PUBLIC SERVICE COMMISSION OF WEST VIRGINIA

Transcription

1 II ENTERED 0.6. Rs-A p-,-* CHARLESTON CASE NO G-42T Entered: February 26, 1985 STANDARD GAS COMPANY, a corporation, Jane Lew, Lewis County. In the matter of increased rates and charges. ORIGINAIj 1 FINAL I 3-16-BG 1 HEARING EXAMINER'S DECISION PROCEDURE On October 19, 1984, Standard Gas Company, a corporation, Jane Lew, Lewis County, tendered for filing revised tariff sheets reflecting increased rates and charges for approximately $30,685 or 10% annually, for furnishing gas service to approximately 350 customers in Jane Lew and vicinity, Lewis County, to become effective November 18, By order entered October 30, 1984, the Commission ordered that Standard Gas Company, a corporation, be made Respondent to this proceeding and, pending investigation, hearing and decision. By said order, the aforesaid revised tariff was suspended and the use of the rates and charges stated therein deferred until 12:Ol a.m., March 19, 1985, unless otherwise ordered by the Commission. By order entered December 13, 1984, the matters involved herein were set for hearing before Hearing Examiner Mark T. Aliff to be held in the Commission's Hearing Room, 201 Brooks Street, Charleston, West Virginia, on Friday, January 18, 1985, at 9:30 a.m., EST., at which time and place the Respondent was directed to appear and offer evidence in support of its -' aforesaid increased rates and charges and leave was granted to anyone

2 interested to appear and make such objection thereto as may be deemed proper. Said order further required the Respondent to give notice of the filing of the aforesaid tariff and of the time and place of hearing thereon by posting a copy of said order in conspicuous places where bills for gas service are paid for a period of at least twenty (20) days prior to January 18, 1985, for public inspection, and by publishing a copy of said order once a week for two (2) successive weeks, the first publication to be made not more than thirty (30) days nor less than fifteen (15) days prior to January 18, 1985, in a newspaper, duly qualified by the Secretary of State, published and of general circulation in Lewis County, making due return to the Commission on or before the day of hearing. Proper notice was given and the hearing was held as scheduled. The Respondent appeared by its proper officer and was represented by Thomas N. Hanna, Esquire. The Commission's Staff was represented by Dan Frutchey, Legal Division; Thurmond Ellis, Audit Division; David Akers, Engineering Division; and Gregory Curry, Finance and Special Studies Division. There was one letter of protest received by the Commission and no Protestants appeared at the hearing. At the conclusion of the hearing, the case was submitted for a decision pending receipt of a proposed order by the Respondent. Said proposed order was filed on February 26, DISCUSSION OF THE EVIDENCE INCLUDING FINDINGS OF FACT Robert Linder testified that he was the President and sole stockhold- er of Standard Gas Company and that he had owned the Company for approxi- mately two years, having purchased it from Richard Nernburg. The Company has six full time and one part time employee and provides gas service to -2-

3 approximately 320 residential customers and one industrial customer, Mason Glass. The Company obtains most of its gas from its own wells or certain local suppliers. (Tr., pp. 5-8). Mr. Linder further testified that the Company's gas production and distribution system was not in very good condition and that no major improvements have been made to the system in recent years. As part of this case, the Company submitted a construction budget listing capital improvements totalling approximately $56,000, which Mr. Linder testified would be completed as soon as funds were available. (Tr., p. 8 ). In order to finance the proposed capital improvements, Mr. Linder testified that he had arranged a loan of $40,000 from the Citizen's Bank of Weston. The loan would be for a term of 48 months at a variable interest rate equal to Mellon Bank's prime rate plus 2%. The principal and interest payment on this loan would be approximately $1,000 per month and would be paid from the revenues approved by the Commission in this case. In addition to the loan proceeds, Mr. Linder stated that any other surplus funds that the Company had available would be used for capital improvements. (Tr., pp. 8-13). David Akers, Staff Engineer, testified that the utility portion of Standard Gas is located in and around Jane Lew, West Virginia, and gas service is provided by 17 wells scattered along the system, plus a pipeline feed from Hope Gas, Inc. There are approximately 12 miles of distribution main, most of which has been cathodically protected. In addition, Standard operates 14 wells in Upshur County and sells gas to Columbia Gas Transmission Corporation. (Staff Exhibit No. 3). Mr. Akers further testified that most of the Company's piping network is at least fifty years old and that during the past 13 years, only one CHARLESTON -3- U

