SOURCEGAS DISTRIBUTION LLC DOCKET NO GR-10 (RECORD NO )

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1 SOURCEGAS DISTRIBUTION LLC DOCKET NO. 00--GR- (RECORD NO. ) PRE FILED CROSS ANSWER TESTIMONY OF DON KRATTENMAKER SEMINOLE ENERGY SERVICES LLC I. INTRODUCTION AND PURPOSE Q. Please state your name and business address. A. My name is Don Krattenmaker. My business address is 0 East Seventeenth Avenue, Suite 0, Denver, Colorado 00. Q. Are you the same Don Krattenmaker who has sponsored Pre Filed Direct Testimony in this proceeding? A. Yes. Q. What is the purpose of Seminole s Pre Filed Cross Answer Testimony? A. The purpose of my cross answer testimony is to respond to the rebuttal testimony of SourceGas Distribution LLC ( SGD ) witness, William (Len) L. Mize III, filed on August 1, 0 in this rate case. 1 II. SEMINOLE S SPECIFIC CONCERNS Q. In his rebuttal testimony, Mr. Mize states that Seminole signed a 0 Choice Gas Service Supplier Participation Agreement with SGD that requires compliance with Fuel Lost and Unaccounted for Gas ( FL&U ) tariff provisions. Does Seminole dispute that statement?

2 A. No, of course not. Indeed, in order to serve Wyoming customers as a Choice Gas Service supplier, it is necessary to sign a Choice Gas Service Supplier Participation Agreement (Agreement) with SGD. The FL&U tariff provisions (SGD Wyo. P.S.C. Tariff No. ) referenced in the Agreement state fixed numerical percentages for Non Choice Gas Service customers (Pass On Rate/Regulated Rate customers served by a SGD affiliate, SourceGas Energy Services Company) but provide for three different formulas no stated numerical percentages -- for Choice Gas Service customers. It is this inconsistency in the SGD treatment of FL&U provisions for Choice Gas Service customers and Non Choice Gas Service customers that Seminole brings to the Commission s attention in this rate case. Q. In his rebuttal testimony, Mr. Mize also states, on page 1, that Seminole is responsible for all FL&U gas requirements of the upstream pipeline and SGD s system. Does Seminole dispute that statement? A. No. In 0, as in the past years, Seminole struggled with these undetermined FL&U tariff provisions because, learning of the FL&U percentage only after the Choice Gas Service customer rates are set requires Seminole to factor in a FL&U percentage that is not the actual FL&U percentage. Therefore, it is impossible for Seminole to set a rate that exactly forecasts the FL&U responsibility to be borne by Seminole and, in turn, by the Wyoming Choice Gas Service customers. As I stated in my Pre Filed Direct Testimony at page, FL&U percentages based on updated information and published prior to the start of the Choice Gas Program year will allow Seminole to charge the appropriate fuel and thus lower cost to the end user. A stated fixed numerical FL&U percentage for Wyoming Choice Gas Service customers will ensure price certainty and

3 allow Wyoming customers to select their most appropriate gas supplier during the Choice Gas Service bid week. Q. As currently written, do the SGD tariff provisions state the specific fixed numerical FL&U percentage for Choice Gas Service customers in Casper, Torrington, and Gillette? A. No. No fixed numerical FL&U percentage is stated for Choice Gas Service customers in Casper, Torrington, and Gillette; instead, there are different formulas stated for each division. (See: Don Krattenmaker, Pre Filed Direct Testimony at pages - ; Appendices 1 - ) Without providing for a specific fixed numerical FL&U percentage for Choice Gas Service customers prior to setting gas prices, it is impossible to achieve rate certainty. Q. While the FL&U percentage for Choice Gas Service customers is unstated, is the fixed numerical FL&U percentage stated for Non Choice Gas Service customers? A. Yes. Specific fixed numerical FL&U percentages are stated for Non Choice Gas Service customers. (See: Don Krattenmaker, Pre Filed Direct Testimony at pages - ; Appendices -) Q. What does this difference in the FL&U tariff provisions for Choice Gas Service customers and Non Choice Gas Service customers lead you to believe? A. First, that the SGD system is not so unique or complex that fixed numerical FL&U percentage can not be set. Second, that SGD is able to set a fixed numerical FL&U percentage for Choice Gas Service customers, because it currently sets fixed numerical FL&U percentages for Non Choice Gas Service customers. Third, that the current SGD FL&U tariff provisions are inadequate, both because there are no fixed

