PSCHTITAPC AiroINEs Al l.mv 17 North Second Street 12th Floor Harrisburg, PA 17101-1 601 717-731-1970 Main 717-731-1985 Main Fax www.postschell.com Anthony D. Kanagy akanagypostschell.com 717-612-6034 Direct 717-731-1985 Direct Fax File #: 2270/1 53371 April 4, 2013 VIA ELECTRONIC FILING Rosemary Chiavetta, Secretary Pennsylvania Public Utility Commission Commonwealth Keystone Building 400 North Street, 2nd Floor North P.O. Box 3265 Harrisburg, PA 17105-3265 Re: Joint Petition of UGI Utilities, Inc. - Gas Division, UGI Penn Natural Gas, Inc. and UGI Central Penn Gas, Inc. For Approval To Implement Growth Extension Tariff Pilot Programs To Facilitate The Extension of Gas Service To Unserved and Underserved Areas Within The Companies' Service Territories Docket No. P-2013- Dear Secretary Chiavetta: Attached please find the Joint Petition of UGI Utilities, Inc. - Gas Division, UGI Penn Natural Gas, Inc. and UGI Central Penn Gas, Inc. For Approval To Implement Growth Extension Tariff Pilot Programs To Facilitate The Extension of Gas Service To Unserved and Underserved Areas Within The Companies' Service Territories. Copies will be provided as indicated on the Certificate of Service. rsp Ctfully submitted, Anthony D. Kanagy ADKlskr Attachment cc: Certificate of Service 106 15240v1 ALLENTOWN HARRISBURG LANCASTER PHILADELPHIA PITTSBURGH PRINCETON WASHINGTON, D.C. A PENNSYLVANIA PROFESSIONAL CORPORATION
CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing has been served upon the following persons, in the manner indicated, in accordance with the requirements of 52 Pa. Code 1.54 (relating to service by a participant). Tanya J. McCloskey, Esquire Office of Consumer Advocate 555 Walnut Street Forum Place, 5th Floor Harrisburg, PA 17101-1923 Steven C. Gray, Esquire Office of Small Business Advocate Commerce Building 300 North Second Street, Suite 1102 Harrisburg, PA 17101 Johnnie E. Simms, Esquire Bureau of Investigation & Enforcement Commonwealth Keystone Building 400 North Street, 2nd Floor West P0 Box 3265 Harrisburg, PA 17105-3265 VIAFIRSLCLASSMAIL Date: April4,2013 Anthony D. Kanagy 1061503 lvi
BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION Joint Petition of UGI Utilities, Inc. - Gas Division, UGI Peim Natural Gas, Inc. and UGI Central Penn Gas, Inc. For Approval ToimplementGrowth Extension Tariff Pilot Programs To Facilitate The Extension of Gas Service To Unserved and Underserved Areas Within The Companies' Service Territories Docket No. P-2013- JOINT PETITION OF UGI UTILITIES, INC. - GAS DIVISION, UGI PENN NATURAL GAS, INC. AND UGI CENTRAL PENN GAS, INC. I. INTRODUCTION UGI Utilities, Inc. - Gas Division ("UGI"), UGI Penn Natural Gas, Inc. ("PNG") and UGI Central Penn Gas, Inc. ("CPG") (collectively the "UGI Companies" or "Companies") hereby file this Joint Petition requesting Pennsylvania Public Utility Commission ("Commission") approval to implement Growth Extension Tariff ("GET Gas") Pilot Programs to explore new ways to economically extend gas service to new customers in a way that will: (1) allow certain new customers to obtain natural gas service without paying a large up-front contribution; (2) not unreasonably burden existing customers with the costs of line extensions; and (3) make gas service more readily available, thereby producing energy cost savings and other benefits for GET Gas customers. Natural gas is currently one of the cleanest, most abundant 1 and least expensive 2 energy sources in Pennsylvania and across the United States. The recent abundance of gas is due in According to the United States Department of Energy, Energy Information Agency ("ETA"), and the Potential Gas Committee, a non-profit supported by the Colorado School of Mines, the estimated future supply of natural gas stood at 2,170 trillion cubic feet ("TCF") at the end of 2010 - enough natural gas to meet national energy needs for nearly 100 years. Estimated future supply has grown by 52% on average for the period of 2008-20 10 compared to the 1990-2006 average. 106157 livi
large part to advances in technology that have permitted the economical extraction of natural gas from shale resources, including the Marcellus shale, which is estimated by the ETA to contain 141 TCF of technically recoverable natural gas. Pennsylvania's and the nation's economy are significantly benefiting from this newly realized natural resource. This substantial abundance of natural gas has, in recent years, also resulted in a substantial divergence between natural gas and heating oil prices. The current price spread between natural gas and heating oil, which is the second most prevalent heating source in Pennsylvania, is currently $17.04 per MMBtu. 3 This substantial price spread means that Pennsylvania consumers currently heating with oil who can gain access to natural gas distribution service have the opportunity to save substantial sums of money over time. Substantial savings can also be realized in comparison to other heating sources. Accordingly, it is not surprising that the UGI Companies have seen record numbers of consumers convert to natural gas from alternate fuels, that Pennsylvania policy makers have sought to investigate ways to facilitate the expansion of natural gas distribution service in Pennsylvania, 4 and that there have been proposals and policy initiatives in other states to increase the availability of natural gas distribution service. 5 Pennsylvania's businesses and consumers clearly have and are benefiting substantially from the existing natural gas distribution systems in the Commonwealth, and there are significant opportunities for even greater benefits through the cost-effective expansion of those systems to enable more of the Commonwealth's businesses and 2 Appendix A, reflecting data from the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, shows the substantial savings residential customers with access to natural gas can expect compared to other energy sources. This is the spread between natural gas and heating oil based on the April 2013 NYMEX future closing prices. See Senate Bills 738 and 739, Regular Session 2013-2014. See e.g, Nebraska, Legislative Bill 1115 passed in July 2012; also see the New York State Energy Plan of 2009. 1061571 lvi 2
