Utility To Perform Alternate Calculation Of Default Service Supply Charge, For Informational Purposes Only, To Determine If Alternative Would Reduce Rate Volatility

June 29, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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In a settlement in the §1307(f) rate proceeding of Columbia Gas of Pennsylvania, Columbia has agreed to perform an alternative calculation of its purchased gas cost (PGC) rate, for informational purposes only, to determine if the alternative calculation would reduce PGC rate volatility

Specifically, Columbia agrees under the settlement to perform an alternative calculation as proposed by the Office of Consumer Advocate

During the proceeding, OCA had cited volatile PGC rates in the summer and fall of 2022.

OCA recommended that Columbia revise its quarterly PGC rate calculations to ensure that the commodity component of the PGC rate is reflective of Columbia’s projected commodity cost of gas

OCA noted that the gas supply charge component of Columbia’s PGC rate in its July 2022 quarterly filing made on June 29, 2022 was $2.8680 per Dth. The gas supply charge reflected in Columbia’s July 2022 quarterly PGC filing was based on actual and projected commodity costs for the 2021 PGC period which extended from October 2021 through September 2022

However, for just the July 2022 through September 2022 period for which the PGC rate reflected in Columbia’s July 2022 quarterly filing would be in effect, Columbia was projecting that its monthly commodity cost of gas would be in the $7.50 to $8.10 per Dth range, while still basing the rate on the longer October 2021 through September 2022.

OCA noted that the lower $2.8680 per Dth rate, even when Columbia was forecasting rates in the $7.50 to $8.10 per Dth range, resulted from PUC PGC regulations related to the treatment of storage

Under the Commission's PGC regulations, the commodity costs associated with the gas supplies that are injected into storage are not recovered until those gas supplies are withdrawn from storage.

"Columbia was projected to inject significant quantities of gas into storage during the July through September 2022 period that the July 2022 PGC rate was to be in effect. Therefore, Columbia reduced its projected commodity costs to account to the gas supplies to be injected into storage. Because the average commodity cost of the gas supplies injected into storage during period July through September 2022 was significantly higher than the average commodity cost of the gas supplies purchased by Columbia during the 2021 PGC period prior to July 2022 and recovered through PGC rates, this reduced Columbia’s average commodity cost for the 2021 PGC period," OCA noted

OCA had said, "Assessing PGC customers a gas supply charge of $2.8680 per Dth for the period July through September 2022 is unreasonable when commodity costs are expected to be in the range of $7.50 to $8.10 per Dth, and results in a significant under collection of gas costs."

OCA noted that, in Columbia’s October 2022 quarterly PGC filing, the gas supply charge was based on projected commodity costs for the 2022 PGC period (October 2022 through September 2023). "Because the gas supply charge component of Columbia’s July 2022 PGA was significantly below its projected commodity cost of gas, which were reflective of actual commodity prices ... the Company’s October 2022 PGC rate increased by $3.7743 Dth or 75%."

"Rate stability and predictability with a minimum of unexpected changes, or gradualism, is one of the principles of a sound rate design. A rate increase of 75% is inconsistent with the concept of gradualism and was unnecessary had Columbia established a gas supply charge component of its July 2022 PGC rate which was reflective of its actual/projected commodity costs," OCA said

In summary, OCA noted that through Columbia’s PGC calculations, Columbia utilized reduced projected commodity costs to account for the gas supplies to be injected into storage. OCA further noted that, because the average commodity cost of the gas supplies injected into storage during period July through September 2022 was significantly higher than the average commodity cost of the gas supplies purchased by Columbia during the 2021 PGC period prior to July 2022 and recovered through PGC rates, this reduced Columbia’s average commodity cost for the 2021 PGC period. As such, OCA recommended modifying Columbia’s PGC rate calculation to base its gas supply charge that will be in effect during a particular quarterly PGC period only on projected commodity costs for that quarter.

OCA said that one potential modification to reduce such PGC rate volatility, "would be to base its gas supply charge that will be in effect during a particular quarterly PGC period only on projected commodity costs for that quarter."

Columbia agrees to conduct an alternative calculation of the PGC supply charge in this manner, for informational purposes only

OCA stated, "This provision will allow the parties to analyze whether the OCA alternative will reduce price volatility under what are expected to be more stable gas pricing conditions.

Columbia would file the alternative calculations and resulting rates in its 2024 PGC filing.

Signatories to the settlement are Columbia, OCA, and the PUC's Bureau of Investigation and Enforcement

Docket No. R-2023-3038630

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