STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * *

Transcription

1 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter of the application of ) PRESQUE ISLE ELECTRIC & GAS CO-OP ) and the VILLAGE OF HILLMAN to have the ) Commission establish rates, charges, ) Case No. U terms and conditions for natural gas ) service in Presque Isle s Regulated Division. ) ) In the matter of the application of ) PRESQUE ISLE ELECTRIC & GAS CO-OP ) to incorporate a gas cost recovery clause ) Case No. U in the rates of its Regulated Gas Division. ) ) In the matter of the application of ) PRESQUE ISLE ELECTRIC & GAS CO-OP ) for authority to implement a gas cost ) recovery plan and factors for the 8-month ) Case No. U period of August 2009 through March 2010 ) for its Regulated Gas Division. ) ) SETTLEMENT AGREEMENT On January 20, 2009, ( Presque Isle ) filed a joint petition with the Village of Hillman requesting that the Michigan Public Service Commission ( Commission ) establish rates, charges, terms, and conditions for natural gas service in Presque Isle s Regulated Gas Division (Case No. U-15774). On February 5, 2009, the Commission issued its Notice of Hearing. On March 4, 2009, the prehearing conference was held pursuant to the Commission s Notice of Hearing. The Commission Staff and Presque Isle participated in the proceeding. At the prehearing conference, Presque Isle presented proof of service of LAN01\ ID\JJBA /0004 1

2 the Notice of Hearing on all cities, incorporated villages, townships and counties in its service area, and also presented an affidavit evidencing the requisite publication of notice. The prehearing conference was conducted as a contested case matter pursuant to the Administrative Procedures Act of 1969, 1969 PA 306, as amended, MCL et seq. On April 1, 2009, Presque Isle filed the testimony and exhibits of Thomas J. Sobeck and Jeffrey C. Laslie in support of the joint petition. On April 30, 2009, Presque Isle filed applications with testimony and exhibits of Thomas J. Sobeck, requesting that the Commission incorporate a gas cost recovery ( GCR ) clause in the rates of Presque Isle s Regulated Gas Division (Case No. U ) and for authority to implement a GCR plan and factor for the 8-month period of August 2009 through March 2010 for Presque Isle s Regulated Gas Division (Case No. U-15776). On May 8, 2009, the Commission issued its Notice of Hearing in Case Nos. U and U On June 10, 2009, the prehearing conference was held pursuant to the Commission s Notice of Hearing, in both dockets. The Commission Staff and Presque Isle participated in these proceedings. At the prehearing conference, Presque Isle presented proof of service of the Notice of Hearing on all cities, incorporated villages, townships and counties in its service area, and also presented an affidavit evidencing the requisite publication of notice. The prehearing conference was conducted as a contested case matter pursuant to the Administrative Procedures Act of 1969, 1969 PA 306, as amended, MCL et seq. A second prehearing conference was set for July 15, 2009 to coincide with the cross-examination scheduled in Case No. U-15774, captioned above. LAN01\ ID\JJBA /0004 2

3 The Parties have exchanged information and engaged in meetings to derive appropriate rates on a going-forward basis for Presque Isle s Regulated Gas Division. Based on such discussions, the Parties have agreed to enter into this Settlement Agreement. In view of the foregoing, and pursuant to Section 78 of the Administrative Procedures Act of 1969, as amended (1969 PA 306, 78; MCL ), Presque Isle and Staff hereby agree as follows: 1. The Parties agree that the Commission should accept jurisdiction over rates, charges, terms, and conditions for natural gas service in Presque Isle s Regulated Gas Division. 2. Concurrent with accepting rate jurisdiction for Presque Isle s Regulated Gas Division, the Parties agree that the Commission should also approve, effective with the first billing cycle on or around August 1, 2009 following the issuance of a Commission Order approving settlement agreement, the rates, charge, terms and conditions of service for Presque Isle s Regulated Gas Division as identified in and attached hereto as Presque Isle Regulated Gas Division Rate Book, and to remain in effect until changed by lawful order of the Commission. 3. The Parties agree that the Commission should accept Presque Isle s requested GCR Clause pursuant to 1982 PA 304, as requested in Case No. U The Parties further agree that the GCR Clause, attached as Attachment 2 (reflective of Revised Exhibit A-1 in Case No. U-15775), should be approved as follows: A. Effective with the first billing cycle immediately following the issuance of a Commission Order approving this settlement agreement. LAN01\ ID\JJBA /0004 3

4 B. The GCR factors authorized by the Commission in approving this settlement agreement may be increased on a quarterly basis, for the remaining quarters of the GCR Plan partial-year, contingent upon the NYMEX futures prices for natural gas increasing to a level above the level incorporated into the calculation of the GCR base price. The Quarterly Adjustment Process monitors the GCR factor as compared to changes in the NYMEX and permits an upward adjustment of the GCR factor not to exceed $0.30 per ccf. The Quarterly Adjustment Process is summarized as follows: i. At least fifteen days before the beginning of each quarter, i.e., June 15, September 15 and December 15, Presque Isle will file with the Commission an updated GCR price, less than or equal to the maximum authorized GCR factor, based on the impact of the NYMEX future prices for the remainder of the GCR period. The information filing will include all supporting documents necessary to verify the updated price, including a copy of the five-day average of the NYMEX strip for the remaining months of the GCR period, and a copy of the NYMEX future prices sheets for the first five trading days of the month, such sheets being an authoritative source used by the gas industry. The filing would be incorporated into the GCR Plan docket, Case No. U (or subsequent Plan-year dockets), and provided with notice to Staff. ii. If the impact of the NYMEX prices on remaining GCR plan year unpurchased volumes is to reduce the GCR plan price significantly, Presque Isle would have the ability to charge less than the maximum authorized GCR factor. If the impact of the NYMEX prices on remaining GCR plan year unpurchased volumes is to increase the GCR plan year base price by more than LAN01\ ID\JJBA /0004 4

