DR 98-041
Keene Gas Corporation
1998 SUMMER COST OF GAS ADJUSTMENT
Order Approving the Cost of Gas Adjustment
O R D E R N O. 22,916
April 30, 1998
APPEARANCES: John F. DiBernardo for Keene Gas
Corporation; and Michelle A. Caraway and Stephen P. Frink
for the Staff of the New Hampshire Public Utilities
Commission.
I. PROCEDURAL HISTORY
On March 31, 1998, Keene Gas Corporation (Keene
Gas or the Company) filed with the New Hampshire Public
Utilities Commission (Commission) its Cost of Gas Adjustment
(CGA) for the 1998 Summer period. 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. The proposed 1998 Summer CGA is a
charge of $0.0251 per therm.
Keene Gas informed customers and interested
parties of the impending rate change by publishing a copy of
the Order of Notice in the Keene Sentinel on April 12, 1998.
The Order of Notice also notified the Company, its customers
and interested parties that the Commission Staff (Staff) was
recommending a change in the CGA mechanism that would allow
Keene Gas to adjust the CGA rate on a monthly basis.
Apart from the Office of Consumer Advocate (OCA)
which is a statutorily recognized intervenor, there were no
intervenors in this docket. A duly noticed hearing on the
merits was held at the Commission on April 27, 1998.
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) Keene Gas's
opposition to the proposed change to the current CGA
mechanism.
A. Calculation and Impact of the Firm Sales CGA
The proposed 1998 Summer CGA charge of $0.0251 per
therm was calculated by reducing the anticipated cost of gas
of $125,952 by the prior period over recovery of $6,365 and
related interest of $688 and dividing the resulting
anticipated costs of $118,899 by projected therm sales of
259,289 to arrive at a per unit cost of gas of $0.4586 per
therm, and then deducting the base summer cost of gas of
$0.4335 per therm.
Keene Gas's proposed 1998 Summer CGA is a charge
of $0.0251 per therm for Firm Sales, representing a decrease
of $0.2092 per therm from the 1997 Summer CGA charge of
$0.2343 per therm.
The proposed firm sales CGA rate of $0.0251 per
therm will reduce an average residential heating customer's
monthly gas bill by approximately $4.19 or 14 percent.
B. Reason for the Reduction in the Summer CGA Rate
Mr. DiBernardo testified that the primary reason
for the significant decrease in the proposed 1998 Summer
CGA rate as compared to the 1997 Summer CGA rate is
attributable to the difference in the prior period
over/under recoveries, including carrying costs. The 1997
Summer CGA calculation included an under recovery of
approximately $25,000, whereas the 1998 Summer CGA
calculation is designed to return approximately $7,000 of an
over recovery. The $32,000 swing in the over/under
collection had a significant impact on rates that are based
on total projected 1998 Summer gas costs of $126,000.
Mr. DiBernardo stated that the 1997 Summer CGA
rate was designed to recover the under collection which
occurred during the previous (1996) summer period. He also
pointed out that last summer's sales were 10% greater than
expected. Thus, the higher 1997 Summer CGA rate recovered
more than just the previous summer's undercollection.
C. Opposition to Revising the CGA Mechanism
Staff recommended that Keene Gas consider a change
in the CGA mechanism identical to that proposed by
EnergyNorth Natural Gas, Inc. in its 1998 Summer CGA filing
(Docket DR 98-015) and approved in Order No. 22,890 dated
March 31, 1998. The revised CGA mechanism would enable
Keene Gas to make monthly adjustments within 10% of the
approved unit cost of gas based on projected over or under
recoveries for the period. Keene Gas would be required to
report the projected over or under recovery, with supporting
schedules, five business days prior to the month end.
During cross-examination, Mr. DiBernardo stated
that he had reviewed the proposed change to the CGA
mechanism that Staff recommended and agreed with Staff that:
the revised CGA mechanism would better match gas cost
revenues with actual gas costs, thereby minimizing over and
under recoveries that are carried forward into subsequent
periods; gas costs under both the current and proposed CGA
mechanism would remain the same; and that Keene Gas had the
staffing and expertise to implement the proposed change.
Nonetheless, Keene Gas was opposed to implementing the
proposed change to the CGA mechanism at this time.
Mr. DiBernardo explained that Keene Gas was in the
process of negotiating the sale of the Company and the
potential buyer had requested that Keene Gas oppose any
change in the CGA mechanism pending the sale.
Mr. DiBernardo also pointed out that propane
prices were typically less volatile during the summer months
and that, due to the reduced heating load, the size of any
over or under recovery would be limited.
Staff
Staff stated that after a thorough review of the
filing and discovery, it believed the proposed 1998 Summer
CGA charge of $0.0251 per therm is reasonable and should be
approved.
Regarding the proposed change to the CGA
mechanism, Staff stated that it believed the proposed CGA
mechanism allowing monthly adjustments would be in the
public good and consistent with how the other New Hampshire
gas companies would now be operating. Although Staff
believed the proposed CGA mechanism is superior to the one
currently used by Keene Gas, Staff supported the Company's
request that the CGA mechanism remain unchanged for the
summer period, for the reasons cited by Mr. DiBernardo.
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 CGA's. We find that the
Company's proposed CGA of $0.0251 per therm, which is a
decrease from the 1997 Summer CGA, is just and reasonable
and in the public good and, accordingly, approve the
proposed rate.
The Commission has approved the proposed change in
the CGA mechanism in 1998 Summer CGA filings for the other
natural gas local distribution companies in New Hampshire,
as proposed and supported by Staff, the companies and the
OCA. We believe that allowing monthly adjustments provides
those companies a greater opportunity to control over and
under recoveries, thus reducing the impact in subsequent CGA
filings of the inherent problems associated with large over
and under recoveries. We believe that the proposed CGA
mechanism better serves the purpose for which the cost of
gas adjustment was first implemented, i.e. to more
accurately reflect seasonal use patterns and costs and
prevent continuous rate increase filings.
We also understand that Keene Gas is currently
understaffed and is in the process of negotiating a sale.
Given this pending sale and the fact that greater stability
in propane prices and limited sales are typically
experienced during the summer period, thus reducing the
potential for a large over or under collection, we will not
require Keene Gas to implement Staff's proposed change to
the CGA mechanism at this time. However, absent some very
strong reason not to, we expect the proposed changes to the
CGA mechanism to be adopted for the 1998/1999 winter period.
Based upon the foregoing, it is hereby
ORDERED, that Keene Gas's Twentieth Revised Page
27, superseding Nineteenth Revised Page 27, N.H.P.U.C. No. 1
- Gas tariff of Keene Gas Corporation providing for a Summer
1998 Cost of Gas Adjustment of $0.0251 per therm for the
period May 1, 1998 through October 31, 1998 is hereby
APPROVED; and it is
FURTHER ORDERED, that Staff's proposed change to
the Cost of Gas mechanism, to allow monthly adjustments, is
DENIED at this time; 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 should the monthly
reconciliation of known and projected gas costs deviate from
the ten percent (10%) trigger mechanism, Keene Gas shall
file a revised CGA; and it is
FURTHER ORDERED, that Keene Gas 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 April, 1998.
Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger
Chairman Commissioner Commissioner
Attested by:
Claire D. DiCicco
Assistant Secretary