Pa. Draft Decision Would "Fix" Off-System Sale Credit At Columbia (Current System Dampens Competition)

A Pennsylvania ALJ would adopt changes to the allocation of the customer-share proceeds of Columbia Gas' off-system sales (OSS) and capacity releases in light of the current mechanism's negative impact on customer choice, though the ALJ would not adopt the solution preferred by natural gas suppliers.

Under Columbia's Unified Sharing Mechanism (USM), 60% of the customer share of net proceeds from off-system sales and capacity releases are allocated to the bypassable Purchased Gas Commodity Charge (PGCC) and 40% to the nonbypassable Purchased Gas Demand Charge (PGDC).

Suppliers had asserted that the current USM is discriminatory because it imposes upon choice customers a subsidy to default service customers, to the tune of about $16 per customer, per year.

The ALJ noted that as natural gas shopping increases, the per-customer credit to the bypassable PGCC from the USM will increase (as it is allocated to a smaller customer base), "effectively serving as a damper on competition."

"Any mechanism which increases the credit to sales customers as shopping levels increase, as the current mechanism does, will obviously not be beneficial to competition," the ALJ said, in concluding that a change is needed.

However, the ALJ rejected retail suppliers' proposal to allocate the off-system revenues solely to distribution customers, finding that certain of the revenues arise from Columbia's management of its default service supply portfolio, for which only sales customers are charged.

The ALJ would instead adopt a proposal from PUC Staff that links the credit allocated to the nonbypassable PGDC to the level of choice participation.

Specifically, the percentage of revenues allocated to the PGDC would be based on two factors, the first being the percentage of capacity release (CR) to total OSS and CR based on a three-year average. The second factor would be calculated based on the current choice participation rate applied to the percentage of revenues derived from sales, options, AMA and exchanges based on a three-year average. The revenues allocated to the PGCC would be the remainder following the calculation of the PGDC percentage. Application of this methodology would allocate a portion of the value of non-capacity release revenue to the choice customers commensurate with levels of choice participation. If choice participation reached 100 percent, then 100 percent of the customers’ share of the CR and OSS would be credited to the PGDC.

However, suppliers said that the alternate mechanism adopted by the ALJ would do little to rectify the advantage granted to default service. Suppliers said that under the adopted Staff proposal, at 30% shopping PGC customers would receive a 14.7 cent per DTH credit and choice customers would only receive a 5.1 cent per DTH credit which is nearly a 300 percent higher credit for PGC customers

The ALJ would deny a request from suppliers for Columbia to study how the pipeline capacity it retains is being utilized.

Suppliers had requested that Columbia should be required to calculate A) the portion of the pipeline assets it retains that is being utilized for system peaking needs and B) the portion of the pipeline assets it retains that it utilizes for PGC delivery needs.

Once the portion of pipeline assets used to serve only the PGC deliveries is identified, in the next 1307(F) proceeding the Commission should then require that those pipeline costs be allocated to the bypassable PGCC, suppliers had recommended

Docket R-2015-2469665