5 5%, Presque Isle could prospectively adjust its GCR factor to that level, but remaining equal to or less than the maximum authorized GCR factor (equal to the GCR factor plus the maximum permitted adjustment under the Quarterly Adjustment Process), subject to the annual reconciliation process. C. The Commission is authorized to approve GCR ceiling price adjustments contingent on future events pursuant to Section 6h(6) of 1982 PA 304, as amended, MCL 460.6h(6). The proposed quarterly ceiling adjustment component is based on a comparison of the average NYMEX gas price for a specified period of time within the GCR year with the NYMEX gas price for the same period that was used in developing the unadjusted GCR factor in this case. The specific amount of any adjustment to the GCR factor as a result of the quarterly review is limited to a portion of the increase in the cost of gas on the NYMEX above levels used in the development of the GCR factor. The actual cost of gas charged in a month could be less than the maximum factor. 4. This settlement agreement incorporates the following proposed rates as reasonable, appropriate, in the public interest and consistent with Commission approval given in recent gas cases: Rate Class Monthly Charge Distribution Charge Residential $11.00 $ per ccf General Service $16.00 $ per ccf Industrial $ $ per ccf LAN01\ ID\JJBA /0004 5

6 In addition, Presque Isle should be authorized to implement its proposed GCR clause and GCR plan with a GCR factor of $ per ccf for the 8-month period August 2009 through March The proposed GCR factor of $ per ccf is further subject to adjustment as permitted by the Quarterly Adjustment Process described above. With the $ per ccf GCR factor, the resulting per ccf charges are as follows: Rate Class Residential General Service Industrial Distribution Charge $ per ccf $ per ccf $ per ccf GCR Factor $ per ccf $ per ccf $ per ccf Total Per ccf Charge $ per ccf $ per ccf $ per ccf 5. Assuming approval of this settlement agreement, without change, Presque Isle will file its Presque Isle Regulated Gas Division Rate Book, hereto, within 30 days of the Order approving this settlement agreement. 6. Presque Isle should be authorized to implement Times Interest Earned Ratio ( TIER ) Ratemaking according to the following process. The proposed annual TIER Ratemaking process would mirror the process implemented for the Presque Isle s electric operations: 1 The Parties understand that future GCR periods will be 12 months in length and this initial plan covers an 8 month period due to the timing of Presque Isle s application in Case Nos. U and U It is understood that the 8 month period ending March 31, 2010 will be subject to reconciliation in Case No. U R, to be filed within three months of the end of the GCR year. However, it is further understood that a separate reconciliation will address the four month period of April 1, 2009 through July 31, 2009, which four month period will be reconciled in a pre-mpsc regulated environment, i.e., the four month reconciliation will be subject to agreements in place between Presque Isle and the townships and villages it serves in a pre-mpsc regulated environment. These processes will be considered together, such that inequity does not result. LAN01\ ID\JJBA /0004 6

7 i. Within 120 days of the end of each calendar year, i.e., by April 30, Presque Isle will submit a calculation of its natural gas operations Adjusted TIER for the calendar year just ended. Thus, Presque Isle s first TIER Ratemaking filing, covering the 2009 calendar year, will be submitted by April 30, ii. For purposes of each natural gas TIER Ratemaking filing, Presque Isle s Adjusted TIER will be based on its Statement of Operations, as set forth on its National Rural Utilities Cooperative Finance Corporation December Financial and Statistical Report ( Form 7 ), Part A, calculated as follows: (a) Step One Identify the applicable calendar year s Patronage Capital or Margins as set forth on the Form 7 Part A, column (b), line This number is referred to as Total Margins. (b) Step Two Subtract from Total Margins (Step One) Gains (Losses) on Disposition of Natural Gas Utility Plant and Capital Assets and any Income (Loss) from Equity Investments (both embedded in line 23), 3 and Other Natural Gas Capital Credits and Patronage Dividends allocated (i.e., declared but not paid) to Presque Isle in the calendar year under consideration (included in the amount on line 26). Thus, natural gas related capital credits and patronage 2 References to line numbers in this portion of the settlement agreement are to Presque Isle s natural gas Form 7, Part, A, column (b). 3 Income From Equity Investments would be a deduction from Total Margins; and Loss From Equity Investments would be an add-on to Total Margins--so that non-regulated activities do not affect the TIER Ratemaking calculation. Presque Isle runs two ledger accounts that should be excluded from any TIER calculation: (i) Account (gain/(loss)) on disposition of utility plant and (ii) Account (gain/(loss)) on disposition of capital assets). LAN01\ ID\JJBA /0004 7