4 mile of pipe has been replaced. If more pipe is not replaced in the future, he predicted that there would be an increasing number of piping problems. Also, he stated that there were many other components in the Company's system, such as meters, regulators, valves, pressure devices, etc., which were old and would require replacement in the near future. Mr. Akers stated that the Company had advised him of their plans to have both a leak survey and corrosion survey completed in 1985, and that this would indicate where improvements are most urgently needed. (Tr., pp. 22, 23, and Staff Exhibit No. 3). Mr. Akers further testified that the Company operates 31 gas wells which are either owned or under lease; that these wells are the primary reason why the Company can serve its customers with lower price gas than nearby utilities; and that, in his opinion, the wells are not being properly maintained and permanent damage could occur at any time. The Company's records show that its total annual gas production declined from 109,458 Mcf in 1977 to 42,806 Mcf in Mr. Akers testified that a significant portion of this decrease was attributable to poor maintenance. In the very near future, he stated that the Company will be forced to make a decision regarding the purchase of bailing equipment to control fluid levels in the wells or providing for well maintenance through contractual arrangements. (Staff Exhibit No. 3). Regarding the proposed capital improvements plan submitted by the Company in this case, Mr. Akers testified that he had reviewed the plans with the Company's engineer and that he is convinced the plans are well justified and the priorities are correct. Mr. Akers then suggested certain revisions to the Company's first step expenditures. With -4-

5 revisions, the total proposed expenditures were $56,000. (Tr., pp. 22, 23, and Staff Exhibit No. 3). Finally, regarding the effect of the improvements on the customers' bills, Mr. Akers testified that the average increase per Mcf should not exceed thirty cents. With an increase of this size, the Company would still be able to sell gas at rates significantly lower than nearby utilities. If improvements are not made in the very near future, Mr. Akers predicted that the Company would be forced to seek a series of significant rate increases. Finally, Mr. Akers stated that plant improvements would increase efficiency and reverse the trend toward higher prices attributable to inefficient operation. (Tr., pp , Staff Exhibit No. 3). Gregory 0. Curry, Finance arid Special Studies Division, testified that the Staff and the Company had entered into a stipulated settlement of this case. (Appendix A, Stipulated Cost of Service, attached to this order). Initially, the Staff had calculated the Company's revenue defi- ciency to be $12,313. As a result of the stipulation, an adjustment was made to increase officers' salaries by $1,800 and to increase attorney's fees by $1,200. These adjustments brought the total Operation and Maintenance Expenses to $110,554, for a total stipulated revenue deficiency of $15,461, based on a rate of return of 12.9%. Also, Mr. Curry testified that the Staff had prepared a stipulated cash flow analysis (Appendix B, Cash Flow Analysis, attached to this order) which showed that under the stipulated rates the Company would have a surplus of $18,819 after allowances were made for all known expense increases that might occur during the first year the new rates were in effect. (Appendix C, Stipulated Rates, attached to this order). -5-

6 Regarding the Company's plans to borrow $40,000 to finance capital improvements, Mr. Curry testified that, in his opinion, the Company would have sufficient funds to service the debt payments of approximately $12,000 annually. Also, the Company should still have a surplus of approximately $6,000 after the debt payments. Mr. Curry testified that he did not think the Company's existing debt plus the additional $40,000 debt was an excessive amount of debt for its size. Finally, Mr. Curry stated that should the Company have unforeseen financial problems in the future and be unable to make its debt payments, the Company could file for an emergency rate increase under the Commission's Rule 19-A and the Staff would expedite the case as much as possible. (Tr., pp , Staff Exhibit No. 4). DISCUSSION It has long been a policy of the Public Service Commission of West Virginia that joint stipulations and settlements for agreement are appro- priate in general rate cases in order to avoid expensive, protracted and unnecessary litigation. However, when such a joint stipulation and agreement for settlement is presented to a Hearing Examiner of the Commis- sion for approval and review, that Hearing Officer must accept a large measure of responsibility for reviewing the entire record, judging the stipulation in light of the whole record and making a determination as to whether or not the stipulation fairly reflects the utility Company's reasonable cost of service and protects the Company's customers from unjust and unwarranted increased in rates. The Hearing Examiner has thoroughly reviewed the terms of the joint stipulation presented in this case and, in addition, has reviewed the -6- I1

