Minnesota Public Utilities Commission Staff Briefing Papers

Transcription

1 Minnesota Public Utilities Commission Staff Briefing Papers Meeting Date: December 5, *Agenda Item # _5 Company: Docket No. Issue(s): Dooley s Natural Gas, LLC G6915/M Does Dooley s Natural Gas, LLC meet the statutory requirements for a small gas utility franchise exemption under Minnesota Statute 216B.16, Subd. 12? Staff: Ann Schwieger... (651) Michelle Rebholz... (651) Relevant Documents Dooley s Natural Gas - Initial Filing... August 1, 2013 Department of Commerce - Comments... September 6, 2013 Dooley s Natural Gas Reply Comments... September 18, 2013 Department of Commerce... November 6, 2013 The attached materials are workpapers of the Commission Staff. They are intended for use by the Public Utilities Commission and are based upon information already in the record unless otherwise noted. This document can be made available in alternative formats (i.e., large print or audio) by calling (651) (voice). Persons with hearing or speech disabilities may call us through their preferred Telecommunications Relay Service. November 25, 2013

2 Staff Briefing Papers for Docket# G6915/M on December 5, 2013 Page 1 Statement of the Issue Does Dooley s Natural Gas, LLC (DNG or Dooley s) meet the statutory requirements to qualify for a small gas utility franchise exemption under Minn. Stat. 216B.16, Subd. 12? Background: Party Comments August 1, 2013: Dooley s filed a Petition requesting approval from the Minnesota Public Utilities Commission (Commission) of an exemption as a small gas utility franchise from the requirements of Minn. Stat. 216B.16 for service provided within the border of several municipalities located in west-central Minnesota. DNG is also requesting an exemption for incidental natural gas distribution service to the rural areas outside of the borders of the municipalities it serves. September 6, 2013: The Minnesota Department of Commerce, Division of Energy (Department) submitted its comments after reviewing DNG s initial filing. The Department withheld a final recommendation due to an outstanding information request that the Company provide the franchise agreements reached with the municipalities and townships. The Department s analysis indicated that based on the information available, it appears that the Company has met part of the qualification for the requested exemption. September 18, 2013: The Company submitted the information requested by the Department. November 6, 2013: The Department reviewed the information and recommended Commission approval of DNG s request for exemption from state regulation. Company Background DNG is a Minnesota company with its principle place of business located in Murdock, Minnesota. DNG is indirectly owned by Dooley s Petroleum, Inc., which is a privately held company that provides propane and fuel oil to homes and businesses throughout Minnesota. DNG was formed to develop a natural gas distribution system to provide natural gas service to Clara City, Maynard, Raymond, Prinsburg and Blomkest (Municipalities). The townships in the service territory include Edwards, Holland, Roseland, Sevea, Whitefield and Fahlun in Kandiyohi County; Rheiderland and Stoneham in Chippewa County; and Crooks in Renville County. The townships are sparsely populated and consist of largely agricultural and farming operations. Prior to Dooley s development of a natural gas distribution system in these communities, natural gas service was not available and propane was the primary fuel for industrial, agricultural, commercial and residential uses. In response to low natural gas prices and the growing price differential between the cost of propane and natural gas, DNG worked with the Municipalities to develop a natural gas distribution system to serve previously un-served customers in the Municipalities and surrounding communities. The system was developed with the understanding that it would be

