November 7, Case No. I G-390P Mountaineer Gas Company lnfrastructure Replacement and Expansion Program Filing for 20 I9

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1 Pittsburgh. 1 1c 500 LEE STREET EAST * SCJITE I600 * CC). BOX 553 * CHARLESTON, WEST VIRGINIA * TELEPHONE: * TELEC(3PIER: I30 DIRECT TELEPHONE: (304) DIFECT TELECOPIER: (304) ~ iacksonkelly.com State Bar No November 7,201 8 VL4 HAND DELIVERY Ingrid Ferrell, Executive Secretary Public Service Commission of WV 201 Brooks Street Charleston, West Virginia Re: Case No. I G-390P Mountaineer Gas Company lnfrastructure Replacement and Expansion Program Filing for 20 I9 Dear Ms. Ferrell: Mountaineer Gas Company, the Staff of the Public Service Commission of West Virginia, the Consumer Advocate Division of the Commission, the West Virginia Energy Users Group, and the Independent Oil and Gas Association of West Virginia, Inc. submit the enclosed Joint Stipulation and Agreement for Settlement in resolution of this case. Company witness Scott F. Klemm and Staff witness Nathan Mills will be available at tomorrow s hearing to support the Joint Stipulation. The parties ask that the Commission excuse all other witnesses. Please file this letter and its enclosure and provide the extra copies to the appropriate parties at the Commission. We also ask that you date stamp the extra copy provided and return it with our messenger. As always, we appreciate your assistance. Sincerely yours, Enc 1 o sure cc: Scott Klemm Linda Bouvette, Esq. Tom White, Esq. Barry A. Naum, Esq. Grant P. H. Shuman, Esq. George A. Patterson, 111, Esq. Nicklaus A. Presley vI 6ridgeporr.W Char(estan,W Marcinmburg.WV * Morgantown.W *Wheeling.WV Denver, CO Cranfordrville. IN * Evansviile. IN Lexington. KY *Akron, OH f PA - Washinkon, DC

2 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON CASE NO G-390P - MOUNTAINEER CAS COMPANY Infrastructure Replacement and Expansion Program Filing for JOINT STI ENT FOR SETTLE Pursuant to W. Va. Code (f) and Procedural Rule 13(d), Mountaineer Gas Company ( Company *), the Staff of the Public Service Commission of West Virginia ( Staff ), the Consumer Advocate Division of the Commission ( CAD ), the West Virginia Energy Users Group ( WEUG ). and the Independent Oil and Gas Association of West Virginia, Inc. ( IOGA, and collectively, the Parties ) join in this Joint Stipulation and Agreement for Settlement ( Joint Stipulation ). In this Joint Stipulation, the Parties propose a comprehensive settlement of the Company s pending application under W. Va. Code <, et seq. ( SB390 ). The Parties recoinmend that the Commission approve the Joint Stipulation without modification, thereby approving the Company s 2019 Infrastructure Replacement and Expansion Program ( REP ) and authorizing a cumulative revenue requirement of $9,524,325 as set forth on Exhibit A and the 2019 IREP Rate Component as set forth on Exhibit B to this Joint Stipulation. Introduction and Procedural History 1. On July 31, 2018, the Company filed for approval of its 2019 IREP, supported by pre-filed direct testimony and several exhibits.

3 2. CAD, WVEUG, and IOGA filed Petitions to Intervene on August 3, 2018, September 20, 2018, and September 24,2018, respectively. 3. In its August 28, 2018 Order, the Commission granted CAD S Petition to Intervene, established a procedural schedule, and required the Company to publish notice of the application and hearing. 4. The Commission granted the Petitions to Intervene filed by WVEUG and IOGA by orders entered on September 21,2018 and September 28,2018, respectively. 5. The Commission held a hearing on October 24, 2018 in Shepherdstown, West Virginia to receive public comments. 6. The Parties filed the testimony of these witnesses: Company: Staff WEUG: C. David Lokant, Thomas D. Westfall, and Scott F. Klemm Eric F. decruyter and Nathan Mills Richard A. Baudino 7. The Parties undertook an investigation of the Application and its attachments and filed data requests on the Company to clarify aspects of the filing. Based on their analyses and the Company s representations and commitments in this Joint Stipulation, the Parties jointly recoinmend approval of the IREP and implementation of the 2019 IREP Rate Component. The Settlement Terms 8. The Parties agree and recommend that the Commission adopt the Joint Stipulation in its entirety as the basis for its resolution of this case. The terms and conditions of the Joint Stipulation, each of which is an essential and integral element of a fair and reasonable resolution in the public interest, are set forth below. 2