consumers to displace less efficient, less environmentally beneficial and more costly energy sources. The UGI Companies' current line extension rules have worked well in balancing the interests of new and existing customers by requiring new customers to bear the uneconomic costs associated with extending service to new areas. Under these rules, applicants seeking an extension of natural gas distribution facilities are granted an allowance towards the costs of the extension reflective of the anticipated distribution revenue to be expected under existing rates, but must pay, in a lump sum, any costs of the extension in excess of this allowance. UGI proposes to retain these rules. However, in seeking creative ways to expand the benefits of natural gas to new customers in Pennsylvania, the UGI Companies are proposing GET Gas Pilot Programs which will allow the Companies to extend natural gas service to certain customers without requiring them to pay large up-front contributions and to effectively pay reduced contributions (because of projected future connections) over time. These customers include those in relatively high density areas typically found in small towns or portions of towns or communities ("Unserved Areas") or small groups or pockets of customers in a neighborhood location ("Underserved Areas") not currently served by natural gas distribution facilities, but who are located relatively close to existing natural gas distribution systems, interstate pipeline facilities, or gathering lines and local production facilities. In both Unserved and Underserved Area cases under the proposed GET Gas rules, the UGI Companies would be permitted to designate a GET Gas facility area where: (1) the total capital costs for an extension to the Unserved or Underserved Area would be in excess of $15,000, (2) there is a reasonable prospect that 50% or more of residential homes along the route of the proposed GET Gas extension will convert their primary heating service to natural 106157110 3
gas within 12 years, and (3) the anticipated investment per projected new customer is less than $10,000. As explained herein, the UGI Companies propose to establish Pilot GET Gas tariffs to define the rules under which the UGI Companies would designate certain newly expanded segments of its system as GET Gas facility areas and to establish the surcharges for those customers connecting to these newly expanded facilities, including the related terms and conditions of the pilot programs. The UGI Companies believe that the GET Gas Pilot Tariff Programs will allow the Companies to extend gas service to Unserved and Underserved Areas of the Companies' service territories, allow GET Gas customers to receive the benefit of natural gas service and further promote the development and use of Marcellus Shale gas in Pennsylvania without undue burden to existing customers. In support of this Petition, the UGI Companies state as follows: II. BACKGROUND AND REASONS FOR FILING 1. UGI, PNG and CPG are affiliated natural gas distribution companies ("NGDC5") subject to the Commission's regulatory jurisdiction. UGI provides natural gas distribution, supply and transportation service to approximately 349,000 customers in fifteen counties in eastern Pennsylvania. PNG provides natural gas distribution, supply and transportation service to approximately 161,000 customers in thirteen counties in northeastern and central Pennsylvania. CPG provides natural gas distribution, supply and transportation service to approximately 77,000 customers in thirty-nine counties throughout Pennsylvania. 2. The UGI Companies' counsel in this proceeding are: 10615711v1
Mark C. Morrow, Esquire (ID # 33590) Chief Regulatory Counsel UGI Corporation 460 North Guiph Road King of Prussia, PA 19406 Phone: 610-768-3628 Fax: 610-992-3258 E-mail:morrowm@ugicorp.com David B. MacGregor, Esquire (ID # 28804) Post & Schell, P.C. Four Penn Center 1600 John F. Kennedy Blvd. Philadelphia, PA 19103-2808 Phone: 215-587-1197 Fax: 215-320-4879 E-mail:dmacgregor@postschell.com Anthony D. Kanagy, Esquire (ID # 85522) Post & Schell, P.C. 17 N. Second Street, 12th Floor Harrisburg, PA 17101-1601 Phone: 717-612-6034 Fax: 717-731-1985 E-mail:akanagypostschell.com 3. The UGI Companies' counsel are authorized to receive service of all documents in this proceeding. 4. Over the past several years, the production of natural gas in the United States has increased substantially due to the extraction of gas from shale formations. One of the biggest shale gas formations, the Marcellus Shale, is located in large part in the western and northern portions of Pennsylvania. ETA projects that the Marcellus Shale formation alone holds 141 TCF of recoverable natural gas (1 TCF heats 15 million homes/year). 5. The massive influx of new gas production has caused a substantial decrease in the price of natural gas. For example, in the summer of 2008, the Henry Hub twelve-month forward strip price was as high as $13.73 per MMBtu (based on the average daily NYMEX price for the 10615711v1
12-month futures strip during June 2008). In the summer of 2012, the same Henry Hub twelvemonth forward strip price dropped to as low as $2.47 per MMBtu (based on the average daily NYMEX price for the 12-month futures strip during June 2012). 6. The price for heating oil, Pennsylvania's second most prevalent heating fuel source, has not experienced the same decrease in price. The UGI Companies estimate that an average 4 person household living in an 1800 square foot house currently pays approximately $1,500 more per year to heat their home using heating oil as opposed to natural gas. 7. The price differential between natural gas and heating oil has created a substantial demand for new gas service by consumers. For example, the UGI Companies, in total, have experienced an increase in gas heating conversion new residential customers from 3,635 customers in 2010 to 8,967 customers in 2012, or approximately a 247% increase during the past two years. 8. All of the UGI Companies currently have Commission-approved line extension rules in their tariffs that apply to the extension of gas facilities to customers. UGI Tariff Gas - Pa. P.U.C. No. 5, Rule 5; PNG Tariff Gas - Pa. P.U.C. No. 8, Rule 5; and CPG Tariff Gas - Pa. P.U.C. No. 4, Rule 5. Under these tariff service extension rules, customers are provided an investment allowance which is calculated based upon a number of factors, including appliance type, projected usage by appliance, revenues related to total usage and investment return criteria. Where a customer's investment allowance amount does not cover the full amount of the required investment, the customer is required to pay an up-front contribution in aid of construction ("CIAC") to offset the uneconomic portion of any service extension. 9. These tariff extension rules are important because they protect existing customers from bearing the costs of uneconomic main extensions. Under Section 1501 of the Public Utility 10615711v1 n.