3 Staff Briefing Papers for Docket# G6915/M on December 5, 2013 Page 2 regulated by the Municipalities due to Minnesota s statutory exemption for small gas utility franchises. As a result of these cooperative efforts, each Municipality has granted DNG a non-exclusive franchise to supply natural gas to customers in the respective Municipalities. In addition, each Municipality has passed a resolution of its governing body supporting an exemption for DNG and confirming in each case that DNG would serve less than 650 customers within each municipality. Construction of the small distribution system was completed near the end of DNG is providing service to approximately 1,260 customers, including thirty-five customers that are located outside of the Municipal borders. According to the Company, at no point will the Company serve more than 2,000 customers in total, nor was the distribution system designed to serve more than 2,000 customers. Exemption for Small Gas Utility Franchise Municipal and Incidental Service In order for DNG to qualify for an exemption from state regulation, the requirements of Minn. Stat. 216B.16, Subd. 12, Exemption for small gas utility franchise, (a), (b) & (c) must be fulfilled. Subd. 12(a). A municipality may file with the commission a resolution of its governing body requesting exemption from the provisions of this section for a public utility that is under a franchise with the municipality to supply natural, manufactured, or mixed gas and that serves 650 or fewer customers in the municipality as long as the public utility serves no more than a total of 2,000 customers. The municipalities of Clara City, Maynard, Raymond, Prinsburg and Blomkest have requested an exemption related to the provision of natural gas services provided by DNG within these communities and have filed the Franchise Agreements as granted, with the Commission. Resolutions were also provided in which the Cities request the Commission to exempt the Company from regulation. In each Municipality, less than 650 customers will be served. DNG is requesting the Commission confirm its statutory exemption for services provided within the Municipal borders. Subd. 12(b). The commission shall grant an exemption from this section for that portion of a public utility's business that is requested by each municipality it serves. Furthermore, the commission shall also grant the public utility an exemption from this section for any service provided outside of a municipality's border that is considered by the commission to be incidental. The public utility shall file with the commission and the department all initial and subsequent changes in rates, tariffs, and contracts for service outside the municipality at least 30 days in advance of implementation. The City of Roseland Township and the City of Whitefield Township/ City of Svea submitted copies of their franchise agreements with DNG. As part of the franchise agreement, the Cities

4 Staff Briefing Papers for Docket# G6915/M on December 5, 2013 Page 3 have also filed copies of their Resolutions in which they request the Commission exempt the Company from regulation. The following townships are located within the service territory are largely rural, sparsely populated and are comprised largely of agricultural land and farming operations; Edwards, Holland, Fahlun, Rheiderland, Stoneham and Crooks. These rural areas did not file franchise agreements or resolutions requesting the Commission grant an exemption. DNG is seeking the exemption from the Commission and requests the Commission find that the rural areas served are incidental to its small gas utility franchise service to the Municipalities. DNG is committed to providing safe and reliable natural gas service to customers in these areas that elect to take service and would fill a currently unmet need and assist economic development in the area. The ability to serve the incidental areas with existing infrastructure by adding customers will result in lower rates for all customers. This is due to the one-system rate structure that has been adopted by DNG and the Municipalities. The rate structure is based on system-wide costs. The same rate for distribution service would apply to all customers within a specific rate class 1. For example, the rate for residential sales service will be the same in each Municipality and the incidental areas. DNG stated that granting of the exemption for incidental natural gas service outside the Municipalities avoids the potential for a dual-regulatory regime where the Municipalities would set one set of rates for DNG customers and the Commission would set the rates for a very small subset of customers located outside of the Municipal limits. Not only would it be nearly impossible to establish separate rates given the common infrastructure and two separate rate authorities, it would be inefficient and raise costs to all customers. DNG has worked closely with the Municipalities to develop a small gas utility franchise that would be regulated by the communities it serves and respectfully requests that the Commission confirm its statutory exemption. Staff Comment Staff agrees with the Department and the Company that the criteria for an exemption both within the municipal borders (Subd. 12(a)) and incidental services provided to rural areas (Subd. 12(b)) have been satisfied and recommends Commission approval. To Staff s knowledge, this is the first exemption request under Minn. Stat. 216B.16, Subd. 12 the Commission has ever received. Staff therefore recommends that the Commission take the extra step of clarifying what statutes will and will not apply to the petitioner. Cold Weather Rule 1 The four customer classes are (1) residential; (2) small volume commercial; (3) large volume commercial and industrial; and (4) agricultural heating and drying.