4 numerical FL&U percentages for Choice Gas Service customers and because the FL&U percentages are not updated on an annual basis. Q. Mr. Mize states in his rebuttal testimony, on page 1, that the FL&U rates, terms, and conditions in the SGD tariff have not been updated since the last rate case. (Docket No. 00--GR-0, implemented in 00). A. I suggest that it is definitely time to update SGD s FL&U tariff provisions. It is a common industry-wide practice to set fixed numerical FL&U percentages and to update FL&U percentages on an established schedule. For example, as I mentioned on page of my Pre Filed Direct Testimony, PSCO s tariff provides for its fixed numerical FL&U percentage to be updated annually. (See: Don Krattenmaker, Pre Filed Direct Testimony at page ; Appendix 1) Q. Why is Seminole raising this issue of inconsistent treatment of FL&U costs between Choice Gas Service customers and Non Choice Gas Service customers in this Wyoming rate case? A. Treatment of FL&U costs are a system-wide SGD issue that has resulted in numerous discussions encompassing SGD procedures to determine pre and post month allocations, imbalances, and fuel lost. While it is a system-wide SGD issue, it is most definitely a Wyoming Choice Gas Service customer issue! It is imperative that the inconsistent treatment of FL&U percentage between Choice Gas Service customers and Non Choice Gas Service customers be addressed and resolved. Q. Mr. Mize states in his Rebuttal Testimony, on page 1, that a stated FL&U percentage for Choice Gas Service customers that is updated annually will shift this contractual risk away from [Seminole] and towards customers electing to receive service

5 under the Pass-On [Regulated Rate] Option and any competing suppliers that factor FL&U into their pricing options differently from Seminole Energy. Do you agree with that analysis? A. No. Setting a fixed numerical FL&U percentage for Wyoming Choice Gas Service customers that Seminole serves will not alter Seminole s obligation to pay FL&U costs; however, it will end the financial exposure of unexpected FL&U over run costs that are billed by SGD when actual usage numbers are provided by SGD to Seminole. Current Non Choice Service Gas customers Pass-On [Regulated Rate] already have price certainty because the FL&U fixed numerical percentages are set by the current SGD tariff. It is only fair and equitable to allow Choice Gas Service customers the same price certainty with regard to this rate component that Non Choice Gas Service customers already enjoy. Equal treatment of both types of customers (Choice and Non Choice) does not shift the risk to Non Choice Gas customers but rather balances the costs over the entire customer base. SGD tariff provisions that include a fixed numerical FL&U percentage that is updated annually will allow all Wyoming Choice Gas Service suppliers to set their pricing options accurately. Accurately set pricing options will result in both price certainty for the suppliers and cost predictability for the customers. Rather than placing additional risk on competing suppliers, a stated and periodically updated fixed numerical FL&U percentage will enable each supplier to set prices to capture costs more exactly, to avoid the risk of over run FL&U costs when the supplier receives SGD actual usage numbers, and to afford the suppliers Wyoming customers price certainty.

6 In order to achieve price certainty and cost predictability for the Wyoming customer, fixed numerical FL&U percentage must be set by SGD by April 1 st of each year, which is prior to the Choice Gas Service Program bid week. Q. Does Seminole have a suggestion on how to proceed with this issue? A. Yes. In discussions with SGD resulting from Seminole s raising this FL&U issue in its Late Motion to Intervene in this rate case and in my Pre Filed Direct Testimony, Seminole declared repeatedly that revising SGD FL&U tariff provisions will affect all suppliers who have signed a Choice Gas Service Supplier Participation Agreement, not just Seminole, and will require Commission approval. Therefore, Seminole urges the Commission to require SGD to provide a Notice of Intent to all suppliers, Staff and the Office of Consumer Affairs (OCA) that review and revision of the FL&U tariff provisions is being considered, that comments are requested, and that a forum for discussion among all the suppliers will be held. Further, the Commission should require that findings, recommendations and proposed tariff language to the FL&U provisions in SGD Wyo. P.S.C. Tariff No. shall be presented to the Commission in a timely fashion, no later than March 1, 0, with a requested effective date of April 1, 0. 1 III. SUMMARY AND CONCLUSION 0 1 Q. Please summarize your Pre Filed Cross Answer Testimony. A. Seminole suggests that SGD revise its tariff language to state the fixed numerical FL&U percentage for all Wyoming customers, that is, for Choice Gas Service customers as it currently does for Non Choice Gas Service customers, and that the fixed numerical

7 FL&U percentage be updated annually. A stated and updated fixed numerical FL&U percentage will provide price certainty for all Wyoming customers. Q. Does this conclude your Pre Filed Cross Answer Testimony? A. Yes, it does.