Code, as interpreted by the appellate courts, utilities are not required to extend service to all customers in their service territory, but are only required to extend service to customers under reasonable conditions subject to the regulations and orders of the Commission. 66 Pa. C.S. 1501; Fayette County Gas Co. v. Pa. P.UC., 33 A.2d 761 (Pa. Super. 1943); Popowsky v.pa. P.UC., 589 Pa. 605, 910 A.2d 38(2006). 10. The Commission has adopted regulations requiring NGDCs to adopt line extension rules in their tariffs to set forth the conditions under which facilities will be extended to serve new customers. 52 Pa. Code 59.27. These line extension rules help to maintain reasonable rates because they protect existing customers from bearing uneconomic extension costs. However, the line extension rules can require potential customers to pay a substantial, upfront CIAC in order to receive natural gas service, which can discourage customers from choosing to move forward with a natural gas service extension even though it may be cost effective over time. 11. In response to the substantial new demand for gas service described above, the UGI Companies have been investigating new ways to reduce or eliminate the up-front CIAC requirement for new customers, without unduly burdening existing customers with uneconomic extension costs. 12. The UGI Companies believe that the GET Gas Pilot Program will meet these goals by allowing the Company to extend facilities in certain Unserved and Underserved Areas without requiring new customers to pay substantial, up-front CIAC amounts and without unduly burdening existing customers. 10615711v1 7
13. The GET Gas Pilot Program is described below. Further details in support of the GET Gas Pilot Program will be provided in the Company's Direct Testimony that will be filed at a later date in this proceeding. III. GET GAS PILOT PROGRAM A. GET GAS TARIFF RULES 14. A copy of the proposed pro forma GET Gas Pilot Tariff rules for each Company is provided as Appendix B hereto. Under the GET Gas Pilot Program, any applicant(s) seeking an extension of Company facilities that would require a total capital main cost of $15,000 or more may request that the Company designate their line extension as a GET Gas facility. 6 The Company may grant the request where: (i) the Company determines, in its sole discretion, that there is a reasonable prospect that, within 12 years, 50% or more of existing residential homes along the facility extension in the GET Gas area will convert their primary heating service to natural gas and directly connect to the GET Gas facilities; and (ii) the estimated average per customer investment for all projected customers to be connected does not exceed $10,000. 7 15. The Company will determine whether a 50% or greater saturation of natural gas service connections is likely to be achieved primarily based on a review of the types of heating fuels currently used by customers along the GET Gas facility path. 6 The Company has selected $15,000 as the minimum capital main cost for the pilot program because UGI believes that many projects less than this size can more readily be funded through other means and because the GET Gas pilot is best focused on projects of larger size. In the event that the total investment per projected customer exceeds the $10,000 limit for a general Unserved Area community location, the UGI Companies will allow a municipality to make arrangements to reduce the total investment to no more than $10,000 per projected customer. The $10,000 determination shall be inclusive of any projected commercial customers. 1061571lv1
16. The 50% market share criteria is designed to achieve two important goals: (i) a GET Gas charge that is reasonably affordable based on the ability of a typical GET Gas customer to pay some or all of this charge from the projected savings realized by switching from other heating sources, and (ii) minimizing the likelihood and extent of cross-subsidies between existing customers and GET Gas customers. 17. The GET Gas Program could apply to two types of areas. The first is an Underserved Area, which is a small group or pocket of customers in a neighborhood location in close proximity to an existing main. The second is an Unserved Area, which is a significant portion of a general community, town or municipality where the Company has identified significant potential for natural gas service demand and existing natural gas facilities are located within a reasonable distance. 18. As explained below, each of the UGI Companies proposes to spend an average of $5 million per year for the 5-year pilot program, for a total investment of $75 million over the 5- year period. The UGI Companies anticipate that approximately half of total pilot period investment amounts will be allocated to Unserved Areas and approximately half will be allocated to Underserved Areas. B. GET GAS PILOT PROGRAM CHARGE 19. The GET Gas charge has been developed on a class basis, based on assumptions related to anticipated GET Gas participants, participant usage levels and average cost estimates for mains and services. This class-based rate method is fully consistent with long-standing principles of public utility rate design, will be more understandable to potential customers than a customer specific charge and will reduce administrative costs. 20. Appendix C hereto provides a detailed spreadsheet which sets forth how the GET Gas Rider charges were calculated. 10615711v1