5 Staff Briefing Papers for Docket# G6915/M on December 5, 2013 Page 4 Minn. Stat. 216B.16, Subd. 12(c) requires compliance with the Commission s Cold Weather Rule policies: Subd. 12(c). However, the commission shall require the utility to adopt the commission's policies and procedures governing disconnection during cold weather. The utility shall annually submit a copy of its municipally approved rates to the commission. The Company has stated it will at all times comply with Minn. Stat. 216B.096, Cold Weather Rule; Public Utility, in Section 28 of its tariff. Staff appreciates the Company s acknowledgement of its duty to comply with the Cold Weather Rule. Staff recommends that the Commission require the Company to list out the entire Cold Weather Rule in Section 28 of its tariff and submit for review as a compliance filing. Staff also suggests the Company update Section 27, XVI. Discontinuance of Gas Service for Non-Payment of its tariff, Item 1a) and amend it to read: To a customer who owes a past due and unpaid balance for utility service at a former address, in the same class of service; and submit the updated tariff for review as a compliance filing. Staff notes that the Department comments at times reference Dooley s exemption from regulation 2. For purposes of clarity, Dooley s petition is only referring to exemption from rate regulation under Minn. Stat. 216B.16. In addition to being subject to the Cold Weather Rule under Minn. Stat. 216B.096, Staff believes Dooley s is also subject to: 216B.0976 Notice to Cities of Utility Disconnection 216B.098 Residential Customer Protections As this is the first exemption filing the Commission has received, Staff also believes it would be appropriate to clarify that, under state law, Dooley s is required to: Submit annual Cold Weather Rule reports as required under Minn. Stat. 216B.096, Subd. 11; 2 Minn. Stat. 216B.02, DEFINITIONS, subd. 4, states that: In addition, the provisions of this chapter shall not apply to a public utility whose total natural gas business consists of supplying natural, manufactured, or mixed gas to not more than 650 customers within a city pursuant to a franchise granted by the city, provided a resolution of the city council requesting exemption from regulation is filed with the commission.. However, Minn. Stat. 216B.16, subd. 12, which was enacted after the Definitions statute, provides more specific guidance and requirements, including various compliance and filing requirements and a 2,000 customer total threshold. Trying to read these statutes together could arguably result in a contradiction, unless one interprets the former to apply only to a gas utility who services only one city and has 650 or fewer customers in total.

6 Staff Briefing Papers for Docket# G6915/M on December 5, 2013 Page 5 Submit annual tariff updates with municipally-approved rates to the Commission (Minn. Stat. 216B.16, Subd. 12(c)); Submit subsequent changes in rates, tariffs, and contracts for service outside the municipalities at least 30 days in advance of implementation. Staff suggests that the petitioner confirm its agreement that it is subject to the above 2 statutes, the two above-listed annual filing requirements, and the filing requirements for service outside the municipalities in its service area. Staff also notes that the exemption from rate regulation under Minn. Stat. 216B.16, subd. 12 only applies as long as the public utility serves no more than 2,000 customers. Dooley s has an affirmative duty to inform the Commission should the Company cross the 2,000 customer threshold. Decision Alternatives A. Petition for Exemption 1.) Approve the Petitioner s request for an exemption from the requirements of Minnesota Statutes 216B.16 for service provided within the borders of the municipalities listed in the petition, and for incidental service outside the borders of the municipalities it serves, as listed in the petition, subject to making required compliance filings; OR 2.) Do not approve the petition. B. Compliance Filings 1.) Require the Company to submit the following compliance filings within 20 days of the Commission s order in this docket; a. update Section 28 of its tariff to reflect the Cold Weather Rule within its tariff b. update Section 27, Item 1a) of its tariff and amend it to read To a customer who owes a past due and unpaid balance for utility service at a former address, in the same class of service c. add language to its tariffs demonstrating is compliance with Minn. Stats. 216B.0976 (Notice to Cities of Utility Disconnection), and 216B.098 (Residential Customer Protections) OR 2.) Do not require some or all of the compliance filings. C. Clarification of Statutory Requirements Going Forward 1.) Clarify that DNG is required to file tariff updates annually for municipally-approved rates, to file annual Cold Weather Rule reports under 216B.091, file changes in rates, tariffs, and contracts at least 30 days prior to implementation for its service areas outside

7 Staff Briefing Papers for Docket# G6915/M on December 5, 2013 Page 6 of municipalities, and inform the Commission immediately if the Company begins to service more than 2,000 customers. OR; 2.) Do not make some or all of the clarifications. Recommendation Staff recommends options: A1, B1, C1