE S^EET PO BOX4166 HARRISBURGPA 17108-1166
ALAN C KOHLER ESQUIRE WOLF BLOCK SCHORR & SOLIS-COHEN 212 LOCUST STREET SUITE 300 HARRISBURGPA 17101 .
44
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