21. In developing the GET Gas charge, the Companies first developed a projected investment per GET Gas customer. 8 The projected main investment cost per customer was based on cost estimates from a review of community projects that would otherwise qualify under the GET Gas tariff and the average main cost per foot for all UGI Companies for all conversion main extensions completed during the 2012 fiscal year. Projected service line costs were based on the average service line costs for all UGI Companies for the 2012 fiscal year. See Appendix C, line 1. 22. The Companies then divided the overall planned annual investment per Company by the investment per customer to derive a projected number of GET Gas customers per Company. See Appendix C, line 2. The total number of customers was then split between residential and commercial customers based on census data indicating that commercial customers represent approximately 7% of the total number of customers in the sample areas. 9 Associated base distribution revenue was then calculated based upon average conversion customer normalized annual usage. 23. The Company then calculated the overall investment amount that could be supported by the expected distribution revenues (non-get revenues) from GET Gas customers and subtracted this amount from the annual GET Gas planned expenditures to determine the overall level of customer contributions that would need to be recovered through the GET Gas 8 The GET Gas charge for each Company is designed to attempt to recover the costs of installing GET Gas facilities from the new class of GET Gas customers through the GET Gas surcharge and normal tariff rates, under an assumption that in total an average of 55% of occupied residential homes in designated GET Gas areas will convert to natural gas. Under the rules of the Program, the UGI Companies may designate an area as GET Gas where it is anticipated that 50% or more of the residential homes in the area will convert to natural gas within a 12 year period. Based upon its initial research, the UGI Companies believe that many of the GET Gas Areas will have a conversion rate that is higher than 50%, with some areas higher than 60%. Therefore, the UGI Companies are setting the GET Gas charge based on an assumption that, on average, 55% of occupied residential homes in GET Gas areas will convert to natural gas. Pursuant to 2010 census data provided by Pennsylvania State University, approximately 7% of properties in the sample community areas are expected to be commercial properties. 106157llv1 10
charges. See Appendix C line 12. The total GET Gas customer contribution requirement was then allocated between residential and commercial customers based on the same percentage of expected base revenue for each class segment; reflecting the base assumption that 93% of customers will be residential customers and 7% will be commercial customers. The residential and commercial GET Gas charges were then set to recover the overall level of required GET Gas contribution amounts, by class, based upon the estimated level of customers that will participate in the GET Gas Program. 24. The monthly GET Gas charge is the same for both residential and commercial customers, with the remaining GET Gas contribution required from commercial customers recovered via volumetric surcharge for all usage in excess of 5 Mef per month.' In total, these charges are designed to recover from GET Gas customers the investment required for the Company to extend its facilities. 25. The table below depicts the monthly and volumetric GET Gas charges for each Company: UGI PNG CPG Residential Monthly GET Gas Rider Fixed Charge (Rates R, RT) $ 65.89 $ 61.21 $ 44.65 Commercial Monthly GET Gas Rider Fixed Charge (Rates N, NT) $ 65.89 $ 61.21 $ 44.65 Commercial Volumetric Rider Charge/Mcf (Rates N, NT) $ 8.73 $ 3.30 $ 1.96 Monthly Volume Threshold all volumes over 5 Mcf all volumes over 5 Mcf all volumes over 5 Mcf 26. As shown in the above table, the GET Gas tariff charges are not the same for each Company. This is because the calculation used to derive the GET Gas charge is based, in part, on the average distribution revenue for a typical customer, which differs by Company. 10 Commercial conversion customer usage was determined based on normalized use per customer for commercial conversion customers for the 2012 fiscal year. 10615711v1 11
27. The GET Gas charge will be applied on a class basis to GET Gas customers. All GET Gas Residential customers for each Company will pay the same GET Gas charge irrespective of the cost to extend service to an individual customer. In addition, all Commercial GET Gas customers for each Company will pay the same charges. 28. Applying the same GET Gas Charge to all customers in each respective class will greatly simplify administration and communication of the program by avoiding the need for the UGI Companies to separately calculate extension costs for individual GET Gas extension projects. This approach also will minimize IT system costs required to support the GET Gas Program. This rate design also is consistent with long-standing principles of class ratemaking. 29. Customers that participate in the GET Gas Pilot Program will pay the monthly GET Gas charges for a 10-year period as a component of distribution service rates, in addition to other applicable tariff charges. The GET Gas charges will be applied to all customers who take service at the premise for the 10-year period following the initial installation of the meter. 30. GET Gas customers may also participate in UGI Companies' Customer Assistance Programs ("CAP Program"), if they otherwise qualify. Distribution charges for CAP Program customers will include GET Gas charges. Payment and shortfall amounts for GET Gas customers in the CAP Program will be determined consistent with existing CAP Program rules. C. THE GET GAS PROGRAM IS A PILOT PROGRAM 31. The UGI Companies are proposing the GET Gas Programs as a pilot program. Each of the UGI Companies are committing to spend an average amount of $5 million per year, for five years for GET Gas projects. The total estimated investment is $25 million per Company and $75 million in total. 32. The pilot aspect of the program relates to initial investment levels by the Companies. After the Companies have installed the facilities, they will continue to allow 1061571 lvi 12
