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OCA Activity - GasCase Update: Modified: 11/20/08 This update contains information about selected dockets with activity since the last Board meeting.
1. DG 06-033 Capacity Reserve Cost Recovery (closed, included in DG 06-098) In June 2006, Northern filed its Long Range Integrated Resource Plan (IRP) for the period 2006 through 2012. The IRP provides details of Northern’s resource planning process and strategies based on its current forecasts of requirements and present market conditions. The filing of the IRP satisfies one of the terms contained within the Stipulation and Settlement approved by the Commission in DG 05-080, Order No. 24,627. Because Northern operates a unified system for customers in New Hampshire and Maine, Northern’s IRP is also being reviewed by the Maine PUC. The parties last met on May 10, 2007. In April 2008, Staff, the OCA and a competitive supplier, Hess, sent a proposed Settlement Agreement to Northern. In early June, the Company responded. Since then, the OCA has participated in discussions with the Staff of the NH Commission and the Maine PUC concerning the Company’s counter proposal. On October 13, 2008, Staff sent a revised settlement proposal, which the OCA supports, to the Company. 2. DG 06-105 Energy North Natural Gas, Inc. d/b/a Keyspan Energy Delivery New England (Keyspan) Long-Range Integrated Resource Plan KeySpan filed a revised filing of its Integrated Resource Plan (IRP) in August 2006. Discovery and technical discussions have been held. Staff filed testimony on February 7, which the OCA supports. One element of Staff’s testimony which the OCA supported focused on the company’s failure to include any demand-side (energy efficiency) resources in its IRP. The final hearing was held on January 9, 2008. A brief or closing statement was filed by each of the parties. The Commission has not yet issued an order. 3. DG 07-033 Northern Utilities, Inc. Cost of Gas (CGA) – Summer 2007 On March 15, 2007, Northern Utilities filed its 2007 Summer Period Cost of Gas Filing, which proposed a 7% decrease over the previous summer. Along with the usual cost of gas issues, the proceeding included two other issues: (1) Northern’s possible over-collection of costs associated with timing differences between payments by Northern of wholesale gas costs and the Company’s receipt of associated revenues from its retail customers; and (2) the appropriate interest rate to apply for ratemaking purposes to the supply-related working capital borrowed by Northern from the “money pool” it shares with other subsidiaries of its parent firm, NiSource, Inc. In April 2007 the Commission approved Northern’s proposed 2007 Summer Period Cost of Gas but reserved ruling on these two issues pending a review of briefs filed by the parties. The OCA filed a brief jointly with Staff and Northern filed its own brief. On May 25,2007 the Commission determined that it would consider the second of these issues, the appropriate interest rate to apply to supply related working capital for COG adjustment purposes, in Docket No. DG 07-072. In September 2007, the Commission ruled on the first of these issues (Order 24,786), finding that Northern is not entitled to recover carrying costs associated with seasonal fluctuations in gas volumes, beyond those costs recovered for working capital needs supported by Northern’s most recent lead-lag study. In other words, the Commission agreed with Staff and the OCA that a double recovery of certain working capital costs occurs when interest is calculated on deferred gas cost collections using accrued costs and billed revenues. On October 1, 2007, Northern filed a motion to stay Order 24,786 and, on October 15, 2007, Northern filed a motion for reconsideration of this order. KeySpan, which had intervened early in these proceedings on the basis of the fact that similar issues were pending in a KeySpan proceeding, DG 07-050 (see below), also filed a motion for reconsideration of this order on October 15, expressing its concerns about the implementation of the transition from billed to accrued revenues method required by Order 24,786. Staff has objected to Northern’s motion. On September 28, 2008, the Commission issued Order No. 24,901, granting in part and denying in part the motions for rehearing. Specifically, the Commission affirmed its decision with respect to the underlying question of double recovery of gas supply costs, that the new accounting method is just and reasonable. On the issue of transitioning to the new accounting method, the Commission agreed with Northern that it has not received a full and fair opportunity to cross examine Staff so as to ascertain fully, for itself and for the record, the full basis for Staff’s position on the appropriate transition. Rather than schedule a pre-hearing conference and take other steps toward an evidentiary hearing, the Commission asked the parties to determine whether they can achieve settlement on the transition question. Specifically, the Commission directed Staff to convene the necessary discussions with the parties and submit a report to the Commission by December 12, 2008. 