DR 98-173 Keene Gas Corporation 1998/1999 Winter Cost of Gas Adjustment Order Approving the Cost of Gas Adjustment O R D E R N O. 23,055 October 30, 1998 APPEARANCES: John F. DiBernardo for Keene Gas Corporation; Ransmeier & Spellman, Professional Corporation by Dom S. D'Ambruoso, Esq. for New Hampshire Gas Corporation; Michelle A. Caraway and Stephen P. Frink for the Staff of the New Hampshire Public Utilities Commission. I. PROCEDURAL HISTORY On October 1, 1998, Keene Gas Corporation (Keene Gas), a public utility engaged in the business of distributing gas to approximately 1,000 customers in Keene, New Hampshire, filed with the New Hampshire Public Utilities Commission (Commission) its Cost of Gas Adjustment (CGA) for the period November 1, 1998 through April 30, 1999 for effect November 1, 1998. Keene Gas's filing included the direct testimony and supporting attachments of John F. DiBernardo, ex-Assistant General Manager working on an as needed basis. On October 1, 1998, Steven R. Adams, New York State Electric & Gas Corporation Manager of Gas Pricing, Regulation & Strategy, filed testimony on behalf of New Hampshire Gas Corporation (NHGC), related to Keene Gas's 1998/1999 Winter CGA. NHGC will acquire Keene Gas on November 1, 1998 pursuant to Commission Order 23,017. An Order of Notice was issued on October 1, 1998 setting the date of the hearing for October 23, 1998 at 10:00 a.m. at the Commission's office in Concord, New Hampshire. A duly noticed hearing on the merits was held at the Commission on October 23, 1998. At the hearing, Mr. D'Ambruoso made a motion to intervene on behalf of NHGC, which was granted. Other than NHGC and the Office of Consumer Advocate (OCA), which is a statutorily recognized intervenor, there were no other intervenors. II. POSITIONS OF THE PARTIES AND STAFF Keene Gas Corporation Keene Gas witness John F. DiBernardo testified at the hearing and explained: a) the calculation of the CGA and its impact on customer bills; b) the primary reason for the reduction in the proposed rate; and c) elimination of the trigger mechanism. A. Calculation and Rate Impact of the Proposed CGA The proposed 1998/1999 Winter CGA credit of $0.0583 per therm was calculated by reducing the anticipated cost of gas of $365,705 by the prior period over collection of $78,976 and related interest of $865, dividing the resulting anticipated costs of $285,864 by projected therm sales of 787,388 to arrive at a per unit cost of gas of $0.3631 per therm, and then deducting the base unit cost of gas of $0.4214 per therm. Keene Gas's proposed 1998/1999 Winter CGA credit of $0.0583 per therm represents a decrease of $0.1413 per therm from the 1997/1998 Winter CGA charge of $0.0830 per therm. The proposed CGA rate of ($0.0583) per therm will reduce an average residential heating customer's monthly gas bill by approximately $10, or 13 percent. B. Factors Contributing to the Decreased CGA Mr. DiBernardo testified that the primary reason for the significant decrease in the proposed CGA per therm price compared to last winter's rate can be attributed primarily to the substantial prior period overcollection to be returned to customers this winter and, to a lesser extent, lower propane costs. Mr. DiBernardo stated that the overcollection resulted from the much warmer than normal winter experience last year. According to Keene Gas records, the 1997/1998 winter was the warmest winter in fifteen years. The 1997/1998 winter period gas usage was significantly lower than anticipated and propane prices dropped, resulting in an abnormally large overcollection. C. Elimination of the Trigger Mechanism The "trigger mechanism" was implemented in 1985 and requires Keene Gas to file a revised CGA if the actual and projected revenues and costs deviate by 10 percent or greater. The trigger mechanism was designed to prevent the carry forward of substantial over or under recoveries from one CGA period to the next as was experienced by Keene Gas. Mr. DiBernardo stated that monthly adjustments should ensure that the ten percent deviation that the trigger mechanism stipulated should not be reached. If a large deviation were ever to develop, a revised