4 Investment. The Parties agree and recommend that the Commission approve the Company s forecasted IREP investments for the year 2019 as set forth on Exhibits 1, 2, and 3 of the Application, except for the Fairview Drive, Hedgesville MS, and Hedgesville HS extension projects ( 2019 Excluded Projects ). However, no Party shall object to an amended filing by the Company with supporting documentation to reopen this proceeding to seek approval of one or more of the 2019 Excluded Projects should the Company receive written commitments from potential customers evidencing an interest in receiving service. The Parties recommend that the Commission approve the Rockwool and US Silica extension projects in the 2019 IREP Rate Component. 10. Revenue Requirement. The Parties agree and recommend that the cumulative IREP annual revenue requirement to be included in rates effective January 1, 2019 is $9,524,325, which includes a $238,049 under-recovery for 2017, as shown on Exhibit A to this Joint Stipulation. For purposes of determining this revenue requirement, the Parties agree as follows: a) The Company shall use a 4.28% depreciation rate to calculate the depreciation expense amount relating to investments in measurement and regulator equipment booked to Account 378 only. Should the Company make any measurement and regulator equipment investment in Account 385, then the Company will apply a 3.00% depreciation rate to such investment. b) The depreciation expense offset amount for measurement and regulator equipment shall be $420,873 which only represents Account 378. If the Company should 3

5 make investment in Account 385, then the depreciation expense offset amount would be increased by $13 8,694. c) The depreciation expense offset shall be reflected on a separate line on Exhibit A as a reduction in rate base and not be used to reduce the dollar amount of IREP investment in determining book depreciation and tax depreciation. Book and tax depreciation shall be based on gross IREP investment amounts. d) Deferred Income Tax Expense ("DITE") embedded in or associated with the Company's base rates shall not be treated as an offset (reduction) to IREP rate base. e) The 2019 revenue offset from new customers shall be increased to $755,373 to include estimated revenues from US Silica. Agreement to provisions lo(c) and 10(d) is without prejudice to each Party's selection or recommendation of a different approach in future Company base rate cases or in the Company's IREP cases effective with the 2020 IREP filing (made on or about August 1,2019). 11. Consumer Protections. The Parties acknowledge that in the Order resolving Hope Gas, Inc.'s ("Hope") 2019 SB390 filing (Case No G-390P) entered October 29, 2018, the Commission directed Hope to work with Staff and other parties, including Bluefield Gas Company and Mountaineer Gas Company, to arrive at reasonable customer protections and revenue limits generated through the incremental SB390 rate recovery mechanism, with a goal of developing a uniform recommendation on consumer protectioiis that could be applied to all gas utilities in future SB390 filings. The Parties recommend that the consumer protection discussions also involve CAD and WVEUG. To reach a compromise on the consuiner protections recommended by Staff and WVEUG in this proceeding, particularly as those 4

6 concerns relate to the cumulative impact of the IREP charge on customers, the Company agrees to file its next general base rate proceeding no later than June 30, Pre-Filing Requirement. The Company will file the historical data for the most recently closed actual SB390 investment period with the Commission by May 31'' annually. 13. Standardized Filings. The Company will have further discussions with Staff to address its proposed reconiinendations to enhance future SB390 filings, including the presentation of exhibits, and to make them more consistent with the Commission Rules. 14. Customer Class Allocation. The Parties agree and recommend that the 2019 IREP Rate Component should be allocated to customer classes as shown on Exhibit B to the Joint Stipulation, which reflects the customer class allocation methodology determined in the last base rate case, No G-42T, and used in the Company's 2018 IREP filing. 15. Revised Tariff. The Parties agree and recommend that the Commission approve the Third Revision to Tariff Form No. 79, substantially in the form attached as Exhibit C to this Joint Stipulation, to be effective for service rendered on and after January 1, The Parties agree and recommend that the Commission find that the form and content of the Application, together with its exhibits and supporting testimony, are responsive to and fulfill the requirements of W. Va. Code lk(b) and (c). General Provisions 17. The Parties support this Joint Stipulation and represent that each of its provisions acceptably resolves all issues raised in this case. Based on the record, the Parties recommend that the Commission accept this Joint Stipulation in resolution of this case. 5

