Template (FUS) Order .us



PENNSYLVANIAPUBLIC UTILITY COMMISSIONHarrisburg, PA 17105-3265Public Meeting held March 17, 2011Commissioners Present:Robert F. Powelson, ChairmanJohn F. Coleman, Jr., Vice ChairmanTyrone J. ChristyWayne E. GardnerJames H. CawleyPennsylvania Public Utility Commissionv.UGI Central Penn Gas, Inc.Docket No.R-2010-2214415ORDERBY THE COMMISSION:On January 14, 2011, UGI Central Penn Gas, Inc. (CPG or Company) filed Tariff Gas-Pa. P.U.C. No. 4, containing proposed changes in rates, rules, and regulations calculated to produce approximately $16.46 million in additional annual distribution revenues; as well as, Tariff Gas-Pa. P.U.C. No. 4-S, containing proposed changes to its Choice Supplier Tariff. This rate change represents an average increase in total rates of approximately 15.5%. Tariff Gas-Pa. P.U.C. No. 4 and Tariff Gas-Pa. P.U.C. No. 4-S propose effective dates of March 15, 2011, both voluntarily postponed until March 18, 2011.CPG’s proposed general rate increase is based on a future test year ending September 30, 2011, and is designed to allow the Company an opportunity to earn an overall rate of return of 9.11%, including an 11.60% return on common equity. Under the Company’s proposal, the average total bill for a residential customer using 821?hundred cubic feet (ccf) of gas per month would increase from $87.03 to $101.72, a 16.9 percent increase. The average total bill for a commercial customer using 285 Mcf per month would increase from $225.64 to $269.11, a 19.3 percent increase. The average total bill for an industrial customer using 1,855 Mcf per month would increase from $1,358.24 to $1,610.60, an 18.6 percent increase. CPG states that it is proposing the revenue increase in order to enable the company to invest in gas plant, to enable the company to recover lost revenue because customers are using less gas, and to enable the company to recover unavoidable cost increases, including salary and wages, healthcare costs and the cost of servicing customer accounts.CPG is proposing new energy efficiency and conservation programs for residential and commercial customers, the elimination of the current declining block structure rate design for its residential customers, the modification of its transportation service offerings and a new natural gas vehicle program for commercial customers. CPG states that regarding allocation of the revenue increase to the various customer classes, its proposal generally moves each class’s average rate of return towards the system average rate of return.Under CPG’s proposal, of the $16.46 million increase, residential customers would receive $10.97 million, commercial and industrials customers would receive $5.02 million and transportation customers would receive $0.47 million. According to CPG, the monthly bill for an average residential customer would increase $14.69, the monthly bill for a commercial customer would increase $43.47 and the monthly bill for an industrial customer would increase $252.36. Our analysis of CPG’s proposed general rate increase has identified “ring fencing” issues that may have a significant impact on the rates to consumers of the utility. Ring fencing protections allow the risks associated with the jurisdictional utility to be isolated from the risks associated with its affiliates of the consolidated entity. Further evidence should be provided with respect to the effectiveness of any such ring fencing protections, and the parties should address the effectiveness and its impact on the credit worthiness of CPG and ultimately the cost of capital of the regulated entity.The Office of Consumer Advocate and Office of Small Business Advocate both filed formal complaints against CPG’s proposed general rate increase. A number of other formal complaints and petitions to intervene were also filed in this proceeding.Our investigation and analysis of CPG’s proposed general rate increase and the supporting data indicate that the proposed changes in rates, rules, and regulations may be unlawful, unjust, unreasonable, and contrary to the public interest. It also appears that consideration should be given to the reasonableness of the Company’s existing rates, rules, and regulations. In this regard we have identified a number of specific issues, which we have delineated in Appendix A, attached to this Order. The following list highlights some of those issues which we deem to be of particular concern:CPG states that it is requesting its proposed rate increase due in part to declining distribution sales and increasing costs. According, it is important that the Company’s test year revenue and expense claims be closely examined to determine their accuracy and the extent to which they support the requested revenue increase.CPG is proposing to standardize its rate schedules to align rate schedule designations with those found in the currently effective, Commission-approved tariffs of UGI Utilities Inc. – Gas Division and UGI Penn Natural Gas, Inc. CPG states that it will undertake reasonable efforts to assign customers to the most economical rate, while at the same time maintain the customer’s existing service type (i.e., retail, choice or transportation). The process for assigning customers should be carefully reviewed to determine if it is appropriate and reasonable.CPG states that it needs to invest in new gas plant. To the extent that any of this investment is included in the Company’s rate base claim in this proceeding, such investment should be closely reviewed to ensure that it was prudently made, and that any utility plant acquired is