,s\-\ COl..lj BRITtSH COLUMBIA .(-- ~ (Q] a ', _. ' ,~ UTlUTlES COMMISSION q;.; . , .•• ~'" t.1J v ~ ~ v ~)~~~5 ct'.o q ORDER ,. /j~ \~ S COl'A~ NUMBER. G-26-89 P-ROVIN'CE OF-BRITISH COLUMBiA BRITISH COLUMBIA UTILITIES COMMISSION IN THE MATTER OF the Utilities Commission Act, S.B.C. 1980, c. 60, as amended and IN THE MATTER OF an Application by Northland Utilities (B.C.) Limited BEFORE: J.D. V. Newlands, ) Deputy Chairman and ) Chairman of the Division; ) \V .M. Swanson, Q.C., ) May 10,1989 Com missioner; and ) W.A. Best, ) Commissioner ) o R D E R WHEREAS a public hearing pertaining to Northland Utilities (B.C.) Limited's ("Northland") Application dated December 20, 1988 for a general rate increase proceeded before the Commission at Dawson Creek, B.C. on April 11, 1989; and WHEREAS pursuant to Order No. G-1-89 Northland was granted an interim, refundable rate increase of 6.51 % effective January 20, 1989 for the 1989 test year and an additional 1.7% over existing rates effective January 1, 1990 for the 1990 test year; and WHEREAS the Commission has considered the Application and evidence adduced thereon, all as set forth in the Reasons for Decision issued concurrently and attached as Appendix A to this Order. NOW n-IEREFORE the Commission hereby orders Northland Utilities (B.C.) Limited as follows: 1. The Commission confirms as firm, the interim rates in effect on January 20, 1989. 2. The Commission will accept, subject to timely filing, amended Gas Tariff Rate Schedules which conform to the terms of the Commission's May 10, 1989 Reasons for Decision. . •• /2 FOURTH FLOOR, BOO SMITHE STREET VANCOUVER. B.C. V6Z 2E1 CANADA TELEPHONE: (604) 660-4700. TELEX: 04·54536. RAPICOM: 120 (604) 66().1102 W·l105
BRITISH COLUMBIA UTILITIES COMMISSION .,.. ORDER ""'" .. 2 NUMBER G-26-89 3. Northland shall comply with all of the directions of the Commission contained in the attached Reasons for Decision issued concurrently. DATED at the City of Vancouver, in the Province of British t Columbia, this /t:/ /.f d ay of May, 1989. Attachment 38I/48/ac 4
j)~~ ~~r APPENDIX A REASONS FOR DECISION ~. 6-JC -W? (n Marketing Northland Utilities (B.C.) Limited ("Northland") states at p. 8 of its Application: "Residential and commercial sales are forecast to remain relatively unchanged. As shown on the schedule below, sales per customer have decreased since 1983 by 9.5% for residential customers and 13.8 % for commercial customers." At p. 9 of the Application, Northland states: "Northland forecasts that the decline in sales per customer for residential and commercial customers ha ve begun to level off." At Transcript pp. 21-35, Northland responds to questions concerning declining sales, sales forecasts and marketing effort. The Company stated that declining sales have been a direct result of fuel price shocks of the mid-1970's and the energy conservation response of consumers. At Tab 2, p. 3 of Exhibit 4 the Company says: "The Company has maintained its market share with respect to residential and commercial space and water heating appliance markets, with penetration levels of 99% and 95% respectively. Market penetration of natural gas ranges and clothes dryers has been maintained at recent historic levels of approximately 15%." The Company stated that there is no significant competition for natural gas for space and water heating load due to relatively low natural gas prices in the service area. It also stated that the low penetration of natural gas ranges and clothes dryers is histor'kal and related to the relatively high natural gas appliance and installation costs. The Commission would encourage the Applicant to seek solutions to installation costs and to promote the benefits of natural gas for cooking and clothes dryers.