7 18. The Parties represent that the Parties pre-filed evidence and exhibits, as well as the testimony to be offered in sponsorship of this Joint Stipulation, is adequate to support the Joint Stipulation. The Parties ask that the pre-filed testimony and exhibits be admitted into the evidentiary record without the necessity of each witness s sponsorship or attendance at hearing. 19. This Joint Stipulation results Erom a review of all evidence and filings in these cases, the Parties analyses of the Application, exhibits, and testimony, the existing statutory and regulatory Erainework, and good faith negotiation. The Joint Stipulation is proposed to expedite and simplify the resolution of this case in the context of an overall settlement. 20. The Parties recommend that the Coinmission adopt this Joint Stipulation as being in the public interest, without adopting or recommending the adoption of any of the compromise positions set forth herein as ratemaking principles applicable to future regulatory proceedings, except as may otherwise be provided herein. Each component of the Joint Stipulation (including this paragraph) is integral to and inseparable from the others, and no Party advocates the Commission s resolution of any issue proposed in this Joint Stipulation other than in the context of its support for the Joint Stipulation as a whole. 21. This Joint Stipulation is subject to the Commission s acceptance and approval. It will be ineffective until and unless approved by the Commission in all of its material terms and without modification. If the Commission does not grant that approval, then the Parties reserve their rights to fully advocate their positions, unlimited by the terms of the Joint Stipulation. [signature page follows] 6

8 WHEREFORE, the Parties respectfully recommend and request that the Commission make appropriate findings of fact and conclusions of law adopting and approving the Joint Stipulation in its entirety, including its attached exhibits. Dated and effective on November 7,2018. MOUNTAINEER GAS COMPANY STAFF OF THE PUBLIC SERVICE COMMISSION OF WEST VIRGINIA --,By CourjSeq Nicklaus A. Presley, Esq. JACKSON KELLY PLLC 1600 Laidley Tower Post Ofice Box 553 Charleston, WV Linda S. Bouvette, Esq. Public Service Commission 201 Brooks Street, P 0 Box 812 Charleston, WV CONSUMER ADVOCATE DIVISION WEST VIRGINIA ENERGY USERS GROUP Thomas White, Esq. Consumer Advocate Division 700 Union Building 723 Kanawha Boulevard, East Charleston, WV Derrick P. Williamson, Esq. Barry A. Naum, Esq. Spilman Thomas & Battle PLLC Bent Creek Blvd., Suite 101 Mechanicsburg, PA INDEPENDENT OIL AND GAS ASSOCIATION OF WEST VIRGINIA, INC. George A. Patterson, 111, Esq. Bowles Rice McDavid Graff & Love, LLP PO Box 1386 Charleston, WV

9 WHEREFORE, the Parties respectfully recommend and request that the Coinmission make appropriate findings of fact and conclusio~~s of law adopting and approving the Joint Stipulation in its entirety, including its attached exhibits. Dated and effective on November 7,2018. MOUNTAINEER GAS COMPANY Cluistopher L. Callas, Esq. Nicklaus A. Presley, Esq. JACKSON KELLY PLLC 1600 Laidley Tower Post Office Box 553 Charleston, WV STAFF OF THE PUBLIC SERVICE COMMISSION OF WEST VIRGINIA Linda S. Bouvette, Esq. Public Service Commission 201 Brooks Street, P 0 Box 812 Charleston, WV i CONSUMER ADVOCATE DIVISION WEST VIRGINIA ENERGY USERS GROUP Jacqueline L. Roberts, Esq. Thomas White, Esq. Consumer Advocate Division 700 Union Building 723 Kanawha Boulevard, East Charleston, WV Grant P. H. Shuman, Esq. Derrick P. Williamson, Esq, Barry A. Naum, Esq. Spilman Thomas & Battle PLLC 1100 Bent Creek Blvd., Suite 101 Mechanicsburg, PA INDEPENDENT OIL AND GAS ASSOCIATION OF WEST VIRGINIA, INC. Bv Counsel owles Rice McDavid Graff & Love, LLP PO Box 1386 Charleston, WV

10 Exhibit A as ~ o ~ p ~ ~ y Case No OP 2019 IREP Rate Component 2019 Revenue Requirement Line IO I Rate Base: 13-month Average IREP Plant 13-month Average Depreciation Expense Offset 13-month Average DtTE Offset 13-month Average Removal Costs 13-month Accumulated Depreciation Subtotal Federal Plant ADIT ("ADFW) Liability net of Federal NOL ADIT Asset Total Rate Base for IREP Rate Design Return an Rate Base I % Return on Rate Base - $ Add: O&M Expense Depreciation Expense State Property Tax (2016 and 2017 [REP Investments) Federal Income Tax State Income Tax Revenue Requirement before Adjustments Plus: Under-recovery of 2017 IREP Reconciliation Less: Revenue Offset from New Customers served by IREP Investment Net Revenue Requirement after Adjustments Gross-up factor for B&O Taxes (I 00.00% %) Revenues Grossed-up for Income and B&O Taxes Gross-up factor for uncollectible expense (100.00% %) Total Revenue Requirement Including State 6&0 Taxes and Uncollectibles Expense Pro-forma Bad Debt Expense: Total Gross Revenue Amount Pro-forma Revenues Gross-up for Income and B&O Taxes Pro-forma Bad Debt Expense Adjustment Amount $ 104,399,150 (25,310,988) 1,220,183 (3,714,613) $ 76,593,732 (2,156,778) $ 74,436, % $ 5,369,882 2,821, , ,182 54,151 $ 9,633, ,049 (755,373) $ 9,115, % $ 9,524, % $ 9,524,325 $ 9,524,325 9,524, Pro-forma State B&O Tax Expense: Pro-forma Revenues Gross-up for Income and B&O Taxes Pro-forma Revenues Gross-up for Income Taxes $ 9,524,325 9,115,732 Pro-forma State B&O Tax Expense Adjustment $ 408,593

