Settlement Would Change Cost Of Capacity Releases At Pennsylvania Utility, Address Consumer Advocate's Concerns Retail Suppliers Being Under-charged

June 25, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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A settlement in the annual 1307(f) purchased gas cost proceeding at Philadelphia Gas Works would require changes to the capacity releases charges applicable to retail suppliers, addressing a concern raised by the Office of Consumer Advocate

An ALJ has recommended that the settlement be adopted without modification. Settling parties include PGW, the PUC's Bureau of Investigation and Enforcement, and OCA

Concerning choice supplier capacity release charges, the settlement provides that:

a) PGW agrees to revise the release location on Transco to Zone 2 to City Gate (currently Zone 3 to City Gate). Releases from this location will begin on or about November 1, 2019. Charges shall be set at maximum pipeline rates.

b) PGW agrees to revise the release location on TETCO to approximately 70% ELA to City Gate and 30% STX to City Gate, to the best of PGW’s ability based on operational constraints, under contract 800232 (CDS). Releases from these locations will begin on or about November 1, 2019. Charges shall be calculated set at maximum pipeline rates.

During the case, OCA had noted that PGW maintains firm transportation (FT) capacity on two interstate pipelines: (1) Texas Eastern Transmission (Tetco) and (2) Transcontinental Gas Pipe Line (Transco). PGW releases a portion of its Tetco and Transco FT capacity to suppliers serving the company's choice transportation customers.

In direct testimony, OCA, "identified a concern that the rates assessed to Choice suppliers are less than the weighted average cost PGW pays for the Tetco and Transco FT capacity."

OCA had initially recommended that retail suppliers be assessed charges for released FT capacity based on PGW's weighted average cost of Tetco and Transco capacity.

A witness for PGW disagreed with OCA's recommendation and stated that if choice suppliers were charged the weighted average cost of gas for Tetco and Transco capacity, choice suppliers would be paying costs of capacity that they are not otherwise assigned.

OCA said that the settlement provisions described above is a reasonable resolution of the issue

"Importantly, the Settlement revises the release locations to move the Company closer to the weighted average cost for gas," the OCA said

All parties have reserved their rights to address this capacity release issue in the next GCR proceeding.

PGW said of the settlement terms related to capacity release, "This change represents a compromise position between PGW's and OCA's filed testimony positions and is reasonable because it recognizes both the importance of ensuring that actual costs are charged as well as the operational processes that PGW must undertake with regard to releasing the capacity and billing for it."

Other terms of the settlement include that PGW agrees to present an updated study with next year’s GCR filing that supports the validity of PGW’s peak day methodology.

Under the settlement, PGW is permitted to continue to retain 25% of capacity release credits (excluding capacity release to firm transportation suppliers), off-system sales margin and asset management margin/credit/fees with the remaining 75% applied as an offset to purchased gas costs.

The GCR rate adopted by the settlement is $4.9887 per Mcf, subject to customary adjustment. This rate is predicated on PGW’s gas cost projections at the time of the March 1, 2019 annual GCR filing. In accordance with 52 Pa. Code § 53.64, PGW will submit a quarterly adjustment to the GCR rate on or before September 1, 2019, to be effective on one day's notice, to account for actual experience and changes in forecasted natural gas prices and demand, which will establish the GCR rate, effective September 1, 2019

R-2019-3007636

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