7 direct testimony and exhibits submitted by the Respondent and the Staff, all of which were introduced into the record of this case. Based upon all of the foregoing, the Hearing Examiner is of the opinion that the joint stipulation agreed to by the Respondent and the Staff is in the public interest and, further, is consistent with the regulatory policies of this State. Therefore, the Hearing Examiner will approve and adopt said joint stipulation, and will approve and adopt the rates set forth in Appendix C, attached hereto, as being reasonable rates and charges to be included in the Company's rates, for all bills rendered for service on and after March 19, FINDINGS OF FACT 1. All of the parties to this proceeding have stipulated and agreed to a revenue deficiency and rates to be recovered and charged by Standard Gas Company. 2. The stipulated cost of service results in a revenue deficiency under present rates of $15,461, at a rate of return of 12.9%, as compared with the originally requested revenue increase of approximately $30,685. CONCLUSIONS OF LAW 1. The public interest is served by the adoption of the joint stipulation agreed to by the Respondent and the Staff in this proceeding, in that the level of rates charged to customers and the return on capital to the utility's investors are equitably balanced. 2. Respondent's rates and charges, set forth in its Tariff P.S.C. W.Va. No. 22, are unjust and unreasonable in that they will not produce sufficient revenues to enable the Respondent to pay its reasonable and -7-

8 necessary operating expenses and taxes, provide for depreciation, and earn a fair return on its property used and useful in its public service business. 3. Respondent's proposed rates and charges, set forth in the Company's Tariff P.S.C. W.Va. 23, filed herein, are unjust and unreasonable in that they would produce more revenue than is needed for the aforesaid purposes. 4. The rates and charges hereinafter approved and attached hereto, as Appendix C, are just and reasonable in that they should produce revenues sufficient, but not more than sufficient, for the aforesaid purposes. 5. The increased rates approved herein are predicated upon the Company's proposed capital improvements and intention to finance said improvements by borrowing $40,000 from the Citizen's Bank of Weston. The Company shall report to the Commission, in writing, upon the closing of said loan. If for any reason said loan is not closed, the Commission may reopen this proceeding to determine the revenue needs of the Company. Also, the Company shall report to the Commission no later than one year from the date this order becomes effective, the progress made in the completion of the proposed capital improvements plan. ORDER IT IS, THEREFORE, ORDERED that: 1. Respondent's proposed rates and charges, set forth in the Company's Tariff P.S.C. W.Va. No. 23, filed herein, are hereby cancelled and stricken from the tariff files of the Commission. 2. Respondent is hereby authorized to place into effect the rates and charges as contained in Appendix C, attached hereto, for providing -8-

9 natural gas service to all its customers, to become effective for all bills rendered for service on or after March 19, Respondent shall file a proper tariff with the Commission setting forth the rates, charges and other tariff provisions herein approved and set forth in Appendix C, attached hereto. 4. Respondent shall report in writing, to the Commission upon the closing of the $40,000 loan from the Citizen's Bank of Weston. Respondent shall also report, in writing, to the Commission no later than one year from the date this order becomes effective, the progress made in the completion of the proposed capital improvements plan. The Executive Secretary is hereby ordered to serve a copy of this order upon the Commission by hand delivery, and upon all parties of record by United States Certified Mail, return receipt requested. Leave is hereby granted to the parties to file written exceptions supported by a brief with the Executive Secretary of the Commission within fifteen (15) days of the date this order is mailed. If exceptions are filed, the parties filing exceptions shall certify to the Executive Secretary that all parties of record have been served said exceptions. If no exceptions are so filed this order shall become the order of the Commission, without further action or order, five (5) days following the expiration of the aforesaid fifteen (15) day time period, unless it is ordered stayed or postponed by the Commission. Any party may request waiver of the right to file exceptions to a Hearing Examiner's Order by filing an appropriate petition in writing with the Secretary. No such waiver will be effective until approved by order of the Commission, nor shall any such waiver operate to make any Hearing m PUBLIC SERVICE COMMISSI.ON CHARLESTON -9