necessary, used and useful to the provision of natural gas distribution service.CPG is proposing a new natural gas vehicle program for commercial customers. The effectiveness of this program and associated operating expense claims should be carefully reviewed.CPG is proposing new energy efficiency and conservation programs in this filing. However, CPG has not included any costs for these programs in its test year operating budget, since it asking for approval of these programs as part of this filing. The effectiveness of these programs and the reasonableness of the proposed costs should be carefully reviewed.CPG and the parties should address the impact of any such ring-fencing on the credit protection and on the bankruptcy-remoteness of CPG Energy Company from its parent or any of its affiliates, and whether any changes to those ring fencing measures are necessary and in the public interest. Based on our analysis of CPG’s filing, and pursuant to 66 Pa. C.S. §1308(d), we will permit Tariff Gas – Pa. P.U.C. No. 4 to be suspended by operation of law for a period not to exceed seven months, or until October 18, 2011, unless permitted by Commission Order to become effective at an earlier date. We will also suspend Tariff Gas – Pa. P.U.C. No. 4S, until October 18, 2011, unless permitted by Commission Order to become effective at an earlier date. In addition, we will direct that an investigation be instituted to determine the lawfulness, justness, and reasonableness of the rates, rules, and regulations contained in the proposed Tariff Gas – Pa. P.U.C. No. 4 and Tariff Gas – Pa. P.U.C. No. 4S, as well as the Company’s existing rates, rules, and regulations. We will further direct that the case be assigned to the Office of Administrative Law Judge for the prompt scheduling of such hearings as may be necessary, culminating in the issuance of a Recommended Decision. As part of this investigation, we will instruct the parties to the proceeding to give particular consideration to the areas of concern identified above, and as further delineated in Appendix A, attached to this Order. The parties are also advised to investigate any other issues they may deem important to the fair and thorough review and analysis of CPG’s general rate increase filing; THEREFORE,IT IS ORDERED:1.That the proposed Tariff Gas-Pa. P.U.C. No. 4 will be suspended by operation of law until October 18, 2011, unless otherwise directed by Order of the Commission.2.That the proposed Tariff Gas-Pa. P.U.C. No. 4S will be suspended until October 18, 2011, unless otherwise directed by Order of the Commission.3.That an investigation on Commission motion be, and hereby is, instituted to determine the lawfulness, justness, and reasonableness of the rates, rules, and regulations contained in the proposed Tariff Gas-Pa. P.U.C. No. 4 and Tariff Gas-Pa. P.U.C. No. 4S.4.That this investigation shall include, but not be limited to, consideration of the issues identified in the body of this Order, as well as in the attached Appendix A, as representing specific areas of concern with regard to the Company’s base rate filing.5.That this investigation shall include consideration of the lawfulness, justness, and reasonableness of the Company’s existing rates, rules, and regulations.6.That the case be assigned to the Office of Administrative Law Judge for the prompt scheduling of such hearings as may be necessary, culminating in the issuance of a Recommended Decision.7.That a copy of this Order shall be served upon the Company, the Office of Trial Staff, the Office of Consumer Advocate, the Office of Small Business Advocate, and any persons who have filed Formal Complaints against the Company’s proposed tariff.2524125167640BY THE COMMISSION,Rosemary ChiavettaSecretary(SEAL)ORDER ADOPTED: March 17, 2011 ORDER ENTERED: March 17, 2011 APPENDIX AUGI Central Penn Gas, Inc. (CPG)Tariffs Gas - Pa. P.U.C. No. 4 & 4-SR-2010-2214415General Rate Increase FilingAreas of ConcernCPG’s test year revenue and expense claims must be closely examined to determine their accuracy and the extent to which they support the requested revenue increase.The level of capital investment appearing in CPG’s rate base claim must be closely reviewed to ensure that it was prudently made, and that any utility plant acquired is necessary, used and useful to the provision of electric distribution service.CPG’s proposed revenue allocation must be carefully examined to determine whether or not it is just and reasonable.The cost allocation methodologies utilized in CPG’s class cost-of-service study must be thoroughly scrutinized in order to ensure that the results of the study are reasonably accurate, and to determine whether or not they support the Company’s proposed revenue allocation.CPG’s proposed customer education program and customer energy efficiency programs must be thoroughly reviewed to determine whether or not they are effective and cost justified. Also, the levels of CPG’s claimed operating expense for these programs must be examined to ensure they are just and reasonable.CPG’s proposed updates to its tariffs to clarify certain provisions and eliminate other provisions must be reviewed to determine whether or not such changes are appropriate.CPG and the parties should address the impact of any such ring-fencing measures on the credit protection and on the bankruptcy-remoteness of CPG Energy Company from its parent or any of its affiliates, and whether any changes to those ring fencing measures are necessary and in the public interest. ................
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