CENTRA!GAS FORT ST. JOHN INC. PHASE!II RATE DESIGN 1.0 INTRODUCTION Centra!Gas Fort St. John Inc. (“Centra!FSJ”, “Company”, “Utility”, “Applicant”) provides natural gas service to over 7,600 customers in the City of Fort St. John, the District of Taylor, the Community of Charlie Lake and an extensive rural service area surrounding Fort St. John which covers approximately 4,000!square kilometers.
In 1995 Centra Gas British Columbia Inc. ("Centra B.C.") was reorganized which removed the Fort!St. John district from Centra!B.C. and established the district as a separate company known as Centra Gas Fort!St. John Inc. This reorganization was approved by Commission Order No.!G-78-95. Both Centra!B.C. and Centra!FSJ remained wholly-owned subsidiaries of Westcoast Energy Inc.
The Company filed a joint revenue requirement and rate design application with the Commission on December!20, 1995. On January!18, 1996, the Commission established a timetable for a review of the application at a public hearing to commence on May!6, 1996 (Commission Order No.!G-2-96).
The revenue requirement component, identified as Phase!I of the application, was resolved through the Commission's negotiated settlement process. Subsequently, on May!1, 1996, Centra!FSJ submitted a revised rate design proposal to reflect the result of a proposed negotiated settlement agreement on the required revenue component (Exhibit 1A). The settlement agreement was submitted to the Commission for review and was approved by the Commission at the conclusion of the initial phase of the May!6, 1996 public hearing held in the City of Fort St. John, B.C. The rate design portion of Centra!FSJ's application was the subject of Phase!II of that hearing.
The evidentiary portion of the Phase!II hearing was completed on May!6, 1996 followed by written argument received on May!14, 1996. After Phase!II concluded further adjustments to the revenue requirement were required to comply with the settlement. The original settlement resulted in a revenue surplus of $1,512,191 and $479,492 for 1996 and 1997 respectively. However, the settlement contained an agreement that the revenue requirement for 1996 and 1997 could be recalculated when actual hearing costs and the actual cost of fixing floating rate debt were known. Subsequent to the hearing, Centra!FSJ filed reports that the actual hearing costs incurred totalled $83,266 and that the floating rate debt was fixed at a cost of 8.45!percent. The actual costs have been reflected in a revised calculation of the revenue requirement for 1996/97 based on the settlement. The result is a revenue surplus of $1,594,819 for 1996
2 and $623,743 for 1997. Over two!years, the difference in the surplus totals $226,879 and is applied as a reduction to margin revenue for this period.
2.0 BACKGROUND TO THE RATE DESIGN APPLICATION In its current rate design application, Centra!FSJ noted that “the existing rate design has never been reviewed on a comprehensive basis”.
In general, prior to 1994, when industrial customers were added, rates were custom-designed based on competitive conditions and alternative energy options. The rates for individual customers, and the amount of revenue the utility was able to collect from transportation customers reflected the competitive alternatives that the customer had at the time the rate was negotiated. Historically, the utility was not in a position to consider the embedded cost of providing service when designing rates for its industrial customers.
In the 1994 Centra!Gas Revenue Requirement Decision, the Commission directed Centra!FSJ to file a report by June!30, 1994 “to include means for achieving rate design initiatives that would not require a full rate design hearing with all of its associated costs for the customers”. Centra!FSJ complied with the Commission direction and filed a report which included a fully allocated cost of service study!(“FACOS”) based on data from the 1993 and 1994 calendar years.
In November!1995, Centra!FSJ sought direction from the Commission concerning the use of the 1994 FACOS study, and the possible need to update it, at additional cost, to support its 1996 rate design application. Commission staff reviewed alternative proposals provided by the Utility but concluded that the incremental benefits from updating the study did not warrant the increased costs (Exhibit!1, pp.!24.5-24.17). Thus, the 1994 FACOS study provided the background against which Centra!FSJ prepared its current rate design proposal.
3.0 THE FACOS STUDY 3.1 Objective Typically, the principal issue to be addressed by a rate design application is the appropriate allocation of utility costs among customer classes. Intraclass rate design issues are normally a secondary consideration. A FACOS study is used to measure the extent to which the revenues contributed by a particular customer class match the historical costs of serving that customer class. This is normally expressed as a ratio for
3 each customer class. Ratios in excess of 1.00 indicate that the class revenues exceed allocated costs while ratios less than 1.00 indicate the opposite.
The Commission recognizes that judgment is involved in undertaking a cost of service study. Considerable judgment is involved not only in classifying costs into capacity, commodity and customer-related components, but also in determining the appropriate method of allocating these charges among different rate classes. In recognition of these inherent difficulties, the band of reasonableness for rate restructuring adopted by the Commission to date, is the commonly accepted band of plus or minus 10!percent around the ideal 1.0!benchmark ratio. In this Decision the Commission applies these threshold limits with the commodity cost of gas excluded from consideration.
3.2 Study Methodology and Conclusions The FACOS study, filed with the Commission in June!1994, used the traditional method of cost determination; functionalization, classification and allocation. The study identified cost components by function, whether gas supply, transmission, distribution or sales related. The classification process determines whether the costs are best identified as being largely commodity-related, result primarily from capacity requirements or are mainly customer-caused. Finally, the costs thus identified are allocated to the various classes of customers.
In making the distributions for the 1994!FACOS, transmission capacity was allocated on the basis of coincident peak demand. Distribution, services and meter capacity costs were allocated on the basis of non-coincident peak demand and customer-related costs were generally allocated according to the number of bills per customer (Exhibit!1, p.!2.8).
An important factor in any FACOS is the minimum system analysis used for classifying capacity-related and customer-related costs of the distribution system. The minimum system for the 1994!FACOS was determined by the Distance/Diameter method which has the advantage of requiring only physical measurement of the length of each type of facility without the need to identify specific historic costs. The method does, however, require arbitrary selection of the minimum sized pipe. The Distance/Diameter method is generally considered by analysts to tend to over-emphasize customer cost components.
4 The results of the study were expressed as the traditional ratio of revenue yield over the cost of serving the particular customer class. The resulting ratios for nine rate classes ranged between 0.234 and 3.459. The study concluded that, in 1994:
• the fixed charges for general service rate customers were substantially below allocated customer costs; • residential and small commercial customer rates were under-recovering allocated costs; • large commercial and industrial customers generally contributed revenue in excess of allocated costs; and • two special contract customers on load-retention rates were significantly under-recovering their share of allocated costs. Centra!FSJ itself noted at the time of its 1994 submission, that the study had limitations. Specifically, the Utility warned that, at the time, electronic metering had been available in Fort St. John for less than a year and that it had, therefore, been forced to use the metered results for a single year (from its largest customers) in lieu of the normally used average peak demand. Moreover, individual peak demands for the different rate classes were, for the most part, not metered but were calculated. In addition, the Company noted that more accurate information, expected to be available in future from its geographical information system database, would ensure better minimum system analysis. Furthermore, one rate class (SIS-10) was not covered by the FACOS since it did not exist at the time the study was prepared.
As part of the current rate application, Centra!FSJ asked Foster Associates (“Foster”), expert consultants on rate design, to review the 1994 FACOS study. As part of its review (Exhibit!2), Foster pointed out certain limitations of the study, while at the same time confirming the essential validity of the work. The most significant of their criticisms concerned the classification and allocation of meters and services. In Foster's opinion, since meters and services are not joint use facilities, the correct allocation factor is the capacity related investment in each class (the remaining investment after subtracting the customer portion) or in the alternative the capacity/customer separation should be eliminated completely so that the entire function becomes classified as customer-related. The objective is to recognize that the cost incidence for meters and services is based on individual customer requirements. However, Foster acknowledged that this change would not affect the conclusions drawn from the study.
Other comments of lesser significance related to penalty revenue as a credit to overall functionalized cost of service, assignment of natural gas vehicle compressor costs, functionalization of payroll items, gas supply overheads and recognition of the coincident peak when allocating distribution main costs. Foster also indicated that the industrial rates should be considered in aggregate rather than as a separate rate group for
5 the purpose of the study. However, combining the results of several rate classes distorts the value of the revenue/cost ratio as guide posts in the development of rate design.
Foster also expressed concern that Centra FSJ’s use of rate classes for individual customers would lead to wide variability in the revenue/cost ratios calculated by the FACOS. In its application, Centra FSJ included a revenue/cost for industrial sales customers as a group and another for transportation service customers.
However, in conclusion, Foster noted that: "The FACOS study prepared for the Fort St. John District of Centra!Gas (B.C.) adheres to generally accepted principles for such studies and contains no serious errors or omissions. As such it is suitable for filing in the current case." 3.3 Limitations of the 1994 FACOS Results for Rate Design The obvious limitation of three-year old data dictates that use of the 1994 results to reset 1996/97 rates be done cautiously. Centra!FSJ appears to have treated the 1994 study results in an appropriate manner, testifying (T:!31) that:
". . . the revenue/cost ratios identified the direction of the rate restructuring to be applied to each class and also provided guidance as to the relative magnitude of the restructuring that would be applied to each class." The Commission recognizes the limitations of the 1994 FACOS and encourages the Applicant to pursue the suggested refinements in future update studies. At the same time, the Commission accepts the 1994 study as a reasonably satisfactory basis for making current adjustments to rate structures.
The primary concern of the Commission is that, in making the current rate design changes based on outdated information, rates not be over-corrected. In addition, the Commission must ensure that the benefits of corrective changes are fairly distributed and that necessary increases do not expose any particular group of customers to unacceptable rate-shock.
4.0 THE RATE DESIGN APPLICATION Centra!FSJ submitted a revised rate design application on May!1, 1996 (Exhibit!1A). It requested implementation of a new rate structure effective January!1, 1996.
6 The Utility believed that the revenue surplus projected for 1996, which resulted from the combined effect of a decline in gas commodity costs and the negotiated settlement of the Company's revenue application, provided an opportunity to simplify and improve it’s rate design without a net adverse effect on customers.
4.1 Rate Design Objectives Centra!FSJ prefaced its rate design application with an outline of the general objectives it wished to achieve. The Company clearly recognized that it was not possible to achieve all objectives in a single re-structuring and indicated it intended to further address them in its next application (Exhibit!1.A, p.!23.1R).
Centra!FSJ's objectives, listed on pages 23.1R and 23.2R of Exhibit!1A, may be summarized as follows: • Rates should recover the approved revenue requirements; • Major adjustments to rates should be made gradually through a number of rate design proceedings; • Changes in rates should avoid subjecting customers to rate shock; • There should be an appropriate balance between energy, demand and customer charges to correctly reflect customer cost-causation; • Rates should provide appropriate cost recovery from each class based on the indications of the Utility’s FACOS; • Rates should not be discriminatory, i.e., they should accurately reflect the level of service provided to each class of customers; • Rates should be designed to provide a smooth transition (crossover) between classes; and • Rates should be simple for customers to understand and simple for the Utility to administer. In addition, Centra!FSJ outlined two important rate design goals specific to its industrial customers. The first related to the level of fixed charges which, in the absence of demand charges, the Company felt should more closely reflect the Utility’s capacity costs. Furthermore, the Utility viewed fixed or basic monthly charges as important to the Utility to assure its revenue stream from industrial customers with sometimes erratic consumption patterns. Centra!FSJ viewed higher basic charges as a step toward the implementation of a demand charge. This is the component of a firm service rate that applies to the peak demand of the customer and is intended to recover the Utility's capacity costs. The Utility plans to introduce this element in the next rate application when a revised billing system will be capable of handling such charges (Exhibit!6, Tab!6, CPMI 1.1.1).
7 A longer-term Centra!FSJ objective was stated to be to achieve convergence of the transportation margin on industrial T-Service with the sales margin (sales rate minus the cost of gas) on sales service customers. In this way the Utility would eventually be revenue neutral in the provision of sales or transportation services.
4.2 Crossover Points An important consideration of rate design is to ensure logical transitions between customer classes. The economic transition between adjacent rate structures is normally referred to as the crossover point. The crossover point occurs at that level of consumption where the customer’s bill is the same for service under either of the adjacent rate classes.
Centra!FSJ expressed the view that, where economic transition points differed from the defined limits of a rate class, customers with consumption levels near the margin might be encouraged to waste gas in order to qualify for an improved rate under an adjacent classification. Tariff boundaries at the economic crossover points force customers to automatically choose the rate class designed for their consumption characteristics. Primarily, for this reason, the Utility sought permission to redefine some of its rate class consumption limits closer to economic crossover levels.
Although Centra!FSJ considered the crossover point to be an important part of rate design it did not consider it to be of over-riding importance!(T:!35).
4.3 Consolidation of Rate Classes Utility customers are normally assigned rate classifications according to load characteristics. These load characteristics may be defined by annual consumption level or by pattern of fuel demand, usually defined as load factor (the ratio of peak demand to average consumption). It is generally desirable in the interest of fairness to place customers having broadly similar load characteristics in the same rate class.
In the interest of simplifying the Company’s rate structure, Centra!FSJ proposed the consolidation of LGS-1 and LGS-2 into a single LGS class. Similarly, the Utility requested permission to consolidate SIS-1 and SIS-2 into a single SIS class. In the future Centra!FSJ plans convergence of industrial sales and transportation rate schedules
8 4.4 The Requested Rate Structure In summary, Centra!FSJ requested approval effective January 1, 1996 for a revised rate structure, comprising both fixed and energy-based components, which would enable it to secure its approved revenue requirements of $15,813,033 in 1996 and 1997. These proposed rates with cost of gas included were projected to generate about $2!million less revenue (or 11.2!percent) than would have been the case using 1995 rates. The May!1 application did not include the subsequently identified $226,879 downward adjustment in revenue requirement.
The requested rate structure, from Exhibit!1A, p.!23/3R, is reproduced below: TABLE NO. 1 PROPOSED CENTRA FSJ RATE LEVELS AND COST OF GAS CHARGE
Basic Monthly Charge Energy Base Charge Cost of Gas _____($/Month)_____ __($/GJ)__ _($/GJ)_ SALES RATE(S): Small General Service Rate 9.50 1.899 1.160 Large General Service Rate 150.00 1.591 1.160 Small Industrial Service Rate One 410.00 1.428 1.115 Small Industrial Service Rate Seven 3,000.00 0.107 1.115 Small Industrial Service Rate Eight 3,000.00 0.135 1.115
TRANSPORTATION RATE(S): Small Industrial Service Rate Five 2,000.00 0.195 Small Industrial Service Rate Nine 8,500.00 0.195 Small Industrial Service Rate Ten 3,200.00 0.064
The following Table!No.!2 shows in summary form the effect of the Centra!FSJ May!1, 1996 rate design application.
9 TABLE NO. 2 CENTRA FSJ 1996/97 RATE DESIGN APPLICATION SHOWING SHIFT IN MARGIN REVENUE Margin After Percentage R/C Revenue Margin Change in Ratio 1994 Requirement Revenue Percentage Total Rate Class FACOS (Phase!1, After RD of Total Revenue Exhibit!B) (Exhibit!1A) Margin (Exhibit 1A) k$ k$ SGS 0.96 8,106.3 8,360.4 81.59% -8.4%
LGS 717.0 599.5 5.85% -21.0% LGS-1 1.47 LGS-2 1.87 SIS-1 595.1 599.5 5.85% -16.2% SIS-1 1.82 SIS-2 2.52
SIS-5 1.94 88.6 65.0 0.63% -13.2% SIS-7 0.23 106.8 106.8 1.04% -35.3% SIS-8 0.34 99.6 99.6 0.97% -32.9% SIS-9 3.46 359.9 241.5 2.36% -20.6% SIS-10 186.5 174.1 1.70% 10.5% Total Margin Revenue over two years 10,259.8 10,246.4 100.00% Total Revenue over two years $15,813.0 15,799.7
Note: Table!No.!2 was developed by the Commission based on the Centra!FSJ application material. 5.0 SALES AND TRANSPORTATION RATE CLASSES In its rate design application, Centra!FSJ proposed a number of structural adjustments to the existing rates including interclass shifts to address imbalances in cost recoveries between classes. At the same time the application proposed adjustments between the basic monthly charge and the energy charge. This Chapter reviews those changes for each class and sets out the Commission’s rate design determination. Chapter!6.0 applies the $226,000 surplus adjustment to develop the required margin revenue class in 1996 and 1997.
10 5.1 General Service 5.1.1 Small General Service (SGS) This class consists of residential, commercial, compressor and processor customers. The utilization and consumption patterns of these customers are quite different. For example, the average annual consumption level for residential customers is estimated at 142.9!GJ for 1996, for commercial customers the annual average is about 710.5!GJ and for compressor and processor customers the range is from 89!GJ to 53,122!GJ. While the load factor characteristics of the residential and commercial customers are similar at approximately 31!percent, the compressor and processor customers have relatively higher load factors. Differences in load characteristics frequently form the basis for separate classifications of customers for rate making purposes.
In its rate design application, Centra!FSJ proposed to increase the basic monthly charge for the Small General Service customer class from $3.73 to $9.50. Centra used the results of the FACOS study to support this proposal. The study results show the rates charged to this class lead to some under-recovery of the revenue requirement and that the fixed customer cost of serving this class is $18.33 per month. Centra!FSJ concluded that by assigning more of the cost responsibility to this class, over-recovery in some of the other classes could be addressed. The current gap between the fixed customer cost and the basic charge provided the basis for the proposed adjustment between the monthly charge and the energy charge.
In determining the amount to increase the basic charge, Centra!FSJ wanted to move the charge as close as possible to the fixed customer cost, while at the same time providing some benefit to this class from the overall decrease in the revenue requirement over the test period (T:!39-40). The proposed charge of $9.50 is in the range of basic charges for equivalent customer classes in Saskatchewan and for Centra Manitoba. However, it is above the basic monthly rate charged by BC!Gas in its Lower Mainland and Columbia Divisions and by Pacific Northern Gas Ltd. ("PNG") West and PNG (N.E.) (Dawson Creek area). For these utilities the equivalent minimum or basic charge is below $7.00!per month. Centra noted that the proposed basic charge would only recover 52!percent of the fixed customer related costs identified in the FACOS study, and that it would be important to continue to address this issue in the future because the largest SGS customers are bearing a portion of the fixed costs of the smaller customers in the class.
In its application Centra FSJ states the proposed SGS rate would result in a decrease of 8.4!percent in the total bill including the cost of gas to the average SGS customer. The decrease for an average residential customer would be 3.5!percent while an average commercial customer would experience a 13.9!percent
11 decrease. However, the impact of the proposed charge on customers in the SGS class would vary with the level of consumption. For example, the impact on customers in the SGS class consuming under 50!GJ a month would be a 16!percent increase (T:!42). A further effect of the rate restructuring proposal is to change the economic crossover point between the SGS and the LGS rate classes from the present 1622!GJ/year to 5500!GJ/year. The Utility, therefore, sought approval to define the boundary between these two classes at the 5500!GJ/year level, noting that such a definition would require reclassifying only seven of its customers.
Commission Determination While the Commission supports moves to more closely align costs and cost recovery by each rate class, it also recognizes that there can be a need to accomplish this objective over a period of time to avoid rate shock. The Commission also has concerns about the price signals that a significantly higher basic charge and lower energy charge would send to customers. The lower unit charge may encourage higher consumption at a cost lower than the incremental delivery cost. The Commission has concluded that to avoid significant bill increases to low consumption customers, while still reflecting the incidence of customer costs, a higher basic monthly charge, but one less than the $9.50 applied for, is appropriate. The Commission directs Centra FSJ to adopt a basic charge for the SGS class of $7.00.
The Commission has determined the margin revenue from this class using the $7.00/month basic charge. The margin revenue contribution for the SGS class was calculated so not to change the contribution of the residential subgroup. That is, the margin revenue amount that would result for the residential sub-group using the rates which Centra!FSJ proposes in its Application, and the new $7.00/month basic charge, were used to estimate an energy charge. This energy charge and the $7.00 basic charge were then applied to all customers who will remain in the SGS class after rate design changes. This results in a margin revenue contribution of $8,613,400 for the class (shown in Table No.!3, Column!2).
This has the effect of lowering the overall rate reduction for SGS customers from 8.4!percent as proposed by Centra!FSJ to an overall reduction of approximately 7.1!percent. The effective 3.5!percent overall rate reduction proposed by Centra!FSJ is retained for residential customers within the class. The Commission anticipates that the net effect will be to bring the imputed revenue/cost ratio for SGS customers slightly above unity.
The SGS class contains customers with different load characteristics which, as noted earlier, normally provides the basis for separate classifications for rate design purposes. The Commission directs
12 Centra!FSJ to address the separation of customers in the SGS class into different classifications in the next FACOS study to reflect residential, commercial and other uses.
5.1.2 Large General Service (LGS) Centra!FSJ proposed that the existing LGS 1 and LGS 2 rate classes be combined as the load profiles of the customers in both groups are similar; the only current differentiation between them is the size of the load. Seven compressor and processor customers will move from SGS to LGS.
Centra!FSJ also proposed a basic monthly charge of $150 to recover 100!percent of the fixed customer costs and a portion of the fixed capacity costs. In the FACOS study the customer cost is shown as $63.66 for!LGS 1 and $220.24 for LGS 2.
The proposed rate restructuring results in a margin decrease of 16.4!percent and an average decrease in rates for the combined LGS class of approximately 21!percent after factoring in the cost of gas. The revenue to cost ratios of 1.472 for!LGS 1 and 1.875 for LGS 2 in the FACOS study show that there is an over-collection of revenue from the!LGS customers. This would support a greater than average decrease in rates to this customer class.
The Commission anticipates that the resulting revenue to cost ratio will still be well above the band of reasonableness of 0.90 to 1.10 adopted by the Commission. As a move towards this objective the Commission is satisfied that the proposed rates are justified.
The Commission approves the consolidation of the LGS!1 and LGS!2 classes into a single LGS!class. The basic monthly charge of $150 and the margin revenue of $599,500 as proposed by Centra FSJ (shown in Table!No.!2) is approved. The Commission also accepts 5500!GJ/year as the minimum consumption level for the new combined LGS class.
5.2 Industrial Sales Service Centra!FSJ's proposed rate design would result in three classes of small industrial sales customers (SIS-1, SIS-7 and SIS-8) following consolidation of two existing rate groups.
13 The SIS-7 and SIS-8 rate groups serve small industrial customers on special load-retention contracts which are fixed for their respective contract terms, and are not therefore subject to rate design margin adjustment.
5.2.1 Small Industrial Service One (SIS-1) The existing SIS-1 and SIS-2 rate classes are generally larger load customers which are less heat-sensitive than the!LGS!class. These two industrial rate schedules are proposed to be combined into the SIS-1 class with a minimum annual consumption of 15,000!GJ. This is an increase from the 11,000!GJ minimum that currently exists (T:!119).
One consideration in developing the appropriate rate design for industrial customers in this category is the relationship between the standard industrial sales rate and the standard transportation rate. These two rate forms should be equal if the cost of gas is excluded resulting in identical revenue/cost ratios. However, the FACOS study indicated revenue to cost ratios of about 2 for both SIS-1 and SIS-2 sales rates. In any case, SIS-1 delivery rates applied to the SIS-10 deliveries would generate much higher revenues that the rates which the SIS-10 customers are now paying. Unfortunately, since SIS!10 did not exist at the time of the FACOS study the precise revenue/cost ratio for this class is unknown. The Company admits that the proposed rates do not fully align sales and transportation classes but represent the maximum movement that can be made at this time (Exhibit!1, p.!23.6).
The consolidated SIS-1 class would have a rate schedule that would apply to seven customers. Although it did not request approval of a tariff restriction in this regard, Centra!FSJ generally considers that industrial customers have a higher load factor than Small General Service customers.
Centra FSJ requires that SIS-1 customers enter into a standard service agreement (T.!65-66). This type of contract generally has a term of five years or greater and includes an asset security clause. The latter ensures that, should the customer leave the system prior to the expiry of the service contract, Centra!FSJ is able to collect from the customer the unrecovered incremental connection cost (T.!66-70).
Although Centra!FSJ does not propose to materially shift margin for the SIS-1 class, the proposal is to increase the basic monthly charge from $36.75 ($146.97 for SIS-2) to $410.00/month to recover a customer cost of $220.24/month (Exhibit!1, Schedule!1.2) and a portion of capacity-related costs for the newly-combined SIS-1 class (T:!70).
14 Commission Determination The Commission agrees with the objective of the proposal to reduce the margin difference between industrial sales and industrial transportation rates. The proposed increase to the basic charge is significant but does appear to reflect customer capacity costs.
The Commission approves the consolidation of SIS-2 with SIS-1 and a basic charge of $410/month for the combined SIS-1 class. However, the Commission views the resultant revenue/cost ratio which is estimated to be above 2.0 as support for a larger margin shift then was proposed in the application. The current rate design is also an opportunity to move the margin components of industrial sales and transportation rates significantly closer together. After consideration of the overall revenue requirement, the Commission directs a reduction in margin of approximately $235,300 from the SIS-1 class. The Commission anticipates that this margin shift will not be enough to bring the revenue/cost ratio within the band of reasonableness, based on the information available at this time. The Commission will review these components again when Centra!FSJ files an updated rate design application in about two years time. The Commission determined margin revenue from this class is $359,800 (shown in Table!No.!3, Column!2).
The Commission recognizes that these rate levels will result in an economic crossover point with the!LGS!class that is considerably less than 15,000!GJ. Conceptually, the Commission favors economic crossover points that are calculated from cost-based rates which reflect the characteristics of the customers in each class. However, it is uncertain if the customers that would be affected by a lower consumption limit for SIS-1 would be prepared to take on the commitments of an industrial customer. This makes it difficult to estimate the impact on revenues that would result from changes to the criteria for SIS-1. The Utility should be better able to evaluate this situation when it files its next rate application in two years time.
The Commission approves 15,000!GJ as the minimum annual consumption criterion for SIS-1. Centra!FSJ is directed in its next rate design application to determine if this threshold excludes customers with consumption characteristics consistent with SIS-1 who would be prepared to use this service were it available to them.
15 5.2.2 Small Industrial Service Seven (SIS-7) and Eight (SIS-8) SIS-7 and SIS-8 are negotiated system by-pass rates which are designed to fully meet the variable cost of service with only a contribution to fixed costs. The outcome is that the revenue/cost ratio is significantly below the band of reasonableness of .9 to 1.10.
