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"Outrage" As Texas Gas Utility Seeks Over 50% Increase In Transportation (Choice) Rate, Verdigris Energy Testifies

Verdigris Seeks To Open Atmos Choice To Commercial Customers (Currently Limited To Industrials)

March 24, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Texas industrial customers expressed "outrage" upon learning of an application by Atmos Pipeline - Texas (APT) to change the Rates of City Gate Service (CGS) and Rate Pipeline Transportation (PT) Rates, with such application including an average rate increase of 57.45% for Rate PT customers, energy consultant and broker Verdigris Energy LLC said in testimony before the Texas Railroad Commission (GUD Docket No. 10580)

Verdigris Energy submitted testimony from energy economist Jeff Nottingham, who, "assert[ed] prima fascia unfairness to Rate PT customers."

According to Nottingham's testimony, APT's rate filing reflects a 57.45% capacity rate increase for Rate PT customers, while other rate classes will only see increases of 19-26%

"The weighted average capacity charge increase for Rate PT customers, most of whom are major employers and contributors to the Texas economy, is more than twice that incurred by Rate CGS – Mid-Tex customers, while the latter also enjoys a 35% reduction in the Gas in Storage Charge," Nottingham said in testimony

"By contrast, the entire class of 'through-service' customers, comprised mostly of gas marketers arbitraging the system, is exempt. APT argues that market forces dictate exempting through-service customers. It could be perceived that political considerations dictate hammering industrial customers instead of more fairly allocating cost-of-service adjustments across all rate classes. We urge the Commission to consider the impact on the industrial base of Texas’ economy and order APT to spread any approved cost-of-service adjustments evenly across all rate classes, on a percentage basis, so as not to unfairly disadvantage any one group," Nottingham said in testimony

Nottingham noted that, "Policy makers in Texas have long advocated competitive retail energy markets for both natural gas and electricity, and we believe this policy has significantly benefitted the Texas economy when compared to states without competitive markets. By over-loading cost shifts to Rate PT customers, APT is damaging, rather than helping, the development of a robust market among natural gas end-users. This course of action will result in fewer Rate PT customers, and disadvantage the entire rate class in successive filings."

"Verdigris Energy would also like to bring the Commission’s attention to the disparate availability of Rate PT among end-users. APT’s company policy offers Rate PT only to customers with an 'industrial' SIC code. By stark contrast, Centerpoint (Texas) offers transportation service to nearly all commercial, industrial and institutional end-users. By unfairly excluding most of their end-users, APT is hampering the development of a robust competitive natural gas supply market in its service territory. In so doing, APT unreasonably restricts the volume of gas transported by Rate PT customers. Whether intentional or not, this yields an unnecessarily small and relatively less influential rate class, upon which APT now proposes to impose a massive 57.45% capacity cost increase," Nottingham said in testimony

"We urge the Commission to order APT to offer an alternative Transportation rate to commercial and institutional customers. We recommend the establishment of a reasonable and appropriate meter charge that would enable end-users below certain volume thresholds to self-select CGS instead of it being forced upon them. This action would expand the competitive natural gas market, rather than detract from it as will the tariff changes proposed in Docket 10580," Nottingham said in testimony

Nottingham also alleged in testimony that the notice provided by Atmos Pipeline - Texas concerning its rate filing was inadequate.

"Upon learning of Docket 10580 from an industry colleague, we immediately contacted our clients and other Rate PT customers who would be adversely impacted by the proposed 57.45% capacity rate increase. Every decision maker we contacted was unaware of the proposed rate increase. In each case, when learning that Rate PT customers will incur a weighted-average proposed 57.45% rate increase, while other rate classes incur a proposed 19.73% or 24.76% increase, the news has been met with outrage. The proposed change falls far short of the just and reasonable standard for shifting costs among rate classes," Nottingham said in testimony

"We do not know how APT tried to notify Rate PT customers, but we can attest that notice did not adequately reach facility, regulatory or corporate leadership. Our searches for press reports via Google, Bing and Yahoo reveal virtually no coverage or information about the 2017 filing of Docket 10580 ... We encourage the Commission and the ALJ to provide a filing extension to enable further interveners, who just learned of Docket 10580, to provide additional testimony," Nottingham said in testimony

In a news release, Verdigris Energy said that another Texas energy market expert, Mike Brasovan, submitted testimony in the case on behalf of Smurfit Kappa Corporation. According to Verdigris Energy, "Brasovan cited numerous rate cases in which the approved rate-of-return was well below the 13.5% sought by Atmos."

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