PENNSYLVANIA
PUBLIC UTILITY COMMISSION
Harrisburg, PA 17105-3265
Public Meeting held July 16, 2013Commissioners Present:
Robert F. Powelson, Chairman
John F. Coleman, Jr., Vice Chairman
Wayne E. Gardner, Dissenting
James H. Cawley
Pamela A. Witmer
Pennsylvania Public Utility Commission
Office of Consumer Advocate
Office of Small Business Advocate
Gerard J. McEnery / R-2013-2341534
C-2013-2344453
C-2013-2347291
C-2013-2350002
v.
National Fuel Gas Distribution Corporation
OPINION AND ORDER
BY THE COMMISSION:
Before the Pennsylvania Public Utility Commission (Commission) for consideration and disposition are: the Stipulation in Partial Settlement of the Rate Investigation Pursuant to 66 Pa.C.S. § 1307(f) (Partial Settlement), executed by National Fuel Gas Distribution Corporation (NFG or the Company), the Commission’s Bureau of Investigation and Enforcement (I&E), the Office of Consumer Advocate (OCA), and the Office of Small Business Advocate (OSBA), and filed on April 25, 2013; the Recommended Decision (RD) of Administrative Law Judge (ALJ) Mary D. Long, issued on May 14, 2013; and the Exceptions to the Recommended Decision filed by NFG on May 24, 2013. Also before the Commission are the Replies to Exceptions filed by I&E and the OCA on May 31, 2013.
I. History of the Proceeding
On January 2, 2013, NFG submitted its purchased gas cost pre-filing pursuant to the Commission’s Regulations at 52 Pa. Code §§ 53.64-53.65. On February1, 2013, NFG made its definitive filing pursuant to Section 1307(f) of the Public Utility Code, 66 Pa.C.S. § 1307(f), which included prepared statements and associated exhibits explaining the Company’s gas procurement policies, and the computation of its proposed purchased gas cost (PGC) rates. Also on February 1, 2013, NFG filed Supplement No. 139 to Tariff Gas – Pa. P.U.C. No. 9, to become effective for service rendered on or after August 1, 2013. NFG’s definitive filing projected a PGC rate of $6.5490 per Mcf.
On January 22, 2013, the OCA filed a Formal Complaint and Public Statement, docketed at C-2013-2344453, and also filed a Notice of Appearance. On February 1, 2013, I&E filed a Notice of Appearance. On February 7, 2013, the OSBA filed a Formal Complaint and Public Statement, docketed at C-2013-2347291, and also filed a Notice of Appearance. On February 22, 2013, Gerard J. McEnery, a customer of NFG, filed a Formal Complaint. However, Mr. McEnery did not otherwise participate in the proceeding, and did not become an active party.
A prehearing conference was held on February 11, 2013, at which the Parties agreed to a litigation schedule. On March 15, 2013, pursuant to the schedule established at the prehearing conference, I&E, the OCA, and the OSBA served their written testimony and exhibits. On April 5, 2013, NFG and I&E served rebuttal testimony and exhibits. On April 12, 2013, I&E and the OCA served surrebuttal testimony. On April 16, 2013, NFG served rejoinder testimony and an associated exhibit.
On April 12, 2013, counsel for NFG informed the ALJ that the Company, I&E, the OCA and the OSBA had achieved a settlement in principle of all issues but one. The sole disputed issue involved a proposal by NFG to change the way it calculates the C-factor component[1] of the PGC rate in its quarterly update filings.
An evidentiary hearing was held on April 17, 2013. The Parties agreed to waive cross-examination of all the witnesses, and NFG, I&E, the OCA and the OSBA moved their written testimony and exhibits into the record. On April 25, 2013, NFG, I&E, the OCA and the OSBA filed their Partial Settlement, as well as briefs on the disputed issue. Reply briefs were filed on May 1, 2013.
The Partial Settlement was served on Mr. McEnery on April 25, 2013. On April 26, 2013, the ALJ issued an order directing Mr. McEnery to file his objections to the Partial Settlement, if any, on or before May 6, 2013. No objections were filed, and the record closed on May 7, 2013.