customers to connect to the facilities after the Pilot term ends. Customers that connect to the facilities within a 12 year period will be required to pay the GET Gas charge for a period of 10 years. Under the Program design, if the assumed customer connections and facility cost estimates are met during the 1 2-year period, GET Gas customers will have paid for the full costs of the GET Gas facilities." After a 12-year period, the GET Gas designation will end, and any new customers that connect will be subject to the Company's otherwise applicable main extension rules. 33. This pilot will give the UGI Companies and the Commission an opportunity to evaluate the benefits of the program. If the program is successful, the UGI Companies may propose to continue it or continue it with modifications in a future filing. It is likely that pilot program results after the first two years will provide substantial data which will serve to validate initial GET Gas program assumptions and support of future modifications. 34. The Company will provide annual reports to the Commission describing program spending, customers connected and other key indicators. 35. The Pilot Program will only be open for investment in new GET Gas facilities as long as the difference between natural gas and heating oil equivalent pricing is equal to or greater than $10.00 per MMBtu. If this differential falls and remains below $10.00 per MMBtu for two consecutive quarters, investment in new GET Gas facilities will be suspended, except for GET Gas facility projects that are currently underway or have been committed to by the UGI Companies. In addition, service connections to GET Gas mains that are already installed will be permitted. The Company has chosen 12 years as a reasonable proxy for the number of years that it will take to reach the projected saturation level of GET GAS customers to pay for the GET GAS facilities. 1061571 lvi 13
36. The Companies have included this provision as a consumer protection to ensure that there is a reasonable economic incentive for customers to choose the GET Gas Program and a reasonable likelihood that the 55% saturation basis for developing the GET Gas charge is attained. If the price spread between natural gas and heating oil drops below $10.00 per MMBtu, the financial incentive for customers to choose the GET Gas program may be reduced, thereby lowering expected saturation levels. D. RATEMAKING IMPLICATIONS OF THE GET GAS PILOT PROGRAM 37. In their first respective base rate cases following the effective date of the GET Gas Program, the Companies will include in their depreciation expense and rate base claims their net investment in all GET Gas facilities that are in service or projected to be in service at the end of the applicable test year. In addition, the annualized interest portion of GET Gas revenues will be credited as a reduction to revenues. The same procedure will be followed in subsequent base rate cases. 38. The ratemaking principles set forth above are an essential part of the GET Gas Pilot Program and are necessary to assure that the Company fully recovers its investment in GET Gas facilities and that existing customers are not unduly burdened by otherwise uneconomic GET Gas investment. Importantly, the UGI Companies hereby request that as part of this Petition the Commission approve the ratemaking methodology proposed herein. E. CUSTOMER EDUCATION AND OUTREACH 39. The UGI Companies will provide general information about the GET Gas program through a variety of communications channels. The UGI Companies will utilize news releases and media announcements to inform potential customers of the availability of the GET Gas pilot program. In addition, in Unserved Areas, the UGI Companies will seek to work in partnership with the local municipal officials to develop coordinated meetings or informational 10615711v1 14
events as well as communications regarding availability, timing and sign-up process for GET Gas. The UGI Companies also anticipate undertaking outreach activities with local HVAC contractors in order to address coordination and communication regarding conversion activities and bring potential cost savings to converting customers related to equipment conversions. 40. The UGI Companies will provide training and resources to both call center and other customer facing personnel in order to identify potential GET Gas participants and guide them through the qualification process, GET Gas program terms and conditions, charge applicability and program duration time period. Training will also be provided in order to address issues that may arise when a Get Gas customer moves after the initial GET Gas main facilities are installed. 41. In addition, the UGI Companies will ensure that communications to new GET Gas customers will include information regarding the customer's ability to choose a natural gas supplier ("NGS") at the onset of receiving service. The Companies will also communicate with NGSs that are providing service in the UGI Companies' service territories to determine NGSs' interests in serving GET Gas customers, perhaps under special promotional offers. F. THE GET GAS PILOT PROGRAM IS IN PUBLIC INTEREST 42. As explained above, Pennsylvania-produced Marcellus Shale gas has created a massive supply of natural gas and has led to a dramatic reduction in natural gas prices. 43. The reduction in natural gas prices has created a substantial increase in demand for natural gas service for customers who want to take advantage of the price differential between natural gas and other energy sources, particularly heating oil. 44. The GET Gas Pilot Program will allow the Company to expand service to certain Unserved and Underserved Areas of its service territory. 1061571 lvi 15
45. The GET Gas Pilot Program will encourage new customers to take service because it will reduce the overall CIAC amounts paid by customers by including the projection of future additional customers, and the Pilot Program will eliminate the need for GET Gas Pilot customers to pay large, up-front CIAC amounts by allowing these customers to pay this reduced CIAC amount over time. 46. The GET Gas Pilot Program employs class based rate making concept that affords benefits in terms of lower administrative burden and greater communication effectiveness and clarity. 47. In addition, the GET Gas Pilot Program is designed to not unreasonably burden existing customers with the costs of line extensions. Moreover, the GET Gas Pilot Program will benefit existing customers over time by expanding each of the UGI Companies' customer bases. Expanding the customer base benefits existing customers because it allows the Companies, in base rate proceedings, to spread fixed costs over a greater number of customers, thereby reducing rate impacts for all customers. 48. In filing this GET Gas Pilot Program, the UGI Companies believe they are making an innovative proposal, designed to effectively target and achieve economic expansion to many consumers in Unserved and Underserved Areas of the UGI Companies' distribution systems, while incorporating important consumer protections. The UGI Companies are hopeful that the GET Gas Pilot may serve as a model for others to promote the expanded use and availability of natural gas. G. PROGRAM IMPLEMENTATION 49. Upon Commission approval of the GET Gas Programs, the UGI Companies will be required to implement certain Information Technology ("IT") and other changes to its processes before implementing the GET Gas Programs. 106157110 16