8 dividends that have been both declared and paid to Presque Isle in the calendar year under consideration shall not be subtracted from Total Margins. The remainder, subtracting the items specified above from Total Margins, is referred to as Total Margins less Capital Credits Allocations. For purposes of this determination, there will not be a double count for the comparable electric and natural gas operations, e.g., a capital credit or patronage dividend added or deducted for the electric operations calculation will not be used for the natural gas calculations and vice versa. (c) Step Three Increase Natural Gas Total Margins less Capital Credits Allocations by capital credits/patronage dividends that had been allocated to Presque Isle in prior years, but not issued (i.e., paid) to Presque Isle until the calendar year under consideration. These payments to Presque Isle may be offset by capital credit refunds made by Presque Isle to its natural gas members in the current year in the form of general capital credit retirements. Any capital credit refunds made by Presque Isle that are used in this offset may not also be used in any other adjustments to Total Margins or TIER. Furthermore, the remainder of these payments to Presque Isle, the offset, cannot be less than zero. This remainder is then added to Total Margins less Capital Credits Allocations. The resulting total is referred to as Preliminary Adjusted Total Margins. Again, there will not be a double count for the comparable electric and natural gas operations, e.g., a capital credit or patronage dividend added or deducted for the electric operations calculation will not be used for the natural gas calculations and vice versa. LAN01\ ID\JJBA /0004 8

9 (d) Step Four Presque Isle may reduce Natural Gas Preliminary Adjusted Total Margins by the dollar amount of natural gas capital credit/patronage dividends refunds/retirements made to its general membership in the calendar year under consideration, i.e. general retirements. The resulting number is referred to as Natural Gas Adjusted Total Margins. Such reduction may be used to result in a Natural Gas Adjusted TIER within the TIER quiet zone (addressed below) but may not be used to result in a Natural Gas Adjusted TIER below the TIER floor (addressed below). (e) Step Five Apply the Natural Gas Adjusted Total Margins to the TIER formula to determine the Natural Gas Adjusted TIER, i.e., the Natural Gas Adjusted TIER equals the result of the following: Adjusted Total Natural Gas Margins + Natural Gas Allocated Interest on Long Term Debt Natural Gas Allocated Interest on Long Term Debt iii. If the Natural Gas Adjusted TIER is between 1.6 ( TIER Floor ) and 2.2 ( TIER Ceiling ), i.e., within the TIER Quiet Zone, there need be no adjustment in rates. iv. If the Natural Gas Adjusted TIER is greater than the 2.2 TIER Ceiling, a calculation of necessary revenue reductions or capital credit refunds necessary to bring TIER back to a 1.8 Target TIER would be provided. LAN01\ ID\JJBA /0004 9

10 v. If the Natural Gas Adjusted TIER is below the 1.6 TIER Floor, then a hearing is required to determine what revenue increase is necessary to return to the 1.8 Target TIER. vi. A Natural Gas TIER Ratemaking increase shall not exceed 10%. In the event a greater increase is requested, a standard rate case filing should be required and a class cost of service study shall be submitted which includes all Presque Isle customers, both tariffed and non-tariffed (e.g., special contract customers). vii. The Notice of Hearing shall be expanded so that Parties are not limited to a mathematical calculation of the revenue revision necessary to return TIER to the TIER Target, but may address the total cost of service and all other lawful elements properly to be considered in determining just and reasonable rates. viii. If Presque Isle s calculations indicate that no revenue revisions are required or if Presque Isle desires not to adjust revenues, and such determination is not in dispute, the Parties hereby stipulate that no hearing needs to be conducted or Commission order issued. ix. In addition to the requirement that a class cost of service study be submitted in instances in which greater than a 10% increase is requested (noted above), a comparable cost of service study must be provided at least once every seven years unless requested earlier by Staff or unless waived by the LAN01\ ID\JJBA /

11 Commission. Thus, at a minimum, a comparable cost of service study must be submitted by x. Interest Allocation on Long Term Debt and Equity Normalization Adjustments -- The interest allocation on long term debt and the equity normalization adjustments which have been in effect with respect to Presque Isle s electric operations will be implemented with respect to Presque Isle s natural gas operations so that they appropriately correspond, i.e., so that the sum of the two parts equal the whole. (a). With respect to interest allocation, Presque Isle will monthly allocate actual long term debt interest expense (operating statement line 15) to its electric and natural gas operations using the ratio of electric and natural gas net utility plant (lines 5a and 5b) as represented on its balance sheet for the year most recently ended. At the end of the current operating year and each year there, Presque Isle will restate its actual long term debt interest expense allocation to electric and natural gas operations based on the ratio of electric and natural gas net utility plant balances (lines 5a and 5b) as of December 31. This is the "core" portion of the allocation of electric interest on long term debt. (b). With respect to the equity normalization adjustment, Presque Isle will calculate annually an "equity normalization adjustment" based on its year end audited financial statements. This adjustment will be used to offset the amount of "core" long term debt interest allocated to its electric operations. The adjustment will be calculated for the entire year and then divided by 12 to arrive LAN01\ ID\JJBA /

12 at a monthly adjustment to apply to the financial statements of both the electric and natural gas operations. The annual calculation of the equity normalization adjustment will be static for any given operating year. This adjustment will only be used to reduce the core electric interest allocation. 7. Presque Isle will annually file its GCR Plan case 90 days prior to the start of the next GCR year. 8. Presque Isle will annually file its GCR Reconciliation case within 90 days following the end of its GCR year. 9. Presque Isle s next GCR Plan case for its newly constituted Regulated Gas Division will include information on its study of its natural gas system loss factor; which, until revised by Commission Order shall be 0.00%. 10. Presque Isle s next GCR Plan case for its newly constituted Regulated Gas Division, will include information on its review of storage options for Presque Isle s system. 11. Should Presque Isle apply lesser GCR factors than those identified in its GCR plan, it shall notify the Commission Staff of that fact and file revised tariff sheets reflecting those GCR factors 15 days before implementing the new rate. 12. Each signatory hereto agrees not to appeal, challenge or contest the rates approved by the Commission in this case if they are the result of a Commission order accepting and approving this Settlement Agreement without modification. If the Commission does not accept this Settlement Agreement without modification, this Settlement Agreement shall be withdrawn and shall not constitute any part of the record in this proceeding or be used for any other purpose whatsoever. LAN01\ ID\JJBA /