On May 14, 2013, the Commission issued the Recommended Decision of ALJ Long, which recommended, inter alia, that the Partial Settlement be approved, and that NFG’s proposed methodology for calculating the C-factor in quarterly updates be rejected. As noted, Exceptions to the Recommended Decision were filed by NFG on May 24, 2013, and Replies to NFG’s Exceptions were filed by I&E and the OCA on May31, 2013.
II. Discussion
A. Legal Standards
Section 332(a) of the Code, 66 Pa. C.S. §332(a), provides that the party seeking a rule or order from the Commission has the burden of proof in that proceeding. It is axiomatic that “[a] litigant’s burden of proof before administrative tribunals as well as before most civil proceedings is satisfied by establishing a preponderance of evidence which is substantial and legally credible.” Samuel J. Lansberry, Inc. v. Pa. PUC, 578 A.2d 600, 602 (Pa. Cmwlth. 1990), alloc. denied, 529 Pa. 654,602 A.2d 863 (1992). The term “preponderance of the evidence” means that one party has presented evidence that is more convincing, by even the smallest amount, than the evidence presented by the other party. Se-ling Hosiery v. Margulies, 364 Pa. 45.70 A.2d 857 (1950). In this instance, NFG has the burden of proof.
B. Stipulation in Partial Settlement
As noted, supra, NFG, I&E, the OCA, and the OSBA (Settling Parties) filed a Partial Settlement on April 25, 2013. The Partial Settlement resolved all contested issues in this proceeding, except the issue regarding the appropriate method of calculating the C-factor in the Company’s quarterly adjustments to its PGC rates, as discussed, infra. The Partial Settlement consists of a seventeen-page document with attached Appendices A through F. The body of the document provides the terms and conditions for resolving issues raised by the Settling Parties, and requests findings regarding compliance with 66Pa. C.S. § 1318 for the requisite time periods. Appendix A contains a form of tariff supplement setting forth the rates to become effective for service furnished on and after August 1, 2013. Appendix B contains the calculations used to produce the rates contained in the form of tariff supplement found in Appendix A. The Settling Parties agree that such rates are subject to revision for actual over/under-recoveries of purchased gas costs through June 30, 2013, and for updates to the forecast of wellhead natural gas prices. Appendices C through F contain the respective statements in support of the Partial Settlement of the Settling Parties.
1. Relevant Provisions of Partial Settlement
The relevant provisions of the Partial Settlement, and the issues resolved therein, will now be discussed. We note that this discussion involves a summary of the relevant provisions, and may not reflect every detail as specifically set forth in the Partial Settlement. Consequently, this discussion should not be interpreted as amending the provisions of the Partial Settlement.
a. Standards and Findings
Section 1318(a) of the Public Utility Code provides, in pertinent part:
No rates for a natural gas distribution utility shall be deemed just and reasonable unless the commission finds that the utility is pursuing a least cost fuel procurement policy, consistent with the utility’s obligation to provide safe, adequate and reliable service to its customers. In making such a determination, the commission shall be required to make specific findings which shall include, but need not be limited to, findings that:
(1) The utility has fully and vigorously represented the interests of its ratepayers in proceedings before the Federal Energy Regulatory Commission.
(2) The utility has taken all prudent steps necessary to negotiate favorable gas supply contracts and to relieve the utility from terms in existing contracts with its gas suppliers which are or may be adverse to the interests of the utility's ratepayers.
(3) The utility has taken all prudent steps necessary to obtain lower cost gas supplies on both short-term and long-term bases both within and outside the Commonwealth, including the use of gas transportation arrangements with pipelines and other distribution companies.
(4) The utility has not withheld from the market or caused to be withheld from the market any gas supplies which should have been utilized as part of a least cost fuel procurement policy.
66 Pa. C.S. § 1318(a)
In addition, Section 1318(b) of the Public Utility Code provides as follows:
In any instance in which a natural gas distribution company purchases all or part of its gas supplies from an affiliated interest, as that term is defined in section 2101 (relating to definition of affiliated interest), the commission, in addition to the determinations and findings set forth in subsection (a), shall be required to make specific findings with regard to the justness and reasonableness of all such purchases. Such findings shall include, but not be limited to findings:
(1) That the utility has fully and vigorously attempted to obtain less costly gas supplies on both short-term and long-term bases from nonaffiliated interests.
