Oregon Administrative Rules › Chapter 860 - PUBLIC UTILITY COMMISSION › Division 22 - RATES › Section 860-022-0070 - Procedures and Standards for Reviewing Gas Utility Rates in the Context of the Purchased Gas Adjustment Mechanism

Current through Register Vol. 63, No. 7, July 1, 2024
(1) The purpose of sections (1) through (7)
			 of this rule is to ensure that earnings of a natural gas utility local
			 distribution company ("gas utility" or "LDC") with a purchased gas adjustment
			 ("PGA") mechanism are not excessive prior to passing through prudently incurred
			 base gas cost changes in rates through a mechanism which is fair to all parties
			 and efficient to administer. For purposes of this rule, earnings are excessive
			 only if a gas utility does not share with its customers past revenues related
			 to earnings that exceed an earnings threshold determined by the
			 Commission.
(2) Prudently incurred
			 base gas cost changes will be included in rates through tracking filings,
			 subject to the Commission's review of gas cost purchasing practices at the time
			 of those filings.
(3) A separate,
			 simplified earnings review will be conducted on an annual basis independent of
			 and in advance of the PGA filings. The purpose of such an earnings review is to
			 determine whether the gas utility's earnings are above an earnings threshold so
			 as to require some sharing of revenue with customers before passing through
			 base gas cost changes. The purpose is not to make a forward-looking, permanent
			 change in rates.
(4) In an earnings
			 review conducted under this rule, it is reasonable for PGA base gas cost
			 changes to be passed through into rates if, in circumstances when the gas
			 utility's earnings in the prior year were above an earnings threshold
			 determined in section (5) of this rule, revenue representing a percentage of
			 earnings in that year above that earnings threshold is shared with
			 customers.
(5) The standards to be
			 applied in an earnings review under this rule for each LDC are as follows:
(a) Test year: The test year for the earnings
			 review will be the calendar year immediately prior to the year in which the PGA
			 filing is made, unless otherwise specified by the Commission.
(b) Normalization and adjustments: The test
			 year results will be adjusted with a predetermined list of rate-making
			 adjustments equivalent to those applied in the gas utility's most recent
			 general rate proceeding.
(c)
			 Earnings threshold: There will be no revenue sharing required for years when a
			 gas utility's return on equity from utility operations in Oregon is lower than
			 the earnings threshold determined by the Commission for each LDC. Neither this
			 value nor any of the components implied in establishing it will be precedential
			 in a general rate case involving any Oregon public utility. The Commission will
			 update the value for the earnings threshold annually for each LDC, pursuant to
			 a mechanism established by order of the Commission for each LDC, to reflect
			 changes in conditions in the capital markets. Upon a showing of good cause, the
			 Commission may consider other relevant factors in addition to changes in
			 conditions in the capital markets.
(d) Sharing percentage: The amount of revenue
			 in a test year representing a specified percentage of the earnings above the
			 earnings threshold will be shared with customers. The Commission by order will
			 determine the sharing percentage for each LDC.
(e) Deferral and amortization: Any revenue
			 determined for the gas utility for a test year under section 5(d) of this rule
			 will be deferred as of December 31 of the test year. The balance in the
			 deferred account will accrue interest from that date at the LDC's rate of
			 return on rate base determined in its last general rate case. Interest will
			 continue to accrue at this rate during the amortization period, which will
			 begin on the date of the next PGA rate change and extend for twelve months. The
			 Commission by order will determine the method for allocating amounts to be
			 amortized among customer classes.