50. The Company believes that it could take up to 6 months to implement the IT and other changes necessary to implement the GET Gas Program. Therefore, the UGI Companies request that the Commission not require immediate implementation of the GET Gas Programs but allow the UGI Companies to implement the GET Gas Programs after the necessary IT and other changes are implemented. 106157110 17
IV. CONCLUSION WHEREFORE, for the foregoing reasons, UGI Utilities, Inc. - Gas Division, UGI Penn Natural Gas, Inc. and UGI Central Penn Gas, Inc. respectfully request that the Pennsylvania Public Utility Commission grant this Joint Petition allowing the UGI Companies to adopt GET Gas Pilot Programs as described herein and in the Pro Forma Tariff Supplements attached hereto without modification, approve the ratemaking methodology set forth in Section 111(D) of this Petition and allow the UGI Companies to file the Pro Forma Tariff Supplements to become effective after the UGI Companies are able to make the IT and other changes necessary to implement the GET Gas Programs. submitted, Mark C. Morrow (ID # 33590) UGI Corporation 460 North Gulph Road King of Prussia, PA 19406 Phone: 610-768-3628 E-mail: morrowmugicorp.com Of Counsel: Post & Schell, P.C. Date: April 4, 2013 Ra~vid B. MacGegor (ID # 28804),! Post & Schell, P.C. Four Penn Center 1600 John F. Kennedy Boulevard Philadelphia, PA 19 103-2808 Phone: 215-587-1197 E-mail: dmacgregorpostschell.com Anthony D. Kanagy (ID # 85522) Post & Schell, P.C. 17 North Second Street Floor Harrisburg, PA 17101-1601 Phone: 717-731-1970 E-mail: akanagypostschell.com Attorneys for UGI Utilities, Inc. - Gas Division, UGI Penn Natural Gas, Inc. and UGI Central Penn Gas, Inc. 106157 livi 18
VERIFICATION I, Paul J. Szykman, being the Vice President - Rates for UGI Utilities, Inc., hereby state that the facts above set forth are true and correct to the best of my information and belief and that I expect UGI Utilities, Inc, to be able prove the same at a hearing held in this matter. I understand that the statements herein are made subject to the penalties of 18 Pa.C.S. 4904 (relating to unsworn falsification to authorities). Date: y3 10612819v1
Appendix A
Heating Value Compared to Other Energy Sources heating and water $2,000 Furnace: $522 Residential space ( 96%AFUEGas heating costs 80% AFUE Gas Furnace: $657 show that natural $1,500 7. 7 HSPF Electric gas costs less to Furnace: use than other I major home energy sources. I I 80% Heat Pump: $906 96% AFUE Propane $1,376 $1,000 I 85% AFUE Oil $500 I Furnace: $1,654 AFUE Propane Furnace: $1,682 80%AFUEOiI Furnace: $1,723 Electric Resistance Furnace: $2,129 Sourcw U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy 20 A p/ece of equipment with a higher annual fuel utilization efficiency (AFUE) rating provides greater savings for customers.
Appendix B
Pro Forma Tariff Addendum to Gas Pa. - P.U.C. No. 5 UGI UTILITIES, EC. GAS TARIFF INCLUDING THE GAS SERVICE TARIFF AND THE CHOICE SUPPLIER TARIFF Rates and Rules Governing the Furnishing of Gas Service and Choice Aggregation Service in the West Region East Region Including Territory Described on Pages 8 and 9 Issued: Effective for Service Rendered on and after By: Paul J. Szykrnan Vice President - Rates 2525 N. 121h s, Suite 360 Post Office Box 12677 Reading, PA 196 12-2677 NOTICE THIS TARIFF MAKES CHANGES IN EXISTING RATES (See Page 1)
UGI UTILITIES, INC. Pro Fornia Tariff Addendum to Gas Pa. - P.U.C. No. 5 Page 1 LIST OF CHANGES MADE BY THIS SUPPLEMENT (Page Numbers Refer to Official Tariff) Table of Contents, Page 6 The Growth Extension Tariff pages have been added. Section 5.8, Growth Extension Tariff, Pages 18-18(a) This section has been added to implement the Growth Extension Tariff. Issued: Effective for Service Rendered on and after
ProForma Tariff Addendum to Gas - Pa. P.U.C. No. 5 UGI UTILITIES, INC. Page 6 (C) Section A - Gas Service Tariff TABLE OF CONTENTS Page Number List of Changes Made by This Supplement 1 This Page Reserved for Future Use 2-5 Table of Contents 6-7 Description of Territory: West Region 8 East Region 8-9 Rules and Regulations: 1. The Gas Service Tariff 10 2. Contract for Gas Service 10-11 3. Guarantee of Payment 12-14 4. Service - Supply Facilities 15 5. Extensions 16 18(a) 6. Customer's Facilities 19 7. Customer's Responsibility for Company's Property 20 8. Meter Reading 20 9. Billing and Payment 21 24 10. Tests 25 This Page Reserved for Future Use 26 11. Termination or Discontinuance of Service 27-2 8 12. General 28 13. Purchased Gas Cost 29-37 13.A Merchant Function Charge 38 133 Rider GPC - Gas Procurement Charge 3 8(a) 13.0 Price to Compare 38(a) 14. State Tax Surcharge 39 14.A. Rider LISFIP 40-40(a) 15. Emergency Service and Curtailment of Service 41 46 This Page Reserved for Future Use 47-52 17. General Terms for Delivery Service 53 62 18. Capacity Release of Interstate Pipelines 63 Rate R - General Service - Residential 64-65 Rate RT - General Service - Residential Transportation 66-67 Rate GL - Gas Light Service 68-69 Rate N - General Service - Non-Residential 70 71 Rate NT - General Service - Non-Residential Transportation 72-73 Rate GBM - Gas Beyond the Mains 74-75 This Pages Reserved for Future Use 76 Rate CIAC - General Service - Commercial and Industrial Air Conditioning 77 78 Rate CT - General Service - Commercial and Industrial Air Conditioning - Transportation 79-80 This Page Reserved for Future Use 81-83 Rate PV - Propane Vaporization Service 84-85 Rate SS - Storage Service 86-88 Rate DS - Delivery Service 89-90 This Page Reserved for Future Use 91 Rate NNS - No-Notice Service 92 93 Rate MBS - Monthly Balancing Service 94-95 This Page Reserved for Future Use 96 Rate IS - Interruptible Service - Small Volume 97-99 (C) Indicates Change Issued: Effective for Service Rendered on and after
