Title
Proposed Stipulated Agreement/In the Matter of the Application of NMGC for Revisions to its Rates, Rules, and Charges Pursuant to Advice Notice Nos. 70 and 71; Case No. 18-00038-U before PRC.
Recommended Action
There are three possible motions related to this request:
1. I move that Council approve the proposed Stipulated Settlement as presented by New Mexico Gas Company in PRC Case No. 18-00038-UT, and further authorize Tim Glasco, Utility Manager, to submit, in a form acceptable by the County Attorney, a statement of the County’s position on the Stipulated Settlement as required by the PRC Hearing Officer.
2. I move that Council oppose the proposed Stipulated Settlement as presented by New Mexico Gas Company in PRC Case No. 18-00038-UT, and further authorize Tim Glasco, Utility Manager, to submit, in a form acceptable by the County Attorney, a statement of the County’s position on the Stipulated Settlement as required by the PRC Hearing Officer.
3. I move that Council take no position on the proposed Stipulated Settlement as presented by New Mexico Gas Company in PRC Case No. 18-00038-UT, and further request that staff communicate this position to NMGC and intervening parties and provide a report at the next regularly scheduled Council meeting on the status of the proceedings following the filing of the required statement of positions by the other parties.
Utility Manager's Recommendation
The Utility Manager recommends that Council approve the Stipulated Settlement of PRC Case No. 18-00038-UT.
Body
On February 26, 2018, the New Mexico Gas Company (NMGC), filed with the New Mexico Public Regulation Commission (PRC), a petition to increase various rates and charges (Application). On March 14, 2018, the PRC suspended the Application and appointed a hearing officer, Frances I. Sundheim, on March 29, 2018. On April 18, 2018, the hearing officer set a procedural schedule for hearing of the Application. In addition to the normal procedural matters, the hearing officer set the public hearing on the Application for September 24, 2018 through October 5, 2018.
In NMGC’s Application, NMGC requested an increase in revenues of approximately $8 million to be recovered through base rates, an overall tax unadjusted weighted average cost of capital of 7.65% including a requested return on equity of 10.2% and a capital structure, an increase in access fees for customers, an increase in special charges under NMGC Rate No. 11, approval to implement a weather normalization adjustment (WNA) mechanism, approval to implement an integrated management program (IMP) cost recovery mechanism, approval to implement economic development rates meant to encourage economic development, and a change in the amortization of net regulatory assets related to its overfunded retiree medical plan.
The County, as a transportation customer, falls under NMGC Rate Schedule No. 61. The County purchases natural gas wholesale but must utilize NMGC’s transmission pipelines to deliver the gas to the County’s distribution system. NMGC’s Application would have resulted in an annual increase to the County and its customers of $35,000 to $42,000, or 17.43%. To cover the requested transportation cost increase, the County would have to charge its customers $.0283/Therm for the increase, up from $.0241/Therm for the transportation costs.
After initial submittals by the parties, NMGC has proposed a possible settlement of the matter through a stipulated agreement (Stipulated Settlement) between the various intervening parties. As proposed in the Stipulated Settlement, the impact to the County under Rate Schedule No. 61, would be an increase of only 4.18% in Year 1 and Year 2, with an estimated annual impact of $14,000. Although significantly higher than the standard NMGC residential customer increase, it is still lower than the original NMGC Application estimated increase of 17.43%. If passed, the potential new per Therm rate under the proposed Stipulated Settlement for County would be $0.0259/Therm.
Based on available information, it expected that of the six primary intervening parties, including New Mexