Opinion ID: 2615008
Heading Depth: 1
Heading Rank: 5

Heading: refund apportionment

Text: MDU alleges PSC's refund apportionment action is not supported by substantial evidence. MDU bears the burden of proving that allegation. MDU asserts: The only evidence in the record is that the allocation proposed by MDU was correct as Wyoming's and other states' industrial customers had not made overpayments as part of their utility purchases during the refund period. As the industrial customers had not made overpayments, they were not entitled to a refund. There is no evidence to the contrary. In developing its argument with respect to this assertion, MDU states that in its original application it had used an apportionment methodology which apportioned the refund among all rate classifications, viz., residential, commercial, and industrial customers. In its revised application, it used an apportionment methodology which apportioned the refund among only those customers who had contributed to the overpayment initially. At the hearing, MDU's witness Don Ball explained the error in the original application in this way: The error was that    Montana-Dakota apportioned the refund amount related to commodity based on total sales volumes in each state during the refund period when, in fact, there was no refund received for gas purchased from Williston Basin under rate schedule I-1 under which Montana-Dakota purchased gas for resale to industrial customers. The error gave industrial customers a refund when they actually did not pay enough in the first place. This would be totally inappropriate and the error was corrected in the company's revised filing dated August 12, 1991. Mr. Ball was questioned closely and to good effect by Commissioner Ellenbecker on this subject. The information developed from that questioning was revealing: Q. Is it your position that the Wyoming industrial customers in the allocation methodology to calculate the refund are not entitled to being included in the refund calculation because they don't pay the costs associated with the refund dollar which led to the overcharge and then the resulting refund? A. That is the basic position, and it's not only for Wyoming. It's under the circumstances a systemwide position, because the industrial customers during the refund period have really paid less than they should have. Q. Isn't it correct that throughout the period, the Wyoming industrial customers in their retail rate period for every component of the wholesale gas charges by way of the methodology used in the state of Wyoming one single integrated unit cost of gas that includes all charges from Williston? A. That's true in Wyoming, yes. Q. Doesn't it follow in Wyoming that it might be therefore realistic to include industrial volumes which contributed to the payment of the refund rates from Williston might be appropriate volumes in Wyoming for the calculation of the refund since they participated in the payment of the dollars in Wyoming? A. I don't believe so. At the time, industrial customers were still served from a cost perspective by buying gas under Williston's rate schedule in Wyoming. We have not reserved any demand levels to serve industrial customers. So if there is normal demand or contract demand reserved for a certain customer, first of all, I don't believe it's fair to charge them for it in the first place. Q. But you know better than anyone in the room that they paid for the demand charges as a component of the unit cost of gas in their rates and now some of those demand charges are flowing back to the states in a methodology that includes volumes of use expressed as a proportion of sales or proportion of purchases which those industrial customers paid as part of their rates when they had volumes when they were on the system. Isn't that correct? A. Thatthat is correct. Q. And would you agree A. In Wyoming. Q. that that's an exclusive situation for Wyoming? A. It is a very exclusive situation applicable only in the state of Wyoming. However, the refunds that we receive from Williston are segregated by rate component. If we look, for example, at attachment B page 1, we see that there is a commodity portion of the refund. The refunds for contract demand charges, which are labeled AEQ refund and MDQ refund, are separately set forth. We have over two million dollars of AEQ refunds. Q. Now, staying with your attachment B page 1, which of the refund components identified in the three columns do the Wyoming industrial customers not pay for in their rate? A. They pay for all of them. Q. They pay for all of them? A. That's correct. Q. And if they pay for all of them during the period that they were on system taking sales gas, they overpaid for those components just as did the residential and commercial customers in view of the fact that the FERC has now decided there will be a refund of those dollars; isn't that correct? A. That would be true, yes. From Mr. Ball's entire testimony on the refund apportionment issue, PSC found: 22. MDU's evidence shows that in its initial application, it allocated the FERC refund to Wyoming service based upon the actual usages of all its Wyoming customers, including those industrials on line during the period of the refund. This actual usage basis for the refund period is a reasonable and correct basis, and is further supported and justified by the substantial evidence that discloses that MDU's loss of industrial customers has worked to severely increase its remaining customers' (residential and commercial) rates, including because such remaining customers must pay rates to cover the cost of that part of MDU's facilities installed to serve the industrial customers who have since elected to bypass MDU's distribution service. We are satisfied from our examination of the whole record that substantial evidence exists to support PSC's finding. The ultimate weight to be given that evidence was to be determined by PSC in light of its expertise and the experience of its members in such matters. We hold no error exists on this issue.