Utility, Retail Suppliers Seek Waiver to Exclude Excessive Historic Gas Prices from Collateral Calculation

Washington Gas Light Company, Ambit Northeast, LLC, and Bollinger Energy have jointly petitioned the Maryland PSC for a waiver of WGL's tariffed collateral requirements, which rely in part on historic gas prices from the past three years, in order to exclude excessive prices seen last winter from the calculation, which otherwise would lead to an "unreasonable burden" on suppliers.

Under the current tariff, WGL's Credit Collateral Amount related to Replacement Gas Exposure is the product of (a) daily volumes at risk, (b) the price at risk, and (c) the number of days at risk. The price risk is based on a specific formula that takes into account a number of factors, including the highest monthly average Transco Zone 6 (Non-New York) (Z6 NNY) Gas Daily Midpoint price during the preceding three winter periods.

"As a result of unusually high gas prices experienced on certain days over the January- March 2014 period, the Credit Collateral Amount generated by the formula in the tariff is significantly higher that the Credit Collateral Amount for the prior winter period," the petition states

"Ambit and Bollinger have indicated that this higher Credit Collateral Amount will create an unreasonable burden on suppliers serving customers on the Company's gas distribution system in Maryland," the petition states

In reviewing the credit collateral amounts generated under the formula and the underlying gas price data, Washington Gas has identified 13 days in January, February and March of 2014, where gas prices were more than $20.00 per dekatherm. "Washington Gas has determined that it is appropriate to exclude the high gas prices recorded on those dates from the credit collateral calculations, as gas prices on those 13 days were unusually high," the petition states.

"To determine the level of prices that may be considered anomalous, Washington Gas conducted a ten-year historical analysis on the average Gas Daily settlement prices at Transco Z6 NNY, as published by Platts. The Company's analysis showed that between November 2004 and March 2013, the highest daily settled price at Transco Z6 NNY was $18.17/dth. During last winter, the highest gas daily price for Transco Z6 NNY was $123.49/dth. Based on this analysis, the Company considered prices over $20.00/dth to be excessive for the purpose of calculating the Credit Collateral Amount and requests waiver of the tariff provision and authorization to exclude them from the calculation," the petition states

"Based on further analysis as a result of feedback from Ambit and Bollinger, Washington Gas believes the level of collateral generated by the formula in its tariff for the upcoming winter period is higher than necessary under the circumstances. Washington Gas will reevaluate the circumstances before the Credit Collateral Amounts are calculated next year and determine whether waiver of the provision continues to be appropriate, or whether even a more permanent solution should be implemented and will timely seek any necessary authorization from the Commission," the petition states.

The petitioners asked that WGL be permitted to calculate the required collateral amount by excluding Gas Daily settlement prices at Transco Z6 NNY above $20.00/dth for the upcoming winter period and that such waiver be granted as soon as possible, but not later than October 31, 2014.