4. DG 07-050 Energy North Natural Gas, Inc. d/b/a KeySpan Indirect Gas Costs This docket addresses bad debt costs, single issue ratemaking, and the potential double-recovery of interest related to under/over collection of gas costs. Staff filed testimony on bad debt issues, which the OCA supported. The parties reached a partial settlement of all but one issue, which was litigated at the hearing held on November 5, 2007. Following the hearing, in Order No. 24,858 (May 23, 2008), the Commission approved the partial settlement agreement, but left unresolved the question of how EnergyNorth should transition to using accrued rather than billed revenues to calculate interest on deferred gas cost collections. On September 25, 2008, the Commission issued Order No. 24,901. This order also ruled on a pending motion for rehearing in DG 07-033. At present, only one issue remains in these two cases: transitioning to accrued accounting to calculate interest on deferred gas cost collections. As it did with regard to DG 07-033, the Commission directed the parties to DG 07-050 to participate in the informal discussions Staff will convene in DG 07-033, to explore the possibility of an agreed-upon resolution that would be common to both dockets. As in DG 07-033, the Commission indicated that it would await Staff’s report on or before December 12, 2008. 5. DG 07-072 Carrying Charge Rate to Calculate the Cost of Supply-Related Working Capital On June 25, 2007, the Commission opened this docket to consider an issue that arose in DG 07-033, the Northern 2007 Summer Cost of Gas proceeding, and DG 07-050, a proceeding concerning KeySpan Indirect Gas Costs. The Commission described the issue to be transferred to this new docket as “the appropriate carrying charge rate to calculate the cost of supply-related working capital.” Indirect gas costs are costs such as bad debt or working capital that support the companies’ gas supply function and are recovered through the cost of gas (COG) rate rather than through delivery or base rates. In addition to Northern and KeySpan, the Commission made the three NH Electric Utilities mandatory parties. In September 2007, the Commission granted a motion of Northern and KeySpan to split the proceeding into two phases. See Order 24,793. The first phase, which continues to date, concerns whether the existing practice of applying the overall cost of capital as the return on working capital should be changed to using a short-term debt rate. In October, the Commission granted Staff’s request for a delay of the proceeding until January 18, 2008. Discovery began in February and two technical sessions have been convened. Staff has filed the testimony (original and two revisions) of its consultant, James Rothschild, which generally recommends that when feasible the short-term debt rate be used as the appropriate carrying charge rate to calculate the cost of supply-related working capital for cash working capital. The utilities filed testimony on August 29, 2008 questioning the conclusions of Staff’s consultant. At a hearing on October 15, Staff attempted to present a new version of its written direct testimony. The Companies and the OCA objected to the late nature of Staff’s revised testimony. Other issues arose about whether the latest version of Staff’s testimony accurately reflected the contents of the last revised version, filed in July. Rather than continue with the hearing, the parties agreed to postpone it until a date after December 1. The parties also agreed that Staff would circulate a correct copy of the latest iteration of its direct testimony, that the parties would meet in a technical session after that, and that the Companies could also file revised testimony. 