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
               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.
          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
          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 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
               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.
               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