11 Mountaineer Gas Company Case No G-39OP 2019 IREP Rate Component Alfocation by Customer Class - Line Tariff Sales: RS GS GS/SPC LGS LGSjSPC IS IS jspc LIS LEjSPC NGV (RS) ws Base Revenue Increase Per Case G-42T column (1) $ 5,714,778 $ 1,890,808 $ 223 $ 34,432 $ 9,378 $ 21,253 $ 720 $.$ $ 33,466 Allocation Factor (2) Total Revenue Requirement (3) $ 7,064,112 $ 2,337,253 $ 276 $ 42,562 $ 11, ,271 $ s $ 41,368 Cumulative Billing Units IREP Rate Cumulative Incremental Incremental (mcf or Component IREP Rate [REP Rate IREP Revenue meters) (C) (C) (CI Requirement (6) 258,560 $ $ $ $ $ Transport Volumes: RS $ GS $ GSjSPC $ LGS $ LGS/SPC $ IS 5 rsjspc $ FIS/SPC $ WS/SPC/NGV $ $ ,145,020 $ ,OS 3,708 1,766,224 $ ,320,053 3,398,821 $ ,553,192 2,510,975 16, $ 7,705, $ 9,524,325 47,056,424 $ 3,314,605 (A) - Includes transport volumes (B) ~ Represents number of customers (i.e., meters) in customer cfass (transport customers) (C) - AH rates are volumetric except for LGS and IS customer classes which are monthly fixed charges.

12 Exhibit C Mountaineer Gas Company Charleston, West Virginia 3d Revision of Sheet No. 79 Canceling 2nd Revision of Sheet No. 79 P.S.C. W. Va. No. 2 SERVICE CLASSIFICATION Infi-dstructure Replacement and Expansion Program (IREP) IREP Rate Schedule A~~licability An Infrastructure Replacement and Expansion Program Plan (IREP) rate will be applied to customers' bills after January 1,2019 under the applicable tariff schedule as set forth in the rate schedule shown below. Effective for setvice rendered on and after January 1,2019, the IREP rate will be bilied as a component ofthe volumetric base rate for tariff sales customers and transport customers for each rate schedule as set forth below: Effective for service rendered on and after January 1,201 9, the IMP rate will be billed as a component of the customer charge for tariff sales customers and transport customers for each rate schedule as set forth below: Rate Schedule $ $ Local Tax Surcharge The above rates are subject to the local tax surcharge as set forth on Sheet Nos. 40,41,42, and 43 (C) Indicates change in text (I) Indicates an increase in rates Issued by Authority of an Order Of the Public Service Commission of West Virginia In Case No I 15-G-390P Dated Issued: December Effective: January 1,20 19 lssued by: Tom M. Taylor President

13 CASE NO G-390P PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON MOUNTAINEER GAS COMPANY Infrastructure Replacement and Expansion Program Filings for CERTIFICATE OF SERVICE I certify service of Joint Stipulation and Agreement for Settlement on November 7, 201 8, by United States First Class Mail, postage prepaid, as addressed: Jacqueline L. Roberts, Esq. Tom White, Esq. Consumer Advocate Division 700 Union Building 723 Kanawha Blvd., East Charleston, WV Consumer Advocate Division Linda S. Bouvette, Esq. Public Service Commission of WV P. 0. Box 812 Charleston, WV Commission Staff Grant P. H. Shuman, Esq. Spilman Thomas & Battle P. 0. Box 273 Charleston, WV and Barry A. Naum, Esq. Derrick P. Williamson, Esq. Spilman Thomas & Battle PLLC 1100 Bent Creek Blvd., Suite 101 Mechanicsburg, PA West Virginia Energy Users Group George A. Patterson, 111, Esq. Bowles Rice McDavid Graff & Love, LLP PO Box 1386 Charleston, WV Independent Oil and Gas Association of West Virginia, Iizc ~1