Since the rate levels are fixed until the expiration of the contracts in 1998, there is no opportunity to correct this anomaly through rate design. However, the change in the cost of gas results in overall rate decreases of 35.3!percent and 32.9!percent for the SIS-7 and SIS-8 classes respectively.
Centra!FSJ observes that the SIS-7 and SIS-8 rates, excluding the cost of gas, are similar to SIS-10 rates and that, when the contracts expire, these customers could elect to become transportation customers with minimal impact (T:!122).
Commission Determination These are large customers, and the Commission recognizes that in a competitive situation it may be beneficial to all interested parties to negotiate a rate that is less than the full embedded cost of service. Nevertheless, revenue/cost!ratios for these customers of approximately 0.3 in the 1994 FACOS indicate that the current rates recover much less than the full allocated cost of service. The Commission notes that Centra!FSJ is required to request Commission approval of any agreements with competitive rates which extend or replace the service contracts with the customers now served under SIS-7 and SIS-8.
5.3 Transportation Service Centra!FSJ has three classes of transportation service customers (SIS-5, SIS-9 and SIS-10). Rates SIS-5 and SIS-9 each service a single customer and SIS-10 is intended as a general transportation rate schedule.
5.3.1 Small Industrial Service Five (SIS-5) SIS-5 is a contract transportation rate for a particular customer established on the basis of negotiation considering competitive conditions which existed at the time the rate class was established. It is proposed that a basic charge be introduced to this class at a level of $2,000/month, which alone would generate 74!percent of the overall revenue requirement. The predominant effect would then be a reduction in the revenue collection risk from this class.
16 As this class over-contributes revenue and in 1994 had a revenue/cost ratio of approximately 1.94 (Exhibit!1, Schedule!1.0), a margin reduction of 26.7!percent is proposed through rate design, with a resulting overall revenue decrease of 13.2!percent from 1995 to 1996. The witness for Centra!FSJ indicated that the proposed rate change would move the revenue/cost!ratio close to 1.4 (T:!79-80). The higher basic charge is intended to recover more of the fixed capacity costs, thus ensuring the recovery of the revenue requirement. This is consistent with the rate design for the other transportation customers that are served by the Utility (T.!84-85).
Commission Determination While a basic charge seems appropriate, the Commission is concerned about the magnitude of the basic charge that is proposed for SIS-5. The customer costs of this transportation customer are not significantly different from customers served in SIS-1 which have a basic charge of $410/month!(T:!80-83). The Commission does not accept that the Utility has provided sufficient evidence to demonstrate that a much greater portion of its capacity-related revenue should be collected through fixed charges. (An obvious exception to this view is the situation where the main extension feasibility test indicates a specific revenue requirement level is mandatory for a connection to proceed.) A second consideration is whether implementation of the large basic charge that Centra!FSJ proposes meets the test of gradualism.
The Commission approves a basic charge of $410/month. The total margin revenue is $65,000 as proposed by Centra!FSJ (shown in Table!No.!3, Column!2).
5.3.2 Small Industrial Service (SIS-9) Nine SIS-9 is a transportation rate established by negotiation to reflect the result of a 20 year main extension economic feasibility calculation!(T:!88). The rate level considered the incremental revenue necessary to provide service as well as the construction cost for the connection (T:!95). In recognition of the customer's high revenue/cost ratio (3.46) as determined in 1994, Centra!FSJ proposes to reduce the basic charge to $8,500/month to lower the margin collected from this customer by 33!percent.
In Argument, Centra!FSJ submitted that changes indicated by a fully allocated cost of service study should apply equally to SIS-9 as well as to the other rate classes. Centra!FSJ has subsequently connected approximately 60 customers downstream from this SIS-9 customer. In these circumstances it is the position of Centra!FSJ that responsibility for the entire cost of the incremental facilities should no longer rest solely with the original customer (T:!92-97). Westcoast Energy Inc., the only customer served under SIS-9, supported the review and the proposed adjustment of its toll (T.!126-127).
17 Commission Determination The Commission is reluctant to interfere with the rates of a customer that are based on the results of a main extension feasibility test during the term of its service contract, especially if the result would shift revenue responsibility to other customers without a compelling reason. The fact that additional customers have been connected to this part of the system and are contributing revenue does not automatically absolve the original customer from paying rates that are higher than the average embedded cost of service. At the same time, the rates that Centra FSJ proposes for SIS-9 in 1996/97 will generate substantially the same revenue as the original rates under the service contract (T:!93-94). In these circumstances, the Commission accepts the Centra FSJ proposal for rate class SIS-9. This consists of a basic charge of $8,500/month and margin revenue of $241,500 (shown in Table!No.!3, Column!2).
5.3.4. Small Industrial Service (SIS-10) Ten SIS-10 was initially designed as a competitive transportation rate for one specific industrial customer, taking into consideration the incremental costs of attaching the customer (T:!105). The rate has since been approved by the Commission as a general transportation rate schedule and two customers are currently served. As a general transportation rate it should approximate the general industrial sales rate, or SIS-1 rates with the cost of gas excluded. However, this is currently not the case and, over time, Centra FSJ plans to decrease the industrial sales rate (SIS-1) and increase the SIS-10 rate so the margins will converge and eventually be equivalent.
Through rate design, Centra FSJ proposes a 6.6!percent margin reduction, notwithstanding that these rates are much lower than those proposed for SIS-1. The Utility has a concern that there may be a market constraint with respect to the level of the rate (T:!101-103).
Commission Determination The SIS-10 rate schedule did not exist when the 1994 FACOS was prepared and, hence, the study provides little guidance with respect to this rate. The revenue requirements from Phase!I of this proceeding combined with the rate design changes that are recommended by Centra!FSJ results in an average increase of 10.5!percent in the rates for the class (which does not include the cost of gas).
18 However, the evidence in the proceeding raises serious concerns about SIS-10 as the general rate schedule for transportation service. In large part, this results from the large fixed basic charge which generates the major portion of revenue. It is impossible to structure a single fixed monthly amount which reflects the cost of providing service to a group of customers that differ significantly in size. The unit rate for a small customer would be high and, as the witness for Centra!FSJ observed, it is questionable if such a customer would find the SIS-10 rate attractive (T:!113).
At the other end of the spectrum, the SIS-10 rate may be so attractive to a larger customer that it is unfair to other utility customers. For example, the customer now served under SIS-7 would contribute a similar amount of margin revenue under SIS-10 (T:!111). The 1994 FACOS reported a revenue/cost!ratio of 0.234 (Ex. 1, Schedule 1.1) for SIS-7. In the absence of evidence that the customer has a competitive alternative, the Commission does not accept that SIS-10 rates provide adequate revenue recovery from such a customer.