UGI UTILITIES, INC. ProForma Tariff Addendum to Gas Pa. P.U.C. No. 5 Page 18 RULES AND REGULATIONS (Continued) 5. EXTENSION REGULATION (Continued) 5.7 Taxes on Deposits for Construction & Customer Advances. Any deposit, advance or other like amounts received from the applicant which shall constitute taxable income as defined by the Intemal Revenue Service will have the income taxes segregated in a deferred account for inclusion in rate base in a future rate case proceeding. Such income taxes associated with a deposit or advance will not be charged to the specific depositor of the capital. (C) 5.8 - Pilot Growth Extension Tariff ("GET Gas") Rider 5.8.1 Availability and Purpose. In lieu of the extension rules set forth in Rules 5.1-5.7, the following GET Gas tariff rules may apply. These GET Gas tariff rules will be applied to eligible customers as part of a 5 year pilot program, unless suspended or terminated earlier pursuant to Rule 5.8.4 or Commission order. The GET Gas pilot program is designed to test new tariff rules to facilitate the extension of natural gas service to the general class of residential homes and non-residential buildings, not currently receiving natural gas distribution service, which: (a) are in an Unserved Area (a small group or pocket of customers in a neighborhood location in close proximity to an existing main) or an Underserved Area (a significant portion of a general community or town location or municipality where the Company has identified significant potential for natural gas service demand and existing natural gas facilities are located within a reasonable distance); (b) are reasonably expected over time to reach target customer saturation levels which will produce revenues, including GET Gas Rider charges, that will support required investments and not unduly burden existing customers; and (c) otherwise meet the applicable requirement conditions of the GET Gas program. Under the GET Gas Program, the Company may designate Company facilities extended to an applicant or applicants, as "GET Gas Facilities" and will assess an incremental GET Gas Rider charge amount related to the recovery of GET Gas Contribution In Aid of Construction ("CIAC") amounts, as determined on a general class basis, from the class of customers who may connect to these GET Gas facilities during an initial twelve year period. 5.8.2 Designation. Subject to the funding limitations set forth in Rule 5.8.5, Company may apply the GET Gas program tariff rules to service extension requests which exceed a cost of $15,000 from an Underserved Area or an Unserved Area reasonably designated by Company, where: (a) there is, in the Company's sole discretion, a reasonable prospect that (i) fifty percent (5 0%) or more of existing residential homes along the GET Gas project facility extension route or area will convert their primary heating source to natural gas and directly connect to the GET Gas facilities within 12 years ("GET Gas Customers"); and (b) the estimated total investment for each GET Gas Customer to be connected does not exceed $10,000 (inclusive of any projected commercial customers). (C) Indicates Change Issued: Effective for Service
UGI UTILITIES, INC. Rendered on and after ProForma Tariff Addendum to Gas Pa. P.U.C. No. 5 Page 18(a) (C) RULES AND REGULATIONS (Continued) 5. EXTENSION REGULATION (Continued) 5.8.3 Get Gas Rider. Customers receiving service by connections to Company facilities designated by Company as GET Gas pursuant to Rule 5.9.2 within an initial twelve years following installation, and which receive service under Rate Schedules R, RT, N or NT, shall be required to pay GET Gas Rider charges listed below as part of Basic Natural Gas Service Charges for distribution service for a period often years, beginning from the first date the meter is set. Non-residential customers subject to the GET Gas Rider charge, as determined by the Company is its sole discretion, may not avoid the charge by electing an altemate rate schedule. GET Gas Rider Rate: Rate Schedules Rand RI: $65.89 monthly charge Rate Schedules N and NT: $65.89 monthly charge plus $8.73fMcf for all usage over 5 Mcf/Month 5.8.4 Limitations. If the differential between Average Residential Annual Natural Gas Costs per MMBtU and Average Residential Annual Heating Oil Costs per MMBtu drops and remains below $10.00 per MMBtU for two consecutive quarters (with such calculations performed for the quarters ending March, June, September and December), investment in new GET Gas facilities will be suspended, except for (a) service connections to GET Gas Facilities that are already installed or (b) GET Gas proj ects that are currently underway or have been committed to by the Company. For purpose of the above limitation: Average Residential Annual Heating Oil Costs per MMBtU = (12 month future period average of NYMEX "HO" Contract) plus (delivery variable); and Average Residential Annual Natural Gas Costs per Iv[MBtu = (All applicable Rate R volumetric rates and riders) plus (All applicable Rate R monthly charges, including the monthly GET Gas Rider, divided by the current average annual residential volumes). Company also reserves the right to temporarily close or to terminate the program at its discretion for good reason. 5.8.5 Funding. Funding for this pilot GET Gas tariff program shall be limited to an annual average level of $5 million for the duration of the 5 year pilot term, with total funding not to exceed $25 million, absent Commission approval to exceed these amounts. (C) Indicates Change Issued: Effective for Service Rendered on and after
Pro Forma Tariff Addendum to PNG Gas - Pa. P.U.C. No. 8 UGI PENN NATURAL GAS, INC. GAS TARIFF INCLUDING THE GAS SERVICE TARIFF THE CHOICE SUPPLIER TARIFF Rates and Rules Governing the Furnishing of Gas Service and Choice Aggregation Service in the Territory Described Herein Issued: Effective: By: Paul J. Szykman Vice President - Rates 2525 N. 12th Street, Suite 360 Post Office Box 12677 Reading, PA 19612-2677 http://www.ugi.com/png NOTICE This tariff makes changes in existing rates (See Page 2)
UGI PENN NATURAL GAS, INC. Pro Forma Tariff Addendum to PNG Gas - Pa. P.U.C. No. 8 Page 2 LIST OF CHANGES MADE BY THIS SUPPLEMENT (Page Numbers Refer to Official Tariff) Table of Contents, Paqe 3 The Growth Extension Tariff pages have been added. Section 5.9, Growth Extension Tariff, Paqes 21(a) - 21(b) This section has been added to implement the Growth Extension Tariff.
