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 March 4, 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) seeking a common equity thickness for PNG (N.E.) of 42.5 percent and a rate of return on common equity (ROE) set at 75 basis points above the Commission’s low risk benchmark utility ROE; 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
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$2.371/GJ corresponding to an increase of 8.8 percent compared to 2009 delivery rates. PNG (N.E.)’s
FSJ/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.) 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.) 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 delivery rates; and
J. By Order G-131-09 the Commission approved for PNG (N.E.)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
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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.) 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. An Interim Negotiated Settlement Agreement was reached among the participants and circulated to all registered Interveners and the Commission on February 22, 2010; and
P. Final rates are to be calculated following the Commission’s disposition PNG’s CAP/ROE proceeding and after the completion of PNG-West’s 2010 final Revenue Requirements negotiations; and
Q. The Commission has reviewed the Interim Negotiated Settlement Agreement for PNG (N.E.)’s 2010 Revenue Requirements and considers that approval is warranted.
NOW THEREFORE the Commission orders as follows:
1. The Interim Negotiated Settlement Agreement for PNG (N.E.)’s 2010 Revenue Requirements Application, as issued on February 22, 2010 and attached as Appendix A to this Order, is approved.
2. PNG (N.E.)’s 2010 delivery rates will remain as interim until PNG (N.E.)’s CAP/ROE proceeding is completed and PNG-West’s Revenue Requirements negotiations have resumed to establish permanent 2010 delivery rates for PNG-West and a further PNG (N.E.) Negotiated Settlement Agreement is provided for Commission approval.
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DATED at the City of Vancouver, in the Province of British Columbia, this 4th day of March 2010.
BY ORDER
Original signed by:
D.A. Cote
Commissioner
Attachment