2 At Transcript pp. 33-35, the Company responds to questions about the market for natural gas for vehicles ("NGV") and acknowledges that an apparently successful NGV outlet exists in Fort St. John where the market and alternative transportation fuel prices are similar to those in Dawson Creek. In view of the forecasted limited growth potential for traditional natural gas load in Dawson Creek, the Commission encourages Northland to carefully assess the viability of marketing NGV in its service area through an aggressive and competent NGV retailer. (in Dawson Creek System Operating Pressures Evidence was presented by Northland in the 1983 Rate Hearing to support its position that the Company would be unable to meet its system load in peak conditions if the low delivery pressures from Westcoast were to persist into the next heating season. To overcome this situation, the Company proposed to construct a 168 mm loop parallel to the existing 114 mm feeder main at an estimated cost of $200,000. At the Commission's suggestion the Company investigated alternatives and in the interim obtained a no-cost commitment from Westcoast that its main line pressure would be sufficient during the winter of 1983/84 for Northland to maintain supply. The Commission, in its Decision of December 16, 1983, requested Northland to forward an analysis of alternatives to the looping project. The Commission notes that subsequent to its December 16, 1983 Decision, Northland successfully negotiated a conditional increase in .its minimum contract supply pressure from 100 psig to 150 psig. The terms of this 4 agreement with Northland's supplier, Peace Ri ver Transmission Company Limited ("Peace River"), are contained in the April 13, 1987 letter agreement between Northland and Inland Natural Gas Co. Ltd. (the parent company of Peace River). This letter agreement can be found at the end of Exhibit 4, Tab 3. The cost to Northland for this increase in pressure will be the monthly cost of service associated with the pipeline improvements to be made
3 by Westcoast to provide higher pressure to Peace River which, in turn, will provide 150 psig to Northland. the Westcoast capital cost for providing this pressure increase is estimated to be approximately $50,000. The Commission notes that Northland has also been successful in having its Pipeline Act operating permit modified to allow operation of the gas distribution sy stem at 150 psig. Prior to finalizing the agreement with Peace River for increase in minimum supply pressure, Northland is requested to advise the Commission by November 1, 1989 what load increase can be accommodated by minimum supply pressure of 150 psig, to estimate when such load will be realized, and to advise whether there is an economic advantage to achieving higher minimum contract supply pressure. (iii) Hearing Costs Due to the participation and cooperation of all parties, the hearing costs have been significantly reduced and the hearing expedited. (Iv) Regulatory Process The Applicant responded to the Commission's invitation to suggest enhancement to the regulatory process. The Commission has considered the evidence inconclusi ve at this time. (v) Decision .. The Commission orders as follows: 1. Northland is to adopt mid-year deferred income tax balance as a deduction in rate base to be consistent with the Decision dated December 16, 1983.
4 2. Northland is to achieve a mid-year common equity component of approximately 40% in fiscal 1990. 3. A fair and reasonable rate of return on common equity for Northland should be in the range of 14.00% to 14.75% for test years 1989 and 1990. 4. Northland is to expense and write-off for income tax purposes total hearing costs of approximately $17,000 in 1989, as opposed to the Application provision of $30,000 for a two-year amortization. The Commission recognizes that the Applicant's proposed period is more appropriate in view of the two test years application, however the Commission adopts the one-year amortization in this particular case to maintain rate stability. 5. The interim increase of 6.51 % effective January 20, 1989 approved by Order No. G-1-89 is hereby confirmed. Northland is to increase its rates by a further 0.92% over its current existing rates effective January 1, 1990 as a result of Adjustments 1. to 4. above, rather than 1.7 % approved as interim rates in Order No. G-1-89. As a result, Northland is given the opportunity to earn a normalized rate of return on common equity of 14.6% in 1989 and 14.5% in 1990 as shown in the attached Schedules I to IV. 6. Northland is to increase its monthly fixed charges from $3.00 to $5.00 to all customers effective January 1, 1990. Revised tariff schedules together with a reconciliation of rates must be submitted to the Commission for approval 30 days prior to the effective date • ..
5 DATED at the City of Vancouver, in the Province of British Columbia, this /0 ~ of May, 1989. {1~~1/C7t~ W.M. SWANSON, Q.c., Commissioner v~c42 \1./ .A. BEST, CommIssIOner ..
