IN THE MATTER OF
the Utilities Commission Act, R.S.B.C. 1996, Chapter 473
and
An Application by Pacific Northern Gas (N.E.) Ltd.
(Fort St. John/Dawson Creek and Tumbler Ridge Divisions)
for Approval of its 2010 Revenue Requirements
for the PNG (N.E.) Service Area
BEFORE: D.A. Cote, Panel Chair/Commissioner June 23, 2010
R. K. Ravelli, Commissioner
O R D E R
WHEREAS:
A. On October 5, 2009 Pacific Northern Gas (N.E.) Ltd. [PNG (N.E.)] Fort St. John/Dawson Creek and Tumbler Ridge Divisions applied to the British Columbia Utilities Commission (Commission) for approval of its 2010 Revenue Requirements Application (the Application) to amend its rates on an interim basis, effective January 1, 2010, pursuant to sections 89 and 58 of the Utilities Commission Act (the Act); and
B. On July 16, 2009 PNG (N.E.) and its parent Pacific Northern Gas Ltd. filed with the Commission a Capital Structure and Equity Risk Premium Application (the CAP/ROE Application); and
C. The Application includes the impact of changes to PNG (N.E.)’s capital structure and rate of return as set forth in the CAP/ROE Application and recommends that rates set by this Application remain interim pending the Commission’s disposition of the CAP/ROE Application; and
D. For the PNG (N.E.) Fort St. John/Dawson Creek (FSJ/DC) Division, the Application forecasts a revenue deficiency of $896,000 comprised of a net increase in cost of service of $882,000 and a decreased margin of approximately $14,000; and
E. Based on a common equity thickness and rate of return on common equity as applied for in the CAP/ROE Application, PNG (N.E.)’s FSJ Division sought Commission approval to increase the delivery charge for residential service by $0.281/GJ from $2.471/GJ to $2.752/GJ representing an increase of 11.4 percent compared to the 2009 delivery rates, and for small commercial service by $0.191/GJ from $2.180/GJ to $2.371/GJ corresponding to an increase of 8.8 percent compared to 2009 delivery rates. PNG (N.E.)’s DC Division sought Commission approval to increase the delivery charge for residential service by $0.281/GJ from $2.273/GJ to $2.554/GJ representing an increase of 12.4 percent compared to 2009 delivery rates, and for small commercial service by $0.191/GJ from $1.643/GJ to $1.834/GJ corresponding to an increase of 11.6 percent compared to 2009 delivery rates; and
F. By Order G-131-09, the Commission approved for PNG (N.E.)’s FSJ/DC Division interim delivery rates, effective January 1, 2010 based on Commission approved common equity thickness of 36 percent and a rate of return on common equity set at the existing 40 basis points above the Commission’s low risk benchmark utility ROE; and
G. Based on the common equity thickness and rate of return parameters as set forth in Order G-131-09, the forecasted 2010 revenue deficiency for FSJ/DC is approximately $627,000 comprised of a net increase in cost of service of $612,000 and a decrease in margin of $15,000. Interim rates were set as follows:
▪ The delivery charge for FSJ residential service increased by $0.196/GJ from $2.471/GJ to $2.667/GJ, and for FSJ small commercial service by $0.134/GJ from $2.180/GJ to $2.314/GJ;
▪ The delivery charge for DC residential service increased by $0.196/GJ from $2.273/GJ to $2.469/GJ, and for DC small commercial service by $0.134/GJ from $1.643/GJ to $1.777/GJ; and
H. For PNG (N.E.)’s Tumbler Ridge (TR) Division, the Application forecasts a revenue deficiency of $90,000 comprised of a net increase in cost of service of $106,000 offset somewhat by increased margin of $16,000; and
I. Based on a common equity thickness and rate of return on common equity as applied for in the CAP/ROE Application PNG (N.E.)’s TR Division sought Commission approval to increase the delivery charge for residential service by $0.454/GJ from $4.473/GJ to $4.927/GJ representing an increase of 10.1 percent compared to 2009 delivery rates, and for small commercial service by $0.333/GJ from $4.012/GJ to $4.345/GJ corresponding to an increase of 8.3 percent compared to 2009 delivery rates; and
J. By Order G-131-09, the Commission approved for PNG (N.E.)’s TR Division interim delivery rates effective January 1, 2010 based on Commission approved common equity thickness of 36 percent and a rate of return on common equity set at 65 basis points above the Commission’s low risk benchmark utility ROE; and
K. Based on the common equity thickness and rate of return parameters as set forth in Order G-131-09, the forecasted 2010 revenue deficiency for TR is approximately $76,000 comprised of a net increase in cost of service of $92,000, offset somewhat by an increase in margin of $16,000. Interim rates were set as follows:
▪ Increase the delivery charge for TR residential service by $0.381/GJ from $4.473/GJ to $4.854/GJ, and for small commercial service by $0.279/GJ from $4.012/GJ to $4.291/GJ; and
L. For PNG (N.E.)’s FSJ/DC and TR Divisions, Order G-131-09 also set the preliminary regulatory timetable for the Application and allowed for: Intervener registration, the preliminary review of the Application, and Interveners to make written submissions on a formal review process; and
M. On December 8, 2009, by Letter L-109-09 the Commission confirmed the Application to be reviewed through a Negotiated Settlement Process (NSP) with negotiations to commence on January 18, 2010; and
N. The Commission revised the Regulatory Timetable in Letter L‐111‐09 to have negotiations commence on February 8, 2010 in order to accommodate the availability requirements of the participants; and
O. The NSP discussions were held in Vancouver on February 9 and 10, 2010. The NSP participants agreed that permanent rates were to be calculated following the Commission’s disposition of the CAP/ROE Application and after the completion of the final negotiations of the Application. An Interim Negotiated Settlement Agreement in respect of the Application was reached among the participants and circulated to all Registered Interveners and the Commission on February 22, 2010; and
P. On March 4, 2010, the Commission approved the Interim Negotiated Settlement Agreement in respect of the Application under Order G-34-10; and
Q. On May 20, 2010, the Commission approved the Negotiated Settlement Agreement in respect of the CAP/ROE Application under Order G-84-10; and
R. On May 26, 2010, PNG(N.E.) distributed to the Commission and Registered Interveners the regulatory schedules that reflected the terms set forth in both the Interim Negotiated Settlement Agreement in respect of the Application and the CAP/ROE Application Negotiated Settlement Agreement; and
S. On June 3, 2010, the NSP participants agreed to accept PNG (N.E.)’s regulatory schedules as filed and a final settlement was reached. The Final Negotiated Settlement Agreement was circulated to all Registered Interveners and the Commission on June 11, 2010; and
T. The Commission has reviewed the Final Negotiated Settlement Agreement for PNG (N.E.)’s 2010 Revenue Requirements and considers that approval is warranted.
NOW THEREFORE pursuant to sections 89 and 58 of the Act, the Commission orders as follows:
1. The Final Negotiated Settlement Agreement for PNG (N.E.)’s 2010 Revenue Requirements Application, as issued on June 11, 2010 and attached as Appendix A to this Order, is approved.
2. Interim delivery rates as approved under Order G-131-09 are set as permanent effective January 1, 2010.
3. The Commission will accept, subject to timely filing by PNG (N.E.), Gas Tariff Rate Schedules amended to reflect the permanent rates approved in accordance with the terms of this Order. PNG (N.E.) is to advise its customers via a bill message that the interim rates have been made permanent.
DATED at the City of Vancouver, in the Province of British Columbia, this 23rd day of June 2010.
BY ORDER
Original signed by:
D.A. Cote
Panel Chair/Commissioner
Attachment