6. DG 07-129 Keyspan Energy Delivery 2008 Summer Cost of Gas (COG) The Commission opened this summer COG docket sooner than usual in order to provide more time for the parties and PUC staff to investigate two issues: the Company’s handling of unoccupied customer accounts and the appropriateness of assessing interest on an over-collection balance in the Environmental Remediation account. The parties and Staff agreed there was still not sufficient time to fully analyze the unoccupied accounts issue, so that issue was deferred. Staff and the OCA agreed that interest earned on the Environmental Remediation over-recovery should be credited to ratepayers, and testified regarding this position at the hearing on April 15. The Commission issued Order No. 24,849 on April 23, 2008 approving the gas rates, which allows for an increase over last summer of approximately 13%. The increase is primarily driven by higher national natural gas prices and the change in the under collection balance. On the interest issue the Commission ruled that the sum of approximately $250,000 will be split 80/20 with ratepayer’s receiving 80% or $200,000 while stockholders would retain 20% or $50,000. On June 17, 2008 the Commission issued a Supplemental Order of Notice in response to the Company’s request on June 13 to revise its Summer Cost of Gas effective August 1, 2008. The Company notified the Commission that as allowed in COG cases, the Company had increased its gas rates by 20% as a resulting of increases in the cost of gas. However, because the Company is not allowed to increase its rates more than 20% without Commission approval, the Company is now requesting approval of the new rates, with the opportunity to raise rates up to an additional 20% in the event that gas prices continue to increase. A hearing was held on July 15, 2008 and the Commission issued Order 24,881 on July 31 approving the proposed revisions to the Summer Cost of Gas. Since mid-July market rates for natural gas have declined significantly and the expectation is that KeySpan’s COG rates will also decline. The remaining issue in this docket relates to “Occupant Accounts,” which are accounts for which the Company is providing gas service but for which they do not have a customer of record. The Company, Staff, the OCA and NH Legal Assistance are currently in discussions to resolve this issue both in this docket and in the pending rate case, DG 08-009. 7. DG 08-009 Energy North Natural Gas d/b/a National Grid NH (Grid) delivery rate case On February 25, 2008 Grid filed a petition seeking permanent delivery rates that are designed to produce an increase of $9.9 million in annual revenues, representing a 5.6% increase in total revenues. Grid is also proposing a re-design of the delivery rates, which would double the customer charge and decrease the volumetric charge, which would result in a higher overall percentage increase to the residential class than to larger customers. If approved, annual gas costs for a typical residential heating customer will increase by 6.4%, and, for residential non-heating customers, annual gas costs will increase by 8.5%. The temporary rate hearing was held on August 5 and the final hearing is scheduled for January 2009. Since the temporary rate hearing, the OCA has continued its work on discovery and, on October 2 and 3, the parties met in a technical conference. On October 31, 2008 the OCA filed the testimony of Lee Smith and Art Freitas, of La Capra Associates, on the issue of rate design, as well as the testimony of Ken Traum, on several other issues. Staff and NH Legal Assistance also filed testimony. Final hearings are scheduled for January 27-29, 2009. 8. DG 08-048 Unitil Corp. acquisition of Northern Utilities, Inc. and Granite State Gas Transportation, Inc. On March 31, 2008 Unitil Corporation (Unitil) and Northern Utilities, Inc. (Northern) filed a petition for approval of Unitil’s acquisition of Northern. Unitil’s principal business is the retail distribution of electricity through its subsidiary, Unitil Energy Systems, Inc. in the seacoast and capital regions of New Hampshire and electricity and natural gas through its subsidiary, Fitchburg Gas and Electric Light Company in the greater Fitchburg area of Massachusetts. Northern provides natural gas distribution services to customers in 44 New Hampshire and southern Maine communities, from Atkinson, New Hampshire, to Lewiston-Auburn, Maine. Northern’s immediate parent is Bay State Gas Company. NiSource, Inc. owns all the common stock of Bay State and Granite State Gas Transmission, Inc. Granite owns and operates an interstate pipeline serving Maine, New Hampshire and Massachusetts, including Northern’s distribution system in Maine and New Hampshire. On July 16 the OCA filed Joint testimony of Ken Traum and Steve Eckberg which concluded that the Petition should be denied, but also listed a number of provisions which would improve the request from ratepayers’ perspective. On August 15, 2008 the parties filed a settlement agreement for approval by the Commission. The settlement agreement addressed many of the OCA’s concerns and includes a two-year distribution rate cap for Northern, and a two-year rate cap for Granite beginning on Nov. 1, 2008. On August 19 the parties presented the settlement agreement to the Commission at the final hearing. The Commission issued Order No. 24,906 on October 10, 2008 approving the Settlement Agreement. Final approval is still required by the Maine and Massachusetts Commissions.