At the same time, the Utility requires a general industrial transportation service rate schedule which can be offered to new and existing customers. As an alternative to SIS-10, the Commission finds merit in the suggestion of the Centra!FSJ witness that such a rate schedule could be created from the SIS-1 sales rates by removing the cost of gas (T:!115).
The Commission approves the basic charge of $3,200/month and margin revenue of $174,100 (shown in Table!No.!3, Column!2). Centra!FSJ is directed not to serve additional customers under SIS-10 without obtaining Commission approval to do so. The Commission further directs Centra FSJ to file by September!3, 1996 a general industrial transportation service rate schedule with rate levels that are based on SIS-1 rates.
6.0 IMPACT OF REVENUE REQUIREMENT ADJUSTMENT ON RATES The Commission approved margin revenue determined in Chapter!5 is based on the Centra!FSJ rate application. This must now be decreased for the revenue adjustment of $226,879, as described previously in Chapter!1 on page!1 and!2. The total Commission approved margin revenue for each class was used to apportion this reduction in required revenue. Classes SIS-7 and SIS-8 were excluded from this allocation. This generated an estimate of the approved adjusted margin revenue for each class that is shown in Table!3, Column!4 and which was used to generate the percentages shown in Table!No.!3, Column!5.
19 The Commission directs that the margin revenue for each class be determined according to the percentage of total margin revenue that applies for the class shown in Table!No.!3, Column!5. The energy component of the rate is to be calculated considering the approved basic charge and the class margin developed by applying margin percentages shown in Table No.!3, Column!5.
Table No. 3 COMMISSION APPROVED MARGIN REVENUE PERCENTAGE AS A RESULT OF RATE DESIGN SHIFTS
Column 1 2 3 4 5 6 Margin Percentage after change in Margin Commission Adjustment Revenue Percentage Rate Class After Approved to Revenue Requirement of Total Revenue Rate Design Requirement Adjustment Margin Total Requirement Changes ($226,879) of Revenue ($226,879) k$ k$ k$ k$ SGS $8,106.3 $8,613.4 $194.4 $8,419.0 83.91% -7%
LGS 717.0 599.5 13.5 586.0 5.84% -22% SIS-1 595.1 359.8 8.1 351.7 3.51% -37% SIS-5 88.6 65.0 1.5 63.5 0.63% -15% SIS-7 106.8 106.8 0.0 106.8 1.06% -35% SIS-8 99.6 99.6 0.0 99.6 0.99% -33% SIS-9 359.9 241.5 5.5 236.0 2.35% -22% SIS-10 186.5 174.1 3.9 170.2 1.70% 8% Total Margin Revenue Over Two Years $10,259.8 $10,259.7 $226.9 $10,032.8 100.00% Total Revenue Over Two Years $15,813.0 $15,813.0 $15,586.1
Note: A. Table!No.!3 was developed by the Commission based on the Centra!FSJ application material.
20 B. The revenue requirement adjustment ($226,879) was apportioned to each rate class (except SIS-7 and SIS-8) based on the margin revenue shown in column!2. 7.0 GAS COST ALLOCATION AND GAS RATES In the Settlement Agreement in Phase I of this proceeding, the weighted average cost of gas during 1996/97 was estimated at $1.341/GJ (Exhibit!6, Tab!4, SR.!4.1.6). After deferral account amortization and other adjustments, this resulted in an average gas cost in rates of $1.152/GJ (Exhibit!10, Attachment!2). The rate design issue in Phase!II is to allocate the average gas cost to the individual sales rate classes.
Centra!FSJ buys baseload gas for Fort St. John under a contract which has no demand charge or reservation fee, and pays a variable price that does not differentiate between classes of customer. Centra!FSJ also buys a relatively small amount of peaking gas during the four winter months, in order to meet the seasonal needs of its customers. Commission Order No.!E-6-96 approved these arrangements for the 1995/96 gas contract year.
The cost incidence for peaking gas is affected by the load factors of the various classes. In its rate design application, Centra!FSJ proposes to allocate the cost of peaking gas between the general service classes and the industrial sales classes. The allocation is based on the difference between the average winter energy sales and the yearly average energy sales for the two groups of customers (Exhibit!1, p.!23.13R). The result is to increase the gas cost for general service customers by $0.008/GJ and to decrease that for industrial customers by $0.037/GJ.
The current supply arrangements expire at the end of October, 1996. If the subsequent supply arrangements are significantly different, Centra!FSJ anticipates it will come forward at that time with an application that reflects a different methodology (T:!120-1).
Commission Determination The peaking gas cost adjustments which Centra!FSJ has calculated are directionally correct, and appear reasonable in magnitude considering the Utility's current supply portfolio. The Commission approves cost of gas rates of $1.160/GJ for the SGS and LGS classes and of $1.115/GJ for the industrial sales classes.
21 8.0 EXPECTATIONS FOR THE NEXT APPLICATION The rate design modification as described in Chapters!4 and 5 are measures that can be implemented at this time considering the information available and the need for gradual changes. However, changes are still required to achieve many of the rate design objectives described in section!4.1 and the Commission looks forward to further progress in two years time when the Applicant has indicated new rate design proposals will be submitted.
8.1 New Fully Allocated Cost of Service Study (FACOS) The outdated 1994 FACOS study was a limitation to the current rate design changes. A new FACOS study should be provided at the time of Centra FSJ’s next rate design application. This will provide a much clearer picture of the status of revenue/cost ratios and will assist further rate design modifications.
Centra!FSJ is directed to file its next rate design application by January, 1998. It is to be based on a new system FACOS study that incorporates the recommendations of Foster Associates (Exhibit!2) and separation of residential and commercial classes as described in section!5.1.1.
8.2 Industrial Fixed Charge or Demand Charge One important goal of Centra!FSJ in this rate re-structuring was to recover more of its fixed costs through the fixed monthly charge rather than collect customer expenses in the energy component of the rate form for the industrial customers. If the fixed charge and energy components individually do not reflect respective costs then the correct price signals are not provided. Currently, the Centra!FSJ billing system cannot accommodate demand billing so the present two-component method of fixed charge coupled to an energy charge has been implemented (T:!55). The concept of fixed charges will be reviewed in the future when Centra!FSJ has the capability for demand billing and when demand meters are available. At this time Centra!FSJ proposes to implement demand billing for its transportation customers such as those of SIS-10 (T:!115).
The Commission finds that a fixed charge that recovers part of the demand cost does not provide an accurate price signal. It therefore urges the Applicant to adopt a demand energy rate form as soon as the appropriate facilities can be put in service.