13 13. Presque Isle and the Commission Staff jointly recommend that the Commission issue its Order Adopting Settlement Agreement. 14. This settlement agreement has been made for the sole and express purpose of reaching compromise among the positions of the signatory Parties without prejudice to their rights to take new and/or different positions in other proceedings. If the Commission approves this settlement agreement without modification, neither the Parties to this settlement agreement nor the Commission shall make any reference to or use of the settlement agreement or the order approving it as a reason, authority, rationale or example for taking any action or position or making any subsequent decision in this case or any other cases or proceedings; provided, however, such reference or use may be made to enforce the settlement agreement and order. 15. Section 81 of the Administrative Procedures Act of 1969 is waived by the signatories. Dated: July 17, 2009 MICHIGAN PUBLIC SERVICE COMMISSION STAFF Kristin M. Smith (P46323) Anne M. Uitvlugt (P71641) Assistant Attorneys General 6545 Mercantile Way, Ste. 15 Lansing, MI Telephone: (517) Dated: July 17, 2009 LAN01\ ID\JJBA /0004 PRESQUE ISLE ELECTRIC & GAS CO-OP By: Albert Ernst (P24095) Shaun M. Johnson (P69036) Joseph J. Baumann (P69261) 13

14 DYKEMA GOSSETT PLLC 201 Townsend, Suite 900 Lansing, MI Telephone: (517) LAN01\ ID\JJBA /

15 Page 1 of 85 Original Sheet No. A-1.00 PRESQUE ISLE ELECTRIC & GAS CO-OP RATE BOOK FOR NATURAL GAS SERVICE These Standard Rules and Regulations and Rate Schedules contained herein have been adopted by the Cooperative to govern its relations with Member-Consumers and have been approved by the Michigan Public Service Commission as an integral part of its Rate Book for Gas Service. Copies of the Cooperative s Rate Book for Natural Gas Service are available on Presque Isle Electric & Gas Co-op s website at the following website address or at the Michigan Public Service Commission s website at the following website address, Territory This Rate Book for Natural Gas Service applies to the regulated territory served with Natural Gas by the Cooperative.

16 INDEX SECTION A Page 2 of 85 Original Sheet No. A-2.00 Sheet No. Title Page A-1.00 Index A-2.00 Table of Contents - Checklist A-3.00 Franchise Area Map A-4.00 Territory Served A-5.00 Franchise Agreements A-6.00 Technical Terms and Abbreviations A-7.00 SECTION B ADMINISTRATIVE RULES INDEX B1. Technical Standards for Gas Service (R R ) (For All Customers) B B2. Consumer Standards and Billing Practices for Electric and Gas Residential Service (R R ) B B3. Uncollectibles Allowance Recovery Fund (R R ) (Residential Customers) B B4. Billing Practices Applicable to Non-Residential Electric and Gas Customers (R ) (Including Multifamily Dwelling Service Rate A-1) B B5. Practice and Procedure Before the Commission (R R ) B B6. Filing Procedures for Electric, Water, Steam and Gas Utilities (R R ) B B7. Residential Conservation Program Standards (R R ) B B8. Preservation of Records of Electric, Gas and Water Utilities (R R ) B B9. Michigan Gas Safety Standards (R R ) B B10. Production and Transmission of Natural Gas (R R ) B B11. Uniform System of Accounts for Major and Nonmajor Gas Utilities (R , R ) B B12. Rate Case Filing Requirements for Major Gas Utilities B (Continued on Sheet No. A-2.01)

17 INDEX (Continued from Sheet No. A-2.00) Page 3 of 85 Original Sheet No. A-2.01 SECTION C COOPERATIVE RULES AND REGULATIONS (FOR ALL MEMBERS-CONSUMERS) Sheet No. C1. CHARACTERISTICS OF SERVICE C-1.00 C1.1. Character of Service C-1.00 C1.2. Hours of Service C-2.00 C1.3. Use of Service C-2.00 C1.4. Unusual Facility Requirements C-4.00 C1.5. Invalidity of Oral Agreements or Representations C-4.00 C1.6. Transfers of Gas C-5.00 C2. CONTROLLED SERVICE C-6.00 A. Scope C-6.00 B. Notice of Controlled Service Conditions C-6.00 C. Application for Service C-6.00 D. Approval of Application for Service C-6.00 E. Forfeiture C-8.00 F. Restricted Sales C-8.00 G. Priorities C-9.00 H. Penalties for Violation C C3. CURTAILMENT OF GAS SERVICE C C3.1. Definitions C C3.2. Curtailment of Gas Service for Gas Supply Deficiency C A. Determination of Need for Curtailment C B. Notice of Curtailment C C. Method of Curtailment C D. Base Period C Base Period for System Supply Member- C Consumers 2. Base Period for Non-System Supply Member- Consumers C E. Curtailment Priorities C F. Rate Adjustments C G. Enforcement C H. Penalty C (Continued on Sheet No. A-2.02)