10 CHARLESTON -10- R Examiner's Order or Decision the order of the Commission sooner than five (5) days after approval of such waiver by the Commission. MTA:mal Mark T. Aliff Hearing Examin

11 APPENDIX A Rate Base Rate of Return Allowance for Return Federal Income TaZ Operation & Maintenance Expenses (A) Depreciation Taxes Other Than Federal Income Taxes (B) West Virginia Corporate Net Income Tax Additional B & 0 Taxes Additional Uncollectibles Total Cost of Service Less: Going-Level Revenues (C) STANDARD GAS COMPANY CASE NO G-42T STIPULATED COST OF SERVICE Amount Per Exhibit Stipulated GOC-2 Adj us tment s Amount $ $ $ 96, % v 0 107,554 9,282 14, , ,444 96, % 12,4c)o 0 3,000(1) 110,554 9,282 14, , ,444 Deficiency 12,313 15,461 (A) These Operation and Maintenance Expenses exclude the purchased gas cost. (B) These Other Taxes exclude the Business and Occupation Taxes on purchased gas revenue. (C) These revenues exclude the purchased gas revenues. (1) Adjustment to reflect an additional $1,800 for Officer's salaries (See Staff Audit Report Adjustment No. 6) and an additional $1,200 for Attorney's fees (See Staff Audit Report Adjustment No. 16).

12 APPENDIX B STANDARD GAS COMPANY CASE NO G-42T CASH FLOW ANALYSIS Available Cash Operating Revenue Other Income Total Cash Requirements Operation and Maintenance Expense Taxes Other Than Federal Income Taxes West Virginia Corporate Net Income Tax Federal Income Tax Total Cash Available for Debt Service Debt Service Requirements Principal and Interest Surplus Amount 7 147, , ,616 15, ,863 18,819 CHARLESTON

13 APPENDIX C Sheet 1 of 2 APPLICABILITY STANDARD GAS COMPANY CASE NO G-42T RATES Applicable in entire territory served. AVAILABILITY OF SERVICE MTE Available for general domestic, commercial and industrial service. First 1,000 cu. ft. used per month $8.048 per 1,000 cu. ft. Next 7,000 cu. ft. used per month $3.102 per 1,000 cu. ft. Next 92,000 cu. ft. used per month $2.984 per 1,000 cu. ft. Next 400,000 cu. ft. used per month $2.835 per 1,000 cu. ft. Next 5,500,000 cu. ft. used per month $2.702 per 1,000 cu. ft. All Over 6,000,000 cu. ft. used per month $2.599 per 1,000 cu. ft. The above rates include a purchased gas cost of $1.642 per Mcf as authorized by the Public Service Commission in its order entered on October 29, 1984, in Case No G-30C. All charges under this schedule are subject to a local surcharge of 2%. MINIMUM CHARGE The above schedule is subject to a monthly minimum charge of Four Dollars Seventy-Five Cents ($4.75). APPLICABILITY SPECIAL, REDUCED RATE RESIDENTIAL SERVICE RATE SCHEDULE Applicable in entire territory served. AVAILABILITY OF SERVICE Available for residential customers who qualify for special reduced rates under the provisions of West Virginia Code $ during the billing months of December, January, February, March and April. SO*

14 APPENDIX C Sheet 2 of 2 SPECIAL REDUCED RATE RESIDENTIAL SERVICE RATE SCHEDULE RATE First Next Next Next Next All Over 1,000 cu. ft. used per month $6.438 per 1,000 cu. ft. 7,000 cu. ft. used per month $2.482 per 1,000 cu. ft. 92,000 cu. ft. used per month $2.387 per 1,000 cu. ft. 400,000 cu. ft. used per month $2.268 per 1,000 cu. ft. 5,500,000 cu. ft. used per month $2.162 per 1,000 cu. ft. 6,000,000 cu. ft. used per month $2.079 per 1,000 cu. ft. The above rates include a purchased gas cost of $1,642 per Mcf as authorized by the Public Service Commission in its order entered on October 29, 1984, in Case No C. All charges under this schedule are subject to a local surcharge of 2%. MINIMUM CHARGE The above schedule is subject to a monthly minimum charge of Three Dollars Eighty Cents ($3.80). CHARLESTON