NC?!2~ANJ J!ILIT!ES (B.C. I LIMITED C~IL::Y IS::ME AND EARNED RE!~RN iSOCO ::=:=:=====:=::=:::====::============: Per Application Atplicant's FISCAL 1989 (DEC. 20, 1988) AdJustments -... -. -------------------SALES VOLUME ITJI 1, 287 ------------------------------ --UTILITY REV-ESUE Gas sales 54,099 Other 1 Revenue deficiency 267 Total 4,367 Less- Ccst ~f g~s 2,650 Gress margin 1, -; 17 OPERATING EXPENSES Transmission &d istribution 407 Marketing 17 Custemer Accounting 223 Ac:r.inistratioD 254 Taxes - other 124 De~reciaticn ~34 Other expenses 1.159 Utility iceo::.e before taxes 558 Income taxes-current 123 -deferred 30 Total 1 "1 '01 EARNED RETURN 5405 ------------------------------ ---UTILITY RATE BASE -_ _-_ _ 5 -3 -.251 ---... ----... -----------.. -- --RETURN ON RATE BASE % 12.46 ------------------------------ --[lJ Total hearing cost amortized in 1989. Schecule ------_ --... -_ ---------I -Amended Commission Adjus ted 1989 Adjustments Balances 1. 287 1, 287 ---------------------------- ---------------------------$4, 099 $4,099 1 1 267 267 4,367 4, 367 2,650 2,650 1,717 1. 717 407 407 17 17 . 1 < ','" . -1 223 254 [1] 256 124 124 134 134 1.159 1,161 558 556 123 126 30 24 1;' .,;oJ 150 5405 $406 ------------------... -. ------ -----------------------------53.251 $2,983 ---------------------------- =========:===== 12.46 13.61 ---------------------------. ===============
NCR!H~AND eTILI~iES 13.C.I LIMITED ~TIL;:Y :KCOXE AN~ EARNEV RETURN ISOOO; ----================================== Per Apflicaticn Acplicant's FISCAL 1990 WECo ~O, 19881 ACJum:ents ----------------------SALES VOLUME ITJ) 1,291 ---------.-------------------- --UTIL:TY REVENUE Gas sales S4, 131 Other 1 Revenue deficiency 342 Total 4,474 Less- Ccst cf gas 2I 678 Gross margin 1. 796 CFERATING EXPENSES Trans:ission &d istribution w Marketing 18 C~st=mer Accounting 236 Acministrarion . ~ o " c Taxes - other 131 Depreciarior; 138 Other expenses 1. 237 Utility income befere :axes 559 IncomE taxes-current l ; ' j " -deterred 21 Total 154 EARNED RETURN 5405 ------------------------------ ----UTILITY RATE BASE S3,~68 ---------------------------.-- ----RETURN ON RATE BASE % 12.39 ------------------------------ ----llJ Commis~ion agjustlent to revenue deficiency. l2J Reducea hearIng cost. S:hedu:e lA ------------------------Amended Coml!lission ~.djusted 1950 AdjustJi.encs Balances ---~----1, 291 1,291 ---------------------------- ----------------------------S4,131 S4, 131 1 1 342 ; 35 ) [1 j 30i 4,474 4,09 2.6iS 2.678 1.795 1, 76 1 448 44S 18 18 236 236 266 \ 15) [2] .. , '~.1. 131 1. 1 d ' 138 138 . 1 , (.. ' " 1 ,1 1 1 iI'j~~ .1.""4 559 539 133 110 ,d 27 154 137 $405 5402 -------------------------- -----... -----------------------S3,268 52.974 -------------------------. ---------------------.-----. -12.39 13.52 -------------------------... ===============