22 8.3 Interruptible Service Centra!FSJ and its IRP Stakeholder Group selected interruptible service as one of the demand resources with which to meet system demand. In its Application, Centra!FSJ indicated that it intended to develop a general interruptible rate by the second quarter of 1996. In the hearing, the witness for Centra!FSJ stated that a specific customer who had dual fuel capability had removed that capability and was no longer available as an interruptible customer. The Utility is not yet in a position to file an interruptible rate (T:!117, 124).
Considering the potential benefits to the Utility and its customers from an interruptible rate which would encourage greater use of the system at off-peak times, the Commission directs Centra!FSJ to proceed with the development of a general interruptible rate in an expeditious fashion. The existence of such a rate may encourage the installation of dual fuel capabilities by Centra FSJ customers.
DATED at the City of Vancouver, in the Province of British Columbia, this !!!!!!!! day of July, 1996.
Lorna R. Barr Chair of the Division Frank C. Leighton, P.Eng. Commissioner
23 G-75-96 IN THE MATTER OF the Utilities Commission Act, S.B.C. 1980, c. 60, as amended and An Application by Centra Gas Fort St. John Inc. for Approval of 1996 and 1997 and Rate Design Application BEFORE: L.R. Barr, Deputy Chairperson; and ) F.C. Leighton, Commissioner ) July 12, 1996 O R D E R WHEREAS: A. The Commission's Decision of March 11, 1994 pages!14 and 15 directed Centra Gas Fort St. John Inc. ("Centra!FSJ") to file a report with the Commission addressing the appropriateness of seasonal rates and achieving rate design initiatives; and
B. On December!20, 1995 Centra!FSJ applied to the Commission by letter, and on January!8, 1996 the utility filed its detailed application, to amend rates on an interim and permanent basis to customers, effective January!1, 1996 for the test period 1996 to 1997 ("the Application"), pursuant to Sections!64 and!104 of the Utilities Commission Act ("the Act"); and
C. On February!14, 1996 Centra!FSJ filed rate design evidence which incorporated the net revenue deficiency and proposed rate changes; and
D. On April!15, 1996 a tentative negotiated settlement on the revenue requirements was reached among the participants and circulated to all registered intervenors for comment. On April 29, 1996 Centra!FSJ submitted the negotiated settlement for Commission consideration; and
E. On May!1, 1996 Centra FSJ submitted a revised rate design application which incorporated the revenue requirements in the negotiated settlement; and
F. The Commission considered the impacts of the negotiated revenue requirement settlement and approved the settlement by Order No.!G-60-96 in Phase!I of a public hearing held on May!6, 1996 in Fort!St. John; and
24 G. In Phase!II of the same public hearing the Commission reviewed the impacts of the Centra!FSJ Rate Design Application dated May!1, 1996.
NOW THEREFORE the Commission orders Centra FSJ comply with the directions in the Phase!II Rate Design Decision issued concurrently with this Order.
DATED at the City of Vancouver, in the Province of British Columbia, this !!!!!!!!!!!!!!!!!!!!!!!!day of July, 1996.
Lorna R. Barr Deputy Chairperson
BY ORDER
25 APPEARANCES G.A. FULTON Commission Counsel Boughton Peterson Yang Anderson
M. REGHELINI Centra Gas British Columbia Inc. J. MADSEN Westcoast Energy Inc.
WITNESS PANELS Centra FSJ Panel M. REGHELINI Manager, Regulatory Affairs and Rates Westcoast Energy Panel J. MADSEN Technical Services Superintendent
26 LIST OF EXHIBITS Exhibit __No._ Centra Gas Fort St. John Inc. 1996/97 Revenue Requirements Application 1 Letter from Centra Gas British Columbia Inc. dated May 1, 1996 to the British Columbia Utilities Commission with Centra Gas Fort St. John Inc.' Revised Rate Design Proposals 1A
Review of 1994 Fully Allocated Cost of Service Study for Fort St. John District 2
Letter from Centra Gas British Columbia Inc. dated February 27, 1996 enclosing letters from Foster Associates Inc. dated February 22, 1996 3
Kathleen McShane's opinion of the appropriateness of proposed Rate Design 4 Statistical material in support of Kathleen McShane's opinion 5 Responses to the British Columbia Utilities Commission Staff and Intervenor Information Requests 6
British Columbia Utilities Commission Order No. G-2-96 7 British Columbia Utilities Commission Order No. G-25-96 8 Affidavit of Notice of Publication and letter to the British Columbia Utilities Commission dated May 6, 1996 9
Letter from Centra Gas British Columbia Inc. dated April 29, 1996 with Centra Gas Fort St. John Inc. 1996/97 Rate Application - Negotiated Settlement 10 Letters from Intervenors approving the Negotiated Settlement 10A Letter from Centra Gas Fort St. John Inc. dated May 3, 1996, which provides Continuity Schedules for Deferred Accounts in support of the Negotiated Settlement. 10B Rate Design Scenarios 1 and 2 for Centra Gas Fort St. John Inc. 11 Document titled "Centra Fort St. John 1996-97 Rate Design, excludes Cost of Gas, Information from Application, as revised May 1, 1996" 12 Letter from Centra Gas British Columbia Inc. dated October 16, 1991 regarding Westcoast Energy Inc. - Stoddart Compressor Station amendment to Gas Tariff No. 2 13 British Columbia Utilities Commission Order No. G-117-91 14
27 EXECUTIVE SUMMARY The establishment of the revenue requirement for 1996 and 1997 through a negotiated settlement process was the first phase of a two part public hearing held in Fort!St. John on May!6, 1996 (See British Columbia Utilities Commission Order No.!G-60-96). The second phase of the hearing considered the revised Centra Gas Fort St. John Inc. ("Centra!FSJ") rate design application dated May!1, 1996. This submission incorporated the results of the negotiated settlement process, but did not include subsequent adjustments for hearing costs and cost of debt to be made to the revenue requirement at a later date. Once this determination was made the revenue requirement decreased by $226,879 to $15,586,154. The corresponding margin revenue is $10,033,747.
Centra FSJ Rate Design Application The Centra!FSJ rate design application was based on a 1994 fully allocated cost of service ("FACOS") study. The Company and the Commission recognized the limitations that a study of this age imposed on rate design but accepted this arrangement knowing that this is the first stage in a gradual rate design process. The results of the FACOS study or revenue/cost ratios are considered to be suitable guide posts for the rate design.
Superimposed on rate design at this time was a decrease in the cost of gas and an increase in the cost of service. The magnitude of the gas cost decrease mitigates to some extent the margin shifts and lessens the impact on end-use rates for sales rate classes. This was a compelling argument to begin the rate design process at this time.