(2) That each contract for the purchase of gas from its affiliated interest is consistent with a least cost fuel procurement policy.
(3) That neither the utility nor its affiliated interest has withheld from the market any gas supplies which should have been utilized as part of a least cost fuel procurement policy.
66 Pa. C.S. § 1318(b)
With respect to NFG’s gas purchases and gas purchasing practices during the twelve-month historic reconciliation period ended November 30, 2012, the Settling Parties request that the Commission find that NFG has met the standards of Section 1318 of the Public Utility Code, 66 Pa. C.S. § 1318, as required by Section 1307(f)(5) of the Public Utility Code, 66 Pa. C.S. § 1307(f)(5), as to all actual purchased gas costs in the historic period. The Settling Parties request that the Commission find that, during the twelve months ended November 30, 2012:
a. NFG met the requirements of Section 1318(a) of the Public Utility Code by pursuing a least-cost fuel procurement policy, consistent with its obligation to provide safe, adequate and reliable service to its customers; and
b. NFG met the requirements of Section 1318(b) of the Public Utility Code relating to purchases from, and services provided by, affiliates.
Partial Settlement at ¶ 43.
With respect to the eight-month interim period beginning on December 1, 2012, and with respect to the twelve-month period beginning August 1, 2013, when rates established under the Partial Settlement will be in effect, the Settling Parties request that the Commission find, based upon information presently available and based upon evidence of record in this proceeding concerning NFG’s projected purchases and purchasing policies, that the rates to be adopted by the Commission result from NFG’s compliance with the provisions of Section 1318 of the Public Utility Code, including Sections 1318(a)(1), 1318(a)(2), 1318(a)(3), 1318(a)(4), 1318(b)(1), 1318(b)(2) and 1318(b)(3), 66 Pa. C.S. §§ 1318(a)(1), 1318(a)(2), 1318(a)(3), 1318(a)(4), 1318(b)(1), 1318(b)(2) and 1318(b)(3). Id. at ¶ 44.
The Settling Parties agree that, based upon evidence of record in this proceeding concerning NFG’s projected gas purchases and gas purchasing policies, NFG’s projected gas purchases and projected gas purchasing policies may comply with the standards of Section 1318 of the Public Utility Code. Nevertheless, it is expressly understood and agreed by the Settling Parties that the terms in Section IV.B. of the Partial Settlement are made solely for the purpose of setting prospective rates that shall be subject to the standards of Section 1318 of the Public Utility Code, 66 Pa. C.S. § 1318, and further review in an appropriate future proceeding. Section IV.B. of the Partial Settlement is not intended in any way to limit or prevent I&E, the OCA and the OSBA from reviewing, after such projected gas purchases actually have been made and gas purchasing practices actually have been implemented, whether NFG’s gas purchases and gas purchasing practices complied with Section 1318. If, in an appropriate future proceeding, gas purchases and gas purchasing practices from December 1, 2012 through July 31, 2013, and the twelve-month application period commencing August 1, 2013 and ending on July 31, 2014, are challenged, the Commission’s findings based upon SectionIV of the Partial Settlement shall not bar the examination of such purchases and practices, including, but not limited to, disallowance of, or reductions to, such costs during the eight-month interim period commencing December 1, 2012, and ending on July 31, 2013, and the twelve-month application period commencing August 1, 2013, and ending on July 31, 2014. Id. at ¶ 45.
No issues were raised by any of the Settling Parties regarding NFG’s gas purchases or gas purchasing practices, or its compliance with the provisions of Section 1318(a) and 1318(b) of the Public Utility Code as set forth, supra. Upon review of the evidence of record in this proceeding, we find that, with respect to NFG’s gas purchases and gas purchasing practices during the twelve-month historic reconciliation period ended November 30, 2012, NFG has met the requirements of Section 1318(a) of the Public Utility Code by pursuing a least-cost fuel procurement policy, consistent with its obligation to provide safe, adequate and reliable service to its customers, and has met the requirements of Section 1318(b) of the Public Utility Code relating to purchases from, and services provided by, affiliates.