18 INDEX (Continued from Sheet No. A-2.01) Page 4 of 85 Original Sheet No. A-2.02 SECTION C COOPERATIVE RULES AND REGULATIONS (FOR ALL MEMBERS-CONSUMERS) Sheet No. C3.3. Curtailment of Gas Service During an Emergency C A. Cooperative s Rights to Curtail C B. Steps Prior to Curtailment C C. Notice of Operational Flow Order (OFO) or Curtailment C D. Method of Curtailment C E. Base Period C F. Curtailment Priorities C G. Diversion of Member-Consumer-Owned Gas During Gas C Emergencies H. Rate Adjustments C I. Enforcement C J. Penalty C C3.4. Limitation of Liability C C4. APPLICATION OF RATES C C4.1. Classes of Service C C4.2. Choice of Rates C C4.3. Application of Residential Usage and Non-Residential Usage C A. Residential Usage and Rate Application C Private Family Dwellings C Homes or Dormitories for Groups Other Than C Private Family Dwellings 3. Multifamily Dwellings Service Through Single Meter C B. Non-Residential Usage and Rate Application C C. Combined Residential and Non-Residential Usage and Rate Application C C4.4. Resale C C4.5. Mobile Home Park Individually Served C (Continued on Sheet No. A-2.03)

19 INDEX (Continued from Sheet No. A-2.02) Page 5 of 85 Original Sheet No. A-2.03 SECTION C COOPERATIVE RULES AND REGULATIONS (FOR ALL MEMBERS-CONSUMERS) Sheet No. C5. MEMBER-CONSUMER RESPONSIBILITIES C C5.1. Access to Member-Consumer s Premises C C5.2. Bills and Payments C A. Billing Frequency C B. Meter Reads and Estimated Bills C C. Member-Consumer Meter Reads C D. Responsibility for Payment C E. Due Date C F. Late Payment Charge C G. Returned Bill Payments C H. Billing Error C Overcharge C Undercharge C I. Meter Error or Non-Registering Meter C Overcharge C Undercharge C J. Energy Theft, Stolen Meter and Switched Meter C C5.3. Restoration of Service C C6. METERING AND METERING EQUIPMENT C C7. GAS COST RECOVERY CLAUSE C C7.1. Applicability of Clause C C7.2. Booked Cost of Gas Sold C C7.3. Billing C C7.4. General Conditions C C8. REFUNDING PROCEDURES C C8.1. Receipt of Refunds C A. Supplier Refunds C B. Gas Cost Recovery (GCR) Plan Reconciliation C C8.2. GCR Member Refunds C A. Supplier Refunds C B. GCR Reconciliation C C. Other Refunds C C8.3. Non-GCR Member Refunds C (Continued on Sheet No. A-2.04)

20 INDEX (Continued from Sheet No. A-2.03) Page 6 of 85 Original Sheet No. A-2.04 SECTION D RATE SCHEDULES Sheet No. General Terms and Conditions of the Rate Schedules Surcharges Gas Cost Recovery Factor GCR Quarterly Adjustment Process Special Charges Residential Rate General Service Rate Industrial Rate D-1.00 D-2.00 D-3.00 D-4.00 D-5.00 D-6.00 D-7.00 D-8.00 SECTION E TRANSPORTATION SERVICE (NOT APPLICABLE AT THIS TIME, BUT INCLUDED FOR FUTURE USE) SECTION F GAS CUSTOMER CHOICE PROGRAM (NOT APPLICABLE AT THIS TIME, BUT INCLUDED FOR FUTURE USE) SECTION G STANDARD CUSTOMER FORMS INDEX (NOT APPLICABLE AT THIS TIME, BUT INCLUDE FOR FUTURE USE)

21 Page 7 of 85 Original Sheet No. A-3.00 TABLE OF CONTENTS CHECKLIST Sheet No. Original Sheet No. A-1.00 Original Sheet No. A-2.00 Original Sheet No. A-2.01 Original Sheet No. A-2.02 Original Sheet No. A-2.03 Original Sheet No. A-3.00 Original Sheet No. A-3.01 Original Sheet No. A-3.02 Original Sheet No. A-4.00 Original Sheet No. A-5.00 Original Sheet No. A-6.00 Original Sheet No. A-7.00 Sheet Effective Date Original Sheet No. B-1.00 Original Sheet No. B-2.00 Original Sheet No. B-3.00 Original Sheet No. B-4.00 Original Sheet No. B-5.00 Original Sheet No. B-6.00 Original Sheet No. B-7.00 Original Sheet No. B-8.00 Original Sheet No. B-9.00 (Continued on Sheet No. A-3.01)

22 Page 8 of 85 Original Sheet No. A-3.01 TABLE OF CONTENTS CHECKLIST (Continued from Sheet No. A-3.00) Sheet No. Original Sheet No. C-1.00 Original Sheet No. C-2.00 Original Sheet No. C-3.00 Original Sheet No. C-4.00 Original Sheet No. C-5.00 Original Sheet No. C-6.00 Original Sheet No. C-7.00 Original Sheet No. C-8.00 Original Sheet No. C-9.00 Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Sheet Effective Date

23 Page 9 of 85 Original Sheet No. A-3.02 Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. C Original Sheet No. D-1.00 Original Sheet No. D-1.01 Original Sheet No. D-1.02 Original Sheet No. D-1.03 Original Sheet No. D-2.00 Original Sheet No. D-3.00 Original Sheet No. D-4.00 Original Sheet No. D-5.00 Original Sheet No. D-6.00 Original Sheet No. D-6.01 Original Sheet No. D-7.00 Original Sheet No. D-7.01 Original Sheet No. D-8.00 Original Sheet No. D-8.01 Original Sheet No. E-1.00 Original Sheet No. F-1.00 Original Sheet No. G-1.00 TABLE OF CONTENTS CHECKLIST (Continued from Sheet No. A-3.01)

