Colorado PUC E-Filings System

Transcription

1 Fredric C. Stoffel Director, Regulatory Affairs 1515 Wynkoop Street, Suite 500 P: F: of the State of Colorado 1560 Broadway Suite 250 Colorado PUC E-Filings System The accompanying tariff sheets issued by Black Hills/Colorado Gas Utility Company, LP, d/b/a Black Hills Energy ( Black Hills or the Company ) are sent to you for filing in compliance with the requirements of the Public Utilities Law and the applicable rules of the Public Utilities Commission of the State of Colorado, including Rule 1210, 4 Colorado Code of The following tariff sheets are attached: Colorado P.U.C. Sheet Number Second Revised Sheet No. 44 Original Sheet No Second Revised Sheet No. 45 Second Revised Sheet No. 46 Original Sheet No Original Sheet No Original Sheet No Second Revised Sheet No. 47 COLORADO P.U.C. NO. 3 Title of Sheet Cancels Colorado P.U.C. Sheet Number First Revised Sheet No. 44 First Revised Sheet No. 45 First Revised Sheet No. 46 First Revised Sheet No. 47

2 Page 2 The principal purpose of this filing is to amend the Company s tariff to (a) allow for a Construction Payment Option for customers with Permanent Service who are required to pay a Construction Payment and (b) clarify other terms of the Extension Policies contained in Section 20 of the Company s Colo. PUC No. 3 Tariff. The Company believes that the proposed Construction Payment Option mechanism will allow the Company to provide potential customers, on a non-discriminatory basis, an option to finance the Construction Payment and make both main and distribution extensions less onerous to the customer. The proposed tariff changes affect all customer classes that fall under the tariff s Extension Policies. The Company has a significant rural customer base, and potential new customers are often located in distant sparsely populated areas. In addition, many potential new customers are currently using propane instead of natural gas. Providing a Construction Payment Option may make it feasible for such potential new customers to transition to natural gas when otherwise they would not be financially able to do so. As the Company continually looks to expand its distribution system, potential customers face barriers to attachment. In many instances, there is a distance between the Company s main and the customer s premise, which requires an extension of the distribution main. In addition, the location of these potential customers involves varying terrain conditions. These barriers result in increased up-front costs for potential customer connections to the Company s distribution main. Attached hereto are Appendices A and B. Appendix A provides the applicable proposed tariff sheets, in clean format, which contain modifications made for the Construction Payment Option, as well as clarifications in the existing tariff language. Appendix B provides a redlined version of the applicable tariff sheets. Proposed tariff changes, other than minor changes which are reflected in redline in Appendix B, are summarized below, but refer to Appendix B for the actual changes:

3 Page 3 Proposed Colorado P.U.C. Sheet Number Second Revised Sheet No. 44 Original Sheet No Second Revised Sheet No. 45 Summary of Changes Clarified Construction Allowance definition, added Construction Payment Option concept and other minor changes Added Construction Payment Option related definitions, clarified Extension Agreement definition and other minor changes Minor changes Second Revised Sheet No. 46 Clarifications under Construction Payment Section E, added language relating to Construction Payment Option and moved 20.F Original Sheet No New Construction Payment Option Original Sheet No New Construction Payment Option cont. Original Sheet No New Construction Payment Option cont. Also moved 20.F to this page and made clarifying language changes to 20.F Second Revised Sheet No. 47 Clarification under 20.H As reflected in Appendices A and B, the Construction Payment Option would only apply to the owners of the premises where the extension would be constructed to provide service. This will aid in securing repayment of the financing and reduce the risk of bad debt. In addition, customers choosing the Construction Payment Option would need to sign a Construction Payment Option Loan Agreement, (a current form of which is attached hereto and incorporated herein by this reference as Appendix C)( Loan Agreement ). Key Construction Payment Option rules are set forth in Appendices A, B and C. As stated therein, interest under any Loan Agreement would accrue at the Company s most recently approved weighted average cost of capital ( WACC ) grossed-up for taxes, which is 9.94%, compounded annually for a term no longer than ten (10) years and is subject to a credit evaluation. Tax gross-up on equity is a standard principle in general rate case proceedings, which provides the Company an opportunity to earn its allowed return on equity by covering the costs of income tax expense. In addition, the financed amount will be accounted for in a regulatory asset account and amortized over the life of the loan. So long as there is no default on

4 Page 4 the loan, the financed amount will not be included in rate base. Each month the amount billed (principal and interest) to the customer will be credited to a specific utility revenue account. The monthly amortization will be equal to the principal billed and will be debited to a utility amortization account with the credit side of the entry made to the regulatory assets account. The interest billed to the customer will cover the Company s costs for interest, income taxes, and return on equity. In the event of a default and non-repayment of the Loan Agreement, the unrecovered amount will be credited to the regulatory asset account to zero out the customer s balance and be debited to Plant in Service. Company shareholders will bear the carrying costs of the defaulted amount until the next general rate case. At that time the defaulted amount (as depreciated) would be included in rate base for recovery by all customers. The effect of this filing on the Company s annual revenue cannot be determined at this time because the revenue impact will depend upon the number and types of customers that choose the Construction Payment Option. However, for illustrative purposes only, if any customer in any eligible customer class obtains a $5,000 loan under the Construction Payment Option, such customer, based on the current interest rate of 9.94%, would be impacted as follows: Term of Loan Loan Amount Monthly Loan Payment Total Loan Payment Interest Paid by Customer 3 Years $5, $ $6, $1, Years $5, $ $6, $1, Years $5, $85.42 $7, $2, Years $5, $67.64 $8, $3, This filing will be noticed pursuant to the requirements of the Colorado Public Utilities Law. Concurrently with this filing, Black Hills is filing a Motion for Approval of Alternative Form of Notice with Attachment 1, Customer Notice. The Motion requests Commission approval for three methods of providing the Customer Notice to all customers. First, the Company will post the Customer Notice, this advice letter and its accompanying appendices on the Company s website. Second, a bill message will notify customers of the website posting, and provide both the URL link and a toll-free phone number for assistance. The bill message will run for one full cycle. Third, newspaper legal notices providing the Customer Notice will be published in a newspaper of general circulation covering the Company s service territory, The Colorado Springs Gazette. Black Hills requests that the tariff sheets accompanying this advice letter in Appendix A become effective on February 3, 2016, which is more than thirty (30) days notice.

5 Page 5 Please send copies of all notices, pleadings, correspondence, and other documents regarding this filing to the undersigned, and to: Tana Simard-Pacheco Manager, Regulatory Affairs Black Hills Corporation 1515 Wynkoop Street, Suite 500 Telephone: (303) Facsimile: (720) tana.simard-pacheco@blackhillscorp.com Sincerely, BLACK HILLS CORPORATION Fredric C. Stoffel Director, Regulatory Affairs