CGA would be filed. NHGC Mr. Steven R. Adams testified that NHGC will acquire Keene Gas November 1, 1998, as approved by NHPUC Order 23,017 (September 14, 1998), and that he had reviewed the Keene Gas CGA filing and that Mr. DiBernardo's testimony and exhibits were acceptable to NHGC. NHGC agreed to adopt the monthly adjustment mechanism in the Settlement approved in the above referenced Order, and Mr. Adams testified that with implementation of the monthly adjustment mechanism there would no longer be a practical need for the trigger mechanism, and that NHGC concurred with the suggestion made by Staff that the trigger mechanism be eliminated. Staff Staff stated that after a review of the filing and subsequent discovery, Staff believes that the proposed 1998/1999 Winter CGA credit of $0.0583 per therm is reasonable and should be approved. Staff recommended the elimination of the trigger mechanism, stating that it is Staff's belief that the tools are in place to effectively prevent large over or under recoveries. Staff did state that if a material over or under collection were projected, it would expect a revised CGA filing. OCA While the OCA was unable to attend the hearing, the OCA asked Staff to represent its support for the elimination of the trigger mechanism based on the above stated reasons. III. REPORT OF THE HEARINGS EXAMINER The Hearing Examiner reviewed the filing and supporting testimony presented at the October 23, 1998 hearing and recommended approval of the 1998/1999 Winter CGA for Keene Gas, and its successor, NHGC, of a credit of $0.0583 per therm and elimination of the "trigger mechanism." III. COMMISSION ANALYSIS We find that the projected costs, sales and adjustments to the CGA filing are consistent with those approved by the Commission in past CGAs. We find that Keene Gas's proposed CGA credit of $0.0583 per therm, which is a decrease from the 1997/1998 Winter CGA, is just and reasonable and in the public good and, accordingly, approve the proposed rate. With the purchase of Keene Gas by NHGC, as approved by the Commission, the NHGC tariff that allows for monthly CGA adjustments in response to projected over or under recoveries will be in effect for the 1998/1999 winter period. With the implementation of the new mechanism, it is our belief that the 10% trigger mechanism is no longer needed. Accordingly, we approve the elimination of the trigger mechanism as proposed by Staff and recommended by the Hearings Examiner. Based upon the foregoing, it is hereby ORDERED, that NHGC's Original Page 24, NHPUC No. 1 - Gas tariff of NHGC providing for a winter CGA credit of $0.0583 per therm for the period November 1, 1998 through April 30, 1999, is approved, effective for bills rendered on or after November 1, 1998; and it is FURTHER ORDERED, that NHGC may adjust the approved CGA rate of ($0.0583) per therm upward or downward monthly based on NHGC's calculation of the projected over or under collection for the period, but the cumulative adjustments shall not exceed ten percent, or $0.0363, of the approved unit cost of gas of $0.3631 per therm; and it is FURTHER ORDERED, that NHGC will provide the Commission with its monthly calculation of the projected over or under calculation, along with the resulting revised CGA rate for the subsequent month. NHGC shall include a revised tariff page 24 - Calculation of Cost of Gas Adjustment and revised rate schedules if NHGC elects to adjust the CGA rate; and it is FURTHER ORDERED, that the over or under collection shall accrue interest at the Prime Rate reported in the Wall Street Journal. The rate is to be adjusted each quarter using the rate reported on the first date of the month preceding the first month of the quarter; and it is FURTHER ORDERED, that NHGC shall file properly annotated tariff pages in compliance with this Order no later than 15 days from the issuance date of this Order, as required by N.H. Admin. Rules, Puc 1603. By order of the Public Utilities Commission of New Hampshire this thirtieth day of October, 1998. Douglas L. Patch Susan S. Geiger Nancy Brockway Chairman Commissioner Commissioner Attested by: Thomas B. Getz Executive Director and Secretary