24 Page 10 of 85

25 Page 11 of 85 Original Sheet No. A-5.00 COUNTIES/TOWNSHIPS SERVED IN MICHIGAN COUNTY TOWNSHIP COUNTY TOWNSHIP ALCONA Alcona OTSEGO Bagley Caledonia Charlton Hawes Chester ALPENA Green PRESQUE ISLE Allis Long Rapids Bearinger Maple Ridge Belkap Ossineke Bismarck Case CHEBOYGAN Aloha Krakow Benton Metz Inverness Moltke Koehler Ocqueoc Mullet Presque Isle Pulaski MONTMORENCY Avery Rogers Briley Hillman VILLAGES Hillman Loud Millersburg Montmorency Rust Vienna

26 Page 12 of 85 Original Sheet No. A-6.00 FRANCHISE AGREEMENTS The rates of the Cooperative within all of the territory serviced by the Cooperative are governed by franchise agreements. The franchise agreements of the Cooperative are identified as follows: NAME OF MUNICIPALITY DATE OF ADOPTION OF ORDINANCE Township of Alcona December 14, 1999 Township of Allis March 27, 1996 Township of Aloha April 29, 1996 Township of Avery July 5, 1994 Township of Bagley February 10, 2003 Township of Bearinger February 2, 1998 Township of Belknap April 17, 1995 Township of Benton August 19, 1996 Township of Bismarck December 5, 1994 Township of Briley July 7, 1994 Township of Caledonia December 8, 1999 Township of Case December 5, 1994 Township of Charlton October 12, 1998 Township of Chester March 13, 2001 Township of Green August 17, 1994 Township of Hawes December 14, 1999 Township of Hillman August 2, 1994 Township of Inverness March 11, 1997 Township of Koehler April 22, 1996 Township of Krakow July 9, 1996 Township of Long Rapids June 17, 1998 Township of Loud May 18, 1995 Township of Maple Ridge September 2, 1998 Township of Metz March 9, 1995 Township of Moltke November 7, 2000 Township of Montmorency August 3, 1994 Township of Mullett April 26, 1996 Township of Ocqueoc August 10, 1995 Township of Ossineke March 25, 2000 Township of Presque Isle August 5, 1996 Township of Pulawski August 26, 1996 Township of Rogers October 21, 1996 Township of Rust July 5, 1994 Township of Vienna June 18, 1998 Village of Hillman August 2, 1994 Village of Millersburg December 12, 1994

27 Page 13 of 85 Original Sheet No. A-7.00 TECHNICAL TERMS AND ABBREVIATIONS (FOR ALL CUSTOMERS) The definitions of the following technical terms and abbreviations are applicable to the Cooperative's Gas Rate Book and are not contained in the other sections thereof. A. FOR ALL UTILITIES 1. Commission means the Michigan public service commission. 2. Effective Date means the date when the tariff sheet must be followed. 3. Issue Date means the date the Cooperative files a tariff sheet with the Commission. 4. Rate Book means the complete set of Cooperative filings submitted in accordance with the "Filing Procedures for Electric, Wastewater, Steam and Gas Utilities". 5. Rate Schedule or Rider means the rate or charge for a particular classification of service, including all special terms and conditions under which that service is furnished at the prescribed rate or charge. 6. Rate Sheet or Tariff Sheet means any of the documents filed in accordance with the "Filing Procedures for Electric, Wastewater, Steam and Gas Utilities". 7. Rules and Regulations means the rules, regulations, practices, classifications, exceptions, and conditions that the Cooperative must observe when providing service. 8. Standard Customer Forms Index means a listing showing the number, title, and revision date for all standard forms, in any format (preprinted or electronically preformatted) that the Cooperative uses to document contracts or other agreements that create or alter a customer s rights or responsibilities in dealings with the Cooperative. Standard customer forms require a customer signature or are specifically referenced within the Rate Book for execution between the Cooperative and customers. B. COOPERATIVE 1. Ccf cubic feet 2. Cooperative - 3. Dekatherm - 10 therms or 1,000,000 British thermal units 4. Mcf - 1,000 cubic feet

28 Page 14 of 85 Original Sheet No. B-1.00 SECTION B ADMINISTRATIVE RULES INDEX B1. TECHNICAL STANDARDS FOR GAS SERVICE (R R ) (FOR ALL CUSTOMERS) PART 1. R R PART 2. R R R PART 3. R R R R R PART 4. R R PART 5. R R R R R R R R GENERAL PROVISIONS Definitions. Application, intention, and interpretation of rules; utility rules and regulations. RECORDS, REPORTS, AND OTHER INFORMATION Retention of records. Location of records. Reports and records generally. SERVICE REQUIREMENTS Sale of gas. Permanent service line rules. Main extension rules. Temporary service. Interruptions of service. ENGINEERING Gas facilities; construction and installation. Standards of accepted engineering practice. INSPECTION OF METERS Meters and associated metering devices; inspections and tests. Diaphragm-type meters; meter tests; reports. Retirement of meters. Accuracy of metering equipment; tests; standards. Meter shop; design; meter testing system; standards; handling; calibration cards; calibrated orifices. Pressure measurement standards. Records; meter tests. Records; meter and associated metering device data. (Continued on Sheet No. B-2.00)

