Pa. PUC Approves Changes In Penalty Rates For Retail Supplier Gas Underdeliveries; Storage Changes Approved

August 30, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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The Pennsylvania PUC approved several tariff changes at National Fuel Gas Distribution Corporation (NFGD or "Company")

Under the adopted changes, NFGD will align the rate charged to MMT, DMT & DMLMT customers for nonperformance during Operational Flow Orders (OFOs) with the rate charged to NGSs serving customers under MMNGS and SATS service. "The Company believes the resulting rate is consistent with Advance Notice of Proposed Rulemaking Order in Docket No. L-2017-2619223 (Adopted and Entered August 31, 2017), where the Commission expresses a preference for market based pricing," NFGD has said

During OFOs, entities are charged for any amount of gas utilized in excess of 102% of confirmed deliveries.

Under the prior tariff, NFGD had calculated the charge for OFO under-deliveries to transportation customers as the higher of $25 per Mcf for gas purchased from NFGD or the three part formula of: 1) the sum of the interstate transportation rate applicable to the customer; 2) the highest incremental per Mcf cost of gas purchased in NFGD's gas supply portfolio during the month applicable to the under-delivery; and 3) a premium of 25% (for billing months ended in December, January, February, and March) or 10% (for all other billing months). NFGD utilizes the Tennessee Gas Pipeline’s Zone 4 200 Line Trading Hub, referred in SNL Natural Gas Index as 'TGP Z 4 200L', as its market index point.

Under the new tariff provisions, NFGD will calculate the charges for OFO under-deliveries to transportation customers through the two levels of charges applicable to NGSs serving customers on the MMNGS and SATS rate schedules. First, NFGD will charge transportation customers the higher of 110% of the Daily Market Index (DMI), $10 per Dth (for billing months ended in December, January, February, and March), or $7 per Dth (for all other billing months). NFGD defines the DMI as the Mcf equivalent of the volume weighted average price for the applicable date at its market index point. NFGD will also charge transportation customers the higher of $25 per Dth or the DMI for the under-delivery day for all gas purchased from NFGD by transportation customers, plus all transportation costs to NFGD's city gate.

Additionally, language is provided to clarify that the non-performance rate will apply when the Company issues an OFO that includes a Restriction on Access to Daily Metered Imbalances.

The PUC also approved storage changes.

The adopted changes update NFGD's tariff to reduce the NGS month-end storage requirements for the months ending November 30 from 90% to 86%, December 31 from 75% to 68%, and January 31 from 50% to 45%. NFGD had stated that it performed an internal study of storage requirements and determined that the current heating season requirements may be more strict than necessary to ensure reliable service.

NFGD was also granted authority to further relax the month end storage inventory levels applicable to all NGSs based upon operating conditions that evolve during a heating season. NFGD will post notice on its website at least five business days prior to the last day of the first month to which a relaxed limit would apply.

As noted in our related story today, the PUC also approved a tariff filing from National Fuel Gas Distribution Corporation (NFGD or "Company") which requires retail suppliers and other entities to sign a data security agreement and carry $5 million in cybersecurity insurance as a condition of accessing the utility's systems, including web portals (see story here)

Docket R-2019-3010744

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