Issued Effective for Service Rendered on and after ProForma Tariff Addendum to PNG Gas - Pa. P.U.C. No. 8 Page 3 tjgi PENN NATURAL GAS, INC. TABLE OF CONTENTS PAGE Section A - Gas Service Tariff NUMBER Title Page 1 List of Changes Made by this Supplement 2 Table of Contents 3 Table of Contents (Cont'd.) 4 Description of Territory 5 Description of Territory (Cont'd.) 6 Description of Territory (Cont'd.) 7 Description of Territory (Cont'd.) 8 Definitions - General 9 Definitions - General (Cont'd.) 10 Definitions - General (Cont'd.) 11 Definitions - General (Cont'd.) 12 Definitions - General (Cont'd.) 13 Rules and Regulations: 1. The Gas Service Tariff 14 2. Contract for Gas Service 15 3. Guarantee of Payment 16 Guarantee of Payment (Cont'd.) 17 Guarantee of Payment (Cont'd.) 17(a) 4. Service - Supply Facilities 18 5. Extension Regulation 19 Extension Regulation(Cont'd.) 20 Extension Regulation(Cont'd.) 21 Extension Regulation(Cont'd.) 21(a) - (b) (C) 6. Customer's Responsibility for Company's Property 22 Customer's Responsibility for Company's Property (Cont'd.) 23 7. Meter Reading 24 8. Billing and Payment 25 Billing and Payment (cont'd.) 26 Billing and Payment (cont'd.) 26(a) 9. Termination and Discontinuance of Service 27 Termination and Discontinuance of Service (ContTd.) 27(a) 10. Rider A - State Tax Adjustment Surcharge 27(a) Rider A - State Tax Adjustment Surcharge(Cont'd.) 28 11. Rider B - Section 1307(f) Purchased Gas Costs 28 Section 1307(f) Pur. Gas Costs(Cont'd.) 29 Section 1307(f) Pur. Gas Costs(Cont'd.) 30 Section 1307(f) Pur. Gas Costs(Cont'd.) 31 12. Rider C - Migration Rider 32 13. Rider D - Merchant Function Charge 33 14. Rider E - Universal Service Program 34 Rider E - Universal Service Program(Cont'd.) 35 14.A Rider F - Gas Procurement Charge 35(a) 14.B Price to Compare 35(a) 15. Gas Emergency Planning 36 Gas Emergency Planning (Cont'd.) 37-40 16. GENERAL TERMS FOR DELIVERY SERVICE FOR RATES DS, LFD, XD, AND IS 41 (ContTd.) 42 (Cont'd.) 43 (Cont'd.) 44
(Cont'd.) 45 (Cont'd.) 46 (Cont'd.) 47 (C) Indicates Change Issued: Effective for Service Rendered on and after
UGI PENN NATURAL GAS, INC. ProForma Tariff Addendum to PNG Gas - Pa. P.U.C. No. 8 Page 21(a) RULES AND REGULATIONS 5. EXTENSION REGULATION -Continued (C) 5.9 - Pilot Growth Extension Tariff ("GET Gas") Rider 5.9.1 Availability and Purpose. In lieu of the extension rules set forth in Rules 5.1-5.8, the following GET Gas tariff rules may apply. These GET Gas tariff rules will be applied to eligible customers as part of a 5 year pilot program, unless suspended or terminated earlier pursuant to Rule 5.9.4 or Commission order. The GET Gas pilot program is designed to test new tariff rules to facilitate the extension of natural gas service to the general class of residential homes and nonresidential buildings, not currently receiving natural gas distribution service, which: (a) are in an Unserved Area (a small group or pocket of customers in a neighborhood location in close proximity to an existing main) or an Underserved Area (a significant portion of a general community or town location or municipality where the Company has identified significant potential for natural gas service demand and existing natural gas facilities are located within a reasonable distance); (b) are reasonably expected over time to reach target customer saturation levels which will produce revenues, including GET Gas Rider charges, that will support required investments and not unduly burden existing customers; and (c) otherwise meet the applicable requirement conditions of the GET Gas program. Under the GET Gas Program, the Company may designate Company facilities extended to an applicant or applicants, as "GET Gas Facilities" and will assess an incremental GET Gas Rider charge amount related to the recovery of GET Gas Contribution In Aid of Construction ("CIAC") amounts, as determined on a general class basis, from the class of customers who may connect to these GET Gas facilities during an initial twelve year period. 5.9.2 Designation. Subject to the funding limitations set forth in Rule 5.9.5, Company may apply the GET Gas program tariff rules to service extension requests which exceed a cost of $15,000 from an Underserved Area or an Unserved Area reasonably designated by Company, where: (a) there is, in the Company's sole discretion, a reasonable prospect that (i) fifty percent (50 96) or more of existing residential homes along the GET Gas project facility extension route or area will convert their primary heating source to natural gas and directly connect to the GET Gas facilities within 12 years ("GET Gas Customers") ; and (b) the estimated total investment for each GET Gas Customer to be connected does not exceed $10,000 (inclusive of any projected commercial customers). (C) Indicates Change