29 Page 15 of 85 Original Sheet No. B-2.00 SECTION B ADMINISTRATIVE RULES INDEX (Continued from Sheet No. B-1.00) B1. TECHNICAL STANDARDS FOR GAS SERVICE (R R ) (FOR ALL CUSTOMERS) (Contd) PART 6. R R R R R PART 7. R R R R PART 8. BILL ADJUSTMENT; METER ACCURACY Bill adjustment; meter accuracy. Determination of adjustment. Refunds. Rebilling. Consumption data records. SHUTOFF OF SERVICE Conditions for establishing gas service; liability; notice and record of inability to establish service; refusal of service to customer using other gaseous fuel; exception. Gas facilities hazard. Shutoff of service. Customer notification of shutoff of service. GAS QUALITY R R R Gas purity. Heating value; authorized variations. Heating value records; location and accuracy of measuring equipment; frequency of heating value determination. B2. CONSUMER STANDARDS AND BILLING PRACTICES FOR ELECTRIC AND GAS RESIDENTIAL SERVICE (R R ) PART 1. R R R R R PART 2. R R GENERAL PROVISIONS Application of rules. Definitions. Discrimination prohibited. Conduct of proceedings. Additional rules. APPLICATION FOR SERVICE Service requests for new or previous customers. Applicant information. (Continued on Sheet No. B-3.00)

30 Page 16 of 85 Original Sheet No. B-3.00 SECTION B ADMINISTRATIVE RULES INDEX (Continued from Sheet No. B-2.00) B2. CONSUMER STANDARDS AND BILLING PRACTICES FOR ELECTRIC AND GAS RESIDENTIAL SERVICE (R R ) (Contd) PART 3. R R R R R PART 4. R R R R PART 5. R R R R R R R R R R PART 6. R DEPOSITS AND GUARANTEE TERMS AND CONDITIONS Prohibited practices. Deposit for new customer. Deposit for a previous customer or for continued service. General deposit conditions. Guarantee terms and conditions. PART 4. METER READING PROCEDURES, METER ACCURACY, METER ERRORS AND RELOCATION Actual and estimated meter reading. Company representative identification. Customer meter reading. Meter accuracy, meter errors, meter relocation. BILLING AND PAYMENT STANDARDS Billing frequency; method of delivery. Equal monthly billing. Cycle billing. Payment of bill. Payment period. Allowable charges. Bill information. Separate bills. Billing for non-tariff services. Billing error. VOLUNTARY TERMINATION OF SERVICE Voluntary termination. (Continued on Sheet No. B-4.00)

31 Page 17 of 85 Original Sheet No. B-4.00 SECTION B ADMINISTRATIVE RULES INDEX (Continued from Sheet No. B-3.00) B2. CONSUMER STANDARDS AND BILLING PRACTICES FOR ELECTRIC AND GAS RESIDENTIAL SERVICE (R R ) (Contd) PART 7. R R R R R R R R PART 8. R R R R R R R R R PART 9. R R R R R R UTILITY PROCEDURES Applicability. Complaint procedures. Personnel procedures. Publication of procedures. Access to rules and rates. Reporting requirements. Inspection. Customer access to consumption data. PROCEDURES FOR SHUTOFF AND RESTORATION OF SERVICE Emergency shutoff. Shutoff permitted. Notice of shutoff. Form of notice. Time of shutoff. Manner of shutoff. Manner of shutoff for service provided with remote shutoff and restoration capability. Shutoff prohibited. Restoration of service. ENERGY ASSISTANCE AND SHUTOFF PROTECTION PROGRAMS Listing of energy assistance programs. Notice of energy assistance programs. Medical emergency. Winter protection plan for low-income customers. Winter protection plan for senior citizens. Military protections. (Continued on Sheet No. B-5.00)

32 Page 18 of 85 Original Sheet No. B-5.00 SECTION B ADMINISTRATIVE RULES INDEX (Continued from Sheet No. B-4.00) B2. CONSUMER STANDARDS AND BILLING PRACTICES FOR ELECTRIC AND GAS RESIDENTIAL SERVICE (R R ) (Contd) PART 10. R R R R R R R PART 11. R R R R R R R R R R R R DISPUTED CLAIM, HEARING AND SETTLEMENT AGREEMENT Disputed claim. Utility hearing and hearing officers. Notice of hearing. Hearing procedures. Settlement agreement. Default of settlement agreement. Same dispute. COMMISSION APPEAL PROCEDURES Informal appeal. Filing procedures. Informal appeal procedures. Interim determination. Appeal review. Shutoff pending decision. Informal appeal decision. Failure to comply with informal appeal decision. Same dispute. Formal appeal. Other remedies. Scope of rules. B3. UNCOLLECTIBLES ALLOWANCE RECOVERY FUND (R R ) PART 1. R R GENERAL PROVISIONS Application of rules. Definitions. (Continued on Sheet No. B-6.00)

33 Page 19 of 85 Original Sheet No. B-6.00 SECTION B ADMINISTRATIVE RULES INDEX (Continued from Sheet No. B-5.00) B3. UNCOLLECTIBLES ALLOWANCE RECOVERY FUND (R R ) (Contd) PART 2. R R R R R UNCOLLECTIBLES ALLOWANCE RECOVERY FUND Uncollectibles allowance recovery fund. Annual deposits. Notice of deposit. Disputes; procedure for resolution. Disbursement of funds. B4. BILLING PRACTICES APPLICABLE TO NON-RESIDENTIAL ELECTRIC AND GAS CUSTOMERS (R ) (INCLUDING MULTIFAMILY DWELLING SERVICE RATE A-1 CUSTOMERS) PART 1. R R R R R PART 2. R PART 3. R PART 4. R R R R Applicability purpose. Definitions. Discrimination prohibited. Form of proceedings. Additional rules. APPLICATION FOR SERVICE Application for new service. GENERAL CUSTOMER DEPOSIT CONDITIONS Customer Deposits. METER READING, ESTIMATED BILLS, BILLING ADJUSTMENTS, VOLUNTARY TERMINATION, AND METER RELOCATION Meter reading interval and estimated bills. Metering inaccuracies; billing adjustments. Voluntary termination. Meter or facilities relocation charge. (Continued on Sheet No. B-7.00)

