PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, PA 17105-3265 Public Meeting held September 20, 2018 Commissioners Present: Gladys M. Brown, Chairman Andrew G. Place, Vice Chairman, Statement Norman J. Kennard David W. Sweet John F. Coleman, Jr. Pennsylvania Public Utility Commission Office of Small Business Advocate Office of Consumer Advocate v. Peoples Natural Gas Company, LLC – Peoples Division R-2018-2645278 C-2018-3000494 C-2018-3000567 Pennsylvania Public Utility Commission Office of Small Business Advocate Office of Consumer Advocate v. Peoples Natural Gas Company, LLC – Equitable Division R-2018-3000236 C-2018-3000496 C-2018-3000573 OPINION AND ORDER
natural gas distributors with gross intrastate annual operating revenues in excess of $40 million with affiliated interests). The ALJ concluded that Peoples complied with these requirements. R.D. at 13. Settlements The policy of the Commission is to encourage settlements, and the Commission has stated that settlement rates are often preferable to those achieved at the conclusion of a fully litigated proceeding. 52 Pa. Code §§ 5.231, 69.401. A full settlement of all the issues in a proceeding eliminates the time, effort and expense that otherwise would have been used in litigating the proceeding, while a partial settlement may significantly reduce the time, effort and expense of litigating a case. A settlement, whether whole or partial, benefits not only the named parties directly, but, indirectly, all customers of the public utility involved in the case. Regulatory proceedings are expensive to litigate, and the reasonable cost of such litigation is an operating expense recovered in the rates approved by the Commission. Partial or full settlements allow the parties to avoid the substantial costs of preparing and serving testimony and the cross-examination of witnesses in lengthy hearings, the preparation and service of briefs, reply briefs, exceptions and replies to exceptions, together with the briefs and reply briefs necessitated by any appeal of the Commission’s decision, yielding significant expense savings for the company’s customers. For this and other sound reasons, settlements are encouraged by Commission policy. Despite the policy favoring settlements, the Commission does not simply rubber stamp settlements without further inquiry. In order to accept a settlement such as that proposed here, the Commission must determine that the proposed terms and conditions are in the public interest. Pa. PUC v. York Water Co., Docket No. R00049165
proceeding, infra, based on our review of the record and the terms of the Joint Petition, infra, we find that Peoples has met the terms of Section 1318 of the Code. Terms and Conditions of the Partial Settlement The Joint Petitioners have agreed to the Partial Settlement covering all issues except for one. The remaining Parties to this proceeding, PIOGA and Direct Energy, did not oppose the Partial Settlement. In the Partial Settlement, the Joint Petitioners reached agreement on the findings pursuant to 66 Pa. C.S. § 1307(f) and 66 Pa. C.S. § 1318 of the Code. Additionally, the Joint Petitioners expressed their agreement with respect to the following issues: (1) Lost and Unaccounted for Gas; (2) Sharing Mechanism; (3) Allegheny Valley Connector Capacity Costs; and (3) Miscellaneous Issues. Joint Petition at 6-7. The Partial Settlement consists of the Joint Petition containing the terms and conditions of the Partial Settlement and Appendices A through E, which include the tariff supplement describing the agreed-upon rates in Appendix A, and the Statements in Support filed by Peoples, the OCA I&E, and the OSBA in Appendix B through E, respectively. The essential terms of the Partial Settlement are set forth in ¶¶ 25-35. The Joint Petitioners agreed to the following terms and conditions: LOST AND UNACCOUNTED FOR GAS 25. [Peoples] will be subject to a gathering UFG target (“UFG target”) of 9.0% for the year ending August 31, 2019, 8.5% for the year ending August 31, 2020, and 7.5% for the year ending August 31, 2021.
volumes delivered into the gathering system would be minimal and should not be an issue. R.D. at 86 (citing PNG R.B. at 15-16). Whether the Proposed Producer Retainage Charge is Appropriate Policy for the Unique Situation Presented in this Proceeding Finally, the ALJ rejected PIOGA’s argument that the proposed charge would exacerbate the decline of conventional wells and potentially jeopardize the provision of safe and reliable service or result in a slippery slope. According to the ALJ, despite making this assertion, PIOGA has failed to provide any actual data or analysis to support this conclusion. The ALJ lauded Peoples’ substantial capital investments to replace at-risk pipe in order to address safety and reliability of its system including the gathering system. R.D. at 86-87. The ALJ found no merit in PIOGA’s argument because PIOGA has stipulated in this proceeding that the charge will not have a material effect on the production from existing wells or the production from new wells. Therefore, the ALJ disagreed with PIOGA’s claim that the proposed retainage charge is poor policy. The ALJ concluded that the proposed producer charge would properly balance the interests of both the Company’s customers and the producers, especially, because there is currently no balance in the charges. R.D. at 89. Exceptions, Replies and Dispositions In its Exceptions, PIOGA generally criticizes Peoples’ “about-face” position on this matter, the timing of the request, and the procedure used by Peoples in requesting the proposed producer retainage charge in the instant proceeding. Exc. at 1-4. PIOGA requests that the Commission reject the ALJ’s recommendation and approve either of the OCA’s retainage rate proposals, which are: (1) an additional 2.0% gathering retainage charge assessed to transportation customers on volumes delivered on the