In the Centra!FSJ application the rate form that was proposed for all classes consisted of a basic or fixed charge and an energy charge. In the residential and commercial classes, the basic charge reflected customer costs while in the industrial classes capacity costs and revenue risk reduction were the predominant factors affecting the level of the charge. As a result of rate design the margin revenue increased for the SGS!class, decreased for the SIS-1 and remained constant for all others. The ultimate impact on customers rates of course reflected the change in gas costs as well as cost of service.
Commission Rate Design Determination The Commission made a determination on the margin revenue contribution from each class. The revenue requirements adjustment of $226,879 was then apportioned to the classes in order to determine the amount of margin to be recovered. Finally, the Company was directed by the Commission to develop an energy charge that took into account the percentage of total margin (including the revenue adjustment of -$226,879) that applied to the specific class and the approved basic charge.
28 A summary of the Centra!FSJ Application and Commission direction is as follows: SGS In the SGS!class, the residential subgroup was provided with an overall decrease in rates of 3.5!percent. Centra!FSJ proposed a basic charge for this class of $9.50/month and an overall rate decrease for the class of 7.9!percent.
The Commission approved a basic charge of $7.00/month and maintained the overall rate reduction as proposed by Centra!FSJ for the residential sub-group in this class. As a result, the overall bill impact decreased by 7.5!percent for the class. Centra!FSJ was directed to consider the separation of customers in this class into residential, commercial and other uses. The percentage of total margin revenue is set at 83.9!percent which is an increase over the Centra!FSJ proposal.
LGS The application proposed that a number of customers move into the LGS!class based on an economic cross-over point of 5500!GJ/year. The two sub-groups of the LGS!class were combined and an overall rate decrease of 21!percent was proposed.
The Commission retained the economic cross-over points of 5500!GJ/year as the minimum annual consumption level for the LGS!class. The consolidation of LGS-1 and LGS-2 was approved along with a basic monthly charge of $150/month as proposed. The percentage of total margin revenue remained at 5.8!percent.
SIS-1 Centra!FSJ proposed that the SIS-1 and SIS-2 classes be consolidated into the SIS-1 classification, with rates that generated 5.9!percent of total margin revenue.
The Commission approved a basic charge of $410/month and a minimum annual consumption criteria of 15,000!GJ. The percentage of margin revenue is directed to decrease to 3.5!percent resulting in a lower revenue to cost ratio than proposed by Centra!FSJ.
29 SIS-5 This is transportation service schedule which is based on competitive conditions that existed at the time it was established. Centra!FSJ proposed a basic charge of $2,000/month.
The Commission approved the basic charge for the class, but lowered the amount from $2,000 to $410/month. The margin revenue continues at the level of $65,000 as proposed by Centra!FSJ. The margin percentage of the total is .6!percent is consistent with the application.
SIS-7 and SIS-8 SIS-7 and SIS-8 classes had rate levels fixed by contract and therefore received no margin adjustment. However, the decrease in gas costs resulted in an overall adjustment in rates of -35.3!percent and -32.9!percent respectively which is consistent with the application.
SIS-9 The Commission accepted the Centra!FSJ proposal of a basic charge of $8,500/month. The margin revenue percentage as proposed by Centra!FSJ is maintained.
SIS-10 The basic charge as proposed by the Applicant is approved for $3,200/month and the margin revenue percentage of total is not to change. Centra!FSJ is not to serve additional customers under this schedule without Commission approval. A general transportation service schedule that would have rate levels based on SIS-1 is to be filed by September!3, 1996.
Gas Cost Allocation and Gas Rates The Commission approves the peaking gas cost adjustments which generate rates of $1.16/GJ for the SGS and LGS classes and $1.115/GJ for the industrial sales classes.
Next Rate Design Application The next rate design application, with the separation of SGS into residential and commercial classes is to be filed by January, 1998. The supporting FACOS study is to incorporate the recommendations of Foster Associates.
30 Industrial Fixed Charge or Demand Charge A rate form which identifies a demand charge is to be adopted as soon as appropriate facilities are in place to measure and bill for this component
Interruptible Service A general interruptible rate is to be developed in an expeditious manner. Summary of Rate Design Impact on Total Customer Bills From 1995 Rates to 1996/97 Rates
Application Commission Decision Basic or Basic or Fixed Percentage Fixed Percentage Charge of Margin Bill Charge of Margin Bill Class ($/Month) Revenue Impact ($/Month) Revenue Impact
SGS $ 9.50 81.6% -8.4% $ 7.00 83.9% -7% LGS 150.00 5.9% -21.0% 150.00 5.8% -22% SIS-1 410.00 5.9% -16.2% 410.00 3.5% -37% SIS-5 2,000.00 0.6% -13.2% 410.00 0.6% -15% SIS-7 3,000.00 1.0% -35.3% 3,000.00 1.1% -35% SIS-8 3,000.00 1.0% -32.9% 3,000.00 1.0% -33% SIS-9 8,500.00 2.4% -20.6% 8,500.00 2.4% -22% SIS-10 3,200.00 1.7% 10.5% 3,200.00 1.7% 8%
31 TABLE OF CONTENTS Page No. EXECUTIVE SUMMARY
1.0 INTRODUCTION 1 2.0 BACKGROUND TO THE RATE DESIGN APPLICATION 2 3.0 THE FACOS STUDY 2 3.1 Objective 2 3.2 Study Methodology and Conclusions 3 3.3 Limitations of the 1994 FACOS Results for Rate Design 5
4.0 THE RATE DESIGN APPLICATION 5 4.1 Rate Design Objectives 6 4.2 Crossover Points 7 4.3 Consolidation of Rate Classes 7 4.4 The Requested Rate Structure 8
5.0 SALES AND TRANSPORTATION RATE CLASSES 9 5.1 General Service 10 5.1.1 Small General Service (SGS) 10 5.1.2 Large General Service (LGS) 12 5.2 Industrial Sales Service 12 5.2.1 Small Industrial Service One (SIS-1) 13 5.2.2 Small Industrial Service Seven (SIS-7) and Eight (SIS-8) 15 5.3 Transportation Service 15 5.3.1 Small Industrial Service Five (SIS-5) 15 5.3.2 Small Industrial Service (SIS-9) Nine 16 5.3.4. Small Industrial Service (SIS-10) Ten 17
6.0 IMPACT OF REVENUE REQUIREMENT ADJUSTMENT ON RATES 18 7.0 GAS COST ALLOCATION AND GAS RATES 20 8.0 EXPECTATIONS FOR THE NEXT APPLICATION 20 8.1 New Fully Allocated Cost of Service Study (FACOS) 21 8.2 Industrial Fixed Charge or Demand Charge 21 8.3 Interruptible Service 21
COMMISSION ORDER NO. G-75-96 APPENDIX A - Appearances
APPENDIX B - Exhibits