34 Page 20 of 85 Original Sheet No. B-7.00 SECTION B ADMINISTRATIVE RULES INDEX (Continued from Sheet No. B-6.00) B4. BILLING PRACTICES APPLICABLE TO NON-RESIDENTIAL ELECTRIC AND GAS CUSTOMERS (R ) (INCLUDING MULTIFAMILY DWELLING SERVICE RATE A-1 CUSTOMERS) (Contd) PART 5. R R R R R R PART 6. R R R R R R PART 7. R R R BILLING AND PAYMENTS Cycle billing. Billing information. Discounts and late payment charges. Delivery and payment of bills. Billing for unregulated service. Billing errors. CUSTOMER RELATIONS AND UTILITY PROCEDURES Selection of rate, customer information, and service. Inspection. Customer access to consumption data. Servicing utility equipment on customer's premises. Customer complaints; investigation; records. Records and reports. SHUTOFFS AND RESTORATION Notice of shutoff. Denial or shutoff of service to customer. Manner of shutoff for service provided with remote shutoff and restoration capability. (Continued on Sheet No. B-8.00)

35 Page 21 of 85 Original Sheet No. B-8.00 SECTION B ADMINISTRATIVE RULES INDEX (Continued from Sheet No. B-7.00) B4. BILLING PRACTICES APPLICABLE TO NON-RESIDENTIAL ELECTRIC AND GAS CUSTOMERS (R ) (INCLUDING MULTIFAMILY DWELLING SERVICE RATE A-1 CUSTOMERS) (Contd) PART 8. R R R R R R R R R R R R R PART 8. DISPUTED CLAIMS, HEARINGS AND SETTLEMENT AGREEMENTS Disputed claim. Settlement agreement. Default of settlement agreement. Informal hearing and hearing officers. Notice of hearing. Hearing procedures. Informal appeal procedures. Interim determination. Appeal review. Shutoff pending decision. Informal appeal decision. Failure to comply with informal appeal decision. Scope of rules. ADDITIONAL ADMINISTRATIVE RULES * Waivers may have been granted by the Commission to the Company for certain portions of the administrative rules below. B5. PRACTICE AND PROCEDURES BEFORE THE COMMISSION R R B6. FILING PROCEDURES FOR ELECTRIC, WATER, STEAM AND GAS UTILITIES R R = B7. RESIDENTIAL CONSERVATION PROGRAM STANDARDS R R = B8. PRESERVATION OF RECORDS OF ELECTRIC, GAS AND WATER UTILITIES R R (Continued on Sheet No. B-9.00)

36 Page 22 of 85 Original Sheet No. B-9.00 SECTION B ADMINISTRATIVE RULES INDEX (Continued from Sheet No. B-8.00) B9. MICHIGAN GAS SAFETY STANDARDS R R B10. PRODUCTION AND TRANSMISSION OF NATURAL GAS R R = B11. B11. UNIFORM SYSTEM OF ACCOUNTS FOR MAJOR AND NONMAJOR GAS UTILITIES R , R ttp:// B12. RATE CASE FILING REQUIREMENTS FOR MAJOR GAS UTILITIES

37 Page 23 of 85 Original Sheet No. C-1.00 SECTION C COOPERATIVE RULES AND REGULATIONS (FOR ALL MEMBER-CONSUMERS) INTENT OF SECTION C These General Rules and Regulations for all Member-Consumers are not to supersede but are in addition to Rule B1, Technical Standards for Gas Service, Rule B2, Consumer Standards and Billing Practices for Electric and Gas Residential Service, and Rule B4, Billing Practices Applicable to Non-Residential Electric and Gas Member-Consumers. C1. CHARACTERISTICS OF SERVICE C1.1. Character of Service The Cooperative shall endeavor, but does not guarantee, to furnish a continuous supply of gas and to maintain pressure in its lines within reasonable limits. The Cooperative shall not be liable for interruptions in the service, variations in the pressure, or variations in the service characteristics, or for any loss or damage of any kind or character occasioned thereby, due to causes or conditions beyond the Cooperative's reasonable control, and such causes or conditions shall be deemed to specifically include, but not be limited to the following: acts or omissions of Member-Consumers or third parties; operation of safety devices except when such operation is caused by the negligence of the Cooperative; absence of an alternate supply of service; failure, malfunction, breakage, necessary repairs or inspection of machinery, facilities or equipment when the Cooperative has carried on a program of maintenance consistent with the general standards prevailing in the industry; act of God; war; action of the elements; storm or flood; fire; riot; labor dispute or disturbances; or the exercise of authority or regulation by governmental or military authorities. Regardless of contracts in force, the Cooperative shall have the right (a) to institute and maintain curtailments of gas service in accordance with the provisions of Rule C3, Curtailment of Gas Service, of this Gas Rate Book, and (b) in the event of an emergency causing a short-term shortage of gas supply, to grant preference to that service, which in the Cooperative's judgment, is most essential to the public health, safety and welfare. Before purchasing equipment or installing piping, the Member-Consumer shall secure from the Cooperative information regarding whether new or additional gas loads are being accepted and the characteristics of the service available. (Continued on Sheet No. C-2.00)