NORTHLAND UTILITIES (B.C. I LIKITED UTILITY RATE BASE (SOOO) ===========:=~==:==============:==== Per Apelication A~~licant's FISCAL 1989 FORECAST (DEC. ,0, 1988) AOJustments ---------------------------------.-----Gross plant 56,956 Accumulated depreciation· 11,7291 Less: Contributions (2,332) Plus: Amort. Contributions 174 End of year base -----~o~ ----1~uH Beginning cf year base 3,076 --------------- Ave. value of facilities 3,073 Deferred taxes lerking capital allowance 178 Utility Rate Base 53,251 -----------------. -------.-- ---FISCAL 1950 FORECAST --------------. --------------------------------. Gross plant 57,125 Accumulated depreciation 11,914) Less: Contributions 2,351) Plus: A:ort. Contributions 221 End of year base J;U8"I -----r;un Beginning of year base 3,069 Av . value of fa:ilities 3,075 De erred razes _0 king ~apital allowance i C 1 :OJ. U:ility Rate Base 53,268 ============== --[ll" Deferred tax as deduction from Rat~ Base. [2 Reduced hearing cost provisions. Schedule II -----------.----------Amended Commission Adjusted Adjustment Balances S6,95& S6,956 (1, 729) 11, i 29 ) (2,3321 (2,332 ) 174 174 ----.....,.....-J,UO~ 3,076 3,076 ---------------3,073 3,073 (260) r±~ (260) 178 tS)k liO ----$3,251 52,983 --------------------------- -----------------------------57,125 57,125 (1,914 IL9Hl (2,3511 12,3511 221 221 J-;-V-8r 3,069 3,069 3,075 3, i 5 (286 { 86! , ~ \ .I. .. i B\ 85 53,268 52,974 -----------.---------------- -----------------------------.
S:t€':ule III NORT5LAND UTILITIES IB.C.I LIMITED ============= CALCUL~TI~N OF INCOME TAXES ON JTILITY rNCOME ISOOO) ----------------------------------------------------------------------. . -----.----------FOREO.ST 1989 FORECAST 1990 Income before taxes --------s-'f5E ----~n9 Deduct: interest on debt (206) l T .J i220) Add: non-tax deductible expenses (net) Accounting income after tax 350 319 Deduct: timing differences (5 5) [2 ] (6 3) Taxable income after tax 295 ~ .. ,,~o Tax at 42.84% . ~ . 1.:.0 l1C Deferred income tax 24 1 A .1 " TOTAL 5150 5137 ------------------------------ -----------------------------ill Interest eY-Dense based on forecast balances and rates. t21 Timing differences adjustec to reflect hearing cost reductions . ..
NOR7HLAND UTILITIES (B.C.) LIMITED RETURN ON CAPITAL (SOOO) ===================================== Capitalization Conission FISCAL 1989 FORECAST per Application Adjustments -------------.-----------.-------------Long Ten Debt Sl,547 Reserve for injury/damages 56 [11 Def erred taxes 263 (2 63) Couon Equity 1, 219 --------------- 53,085 ------------------------------ Capitalization Commission FISCAL 1990 FORECAST per Application Adjustments -----------------.-------------------------. I1J Leng Ten Debt Sl, 541 S114 Res!rve fa! Injury/damages 56 [1] Deferred taxes 289 (289) [2J CClUon Equity 1, 254 (114) .-----------------_ -._ S --3 -,1 -4 -0 -- -----... ---------- -.--------Deferred taE as deduction from Rate Base. Equity at 40% with difference as Lone Terl Debt. Approved Return on Comlon Equity. -.. S:hec1l1e IV ---------------------. Capitalization %A verage Cost Amount Percentage % Er.bedded Cost Component % S1,547 54.82 13.320 7. 30 56 1. 98 0.00 0.00 0.00 '3 1, 219 43.20 l 1 4. 606 6.31 --------------- -------------- .-.------------52,822 100.00 ----------------13 .61 ------------ -------------.---------------- =::======::===== Capitalization %A verage Cost Amount Percentage % Em.bedded Cost Com.ponent % --------- --------S1,655 58.04 13.300 7.72 56 1. 96 0.00 o 0.00 [ . ' 0.00 j , 1, 140 40.00 14.500 5.80 $2,851 100.00 13.52 ------------------ ------------------------------ ===::====:=====
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