9. DG 08 –106 Energy North Natural Gas d/b/a National Grid NH (Grid) Winter Cost of Gas On August 29, 2008 EnergyNorth Natural Gas, Inc. d/b/a National Grid NH (Grid), a public utility that distributes natural gas in 29 cities and towns in southern and central New Hampshire and the City of Berlin, filed its cost of gas (COG) and other rate adjustments for the 2008-2009 winter period. On October 17, 2008 Grid filed a revised cost of gas filing with supporting testimony and schedules. On October 20, 2007, Staff filed the direct testimony of Robert Wyatt, a Staff utility analyst, and a hearing on the revised COG was held on October 21, 2008. In Mr. Wyatt’s testimony Staff recommended a modification to the monthly over/under adjustment mechanism and asked that the Commission confirm Staff’s understanding of the intended goals of the monthly over/under adjustment mechanism and hedging policy. Mr. Wyatt testified that currently, without further Commission action, Grid can adjust the COG rates upward or downward within a +/- 20 percent bandwidth of the initially approved COG rate in order to reduce monthly over- or under-collections in the period. Staff’s proposed modification would allow for monthly adjustments beyond the 20 percent with Commission approval. Mr. Wyatt also asked the Commission to confirm that the Company should use its underground storage during the winter period, to mitigate price volatility as intended, unless it can be replaced with less expensive spot gas supply in the same period. Grid’s updated proposed $1.1837 per therm as the 2008-2009 winter COG average residential firm sales rate, which is essentially equivalent to last winter’s CGA rate. The 2008-2009 winter FPO rate for residential customers, $1.2835, was set $0.02 above the COG rates proposed in EnergyNorth’s initial COG filing, in accordance with the method approved in EnergyNorth Natural Gas, Inc., Order No. 24,529, 90 NH PUC 441 (2005). The Commission held a hearing on October 21. At the hearing, the OCA and Staff supported Grid’s proposed COG rates and the concept of reaching an understanding between the Staff, the OCA and the Company of how the Company should use its underground storage in the winter period. The OCA expressed concern about Staff’s proposal to reduce the process required for resetting the COG beyond the 20% bandwidth. On October 29 the Commission issued Order No. 24,909 approving the proposed COG rates and confirming Staff’s position on the use of the Company’s underground storage. With regard to Staff’s proposal to modify the monthly over/under adjustment, the Commission deferred this issue to the summer 2009 cost of gas docket, and requested the parties to meet, in the interim, to “further discuss and refine the Staff’s proposal.” 10. DG 08-115 Northern Utilities Winter Cost of Gas On September 15, 2008 Northern filed for its proposed Winter 2008-2009 Cost of Gas. The proposed residential rate is $1.3899/therm, an increase of $0.2988/therm over the weighted average last winter. Following discovery and a technical session with Staff and the OCA , Northern updated its filing and reduced its request to $1.2636/therm on October 21. Northern also sought approval of the resolution of a metering error that occurred between June 2005 and December 2007 that resulted in customers being charged for gas that was not delivered. Under the proposed resolution, customers will be repaid through in-kind volumes of gas over the next 18 months, beginning on December 1, 2008. Staff also filed testimony of Mr. Wyatt regarding the change in the 20% over-under adjustment mechanisms, as described in detail in the Grid cost of gas docket above. A hearing was held on October 22, 2008, and the Commission issued an Order on October 31, 2008 approving the proposed rates and in-kind repayment of gas that was not previously delivered, while deferring the over-under adjustment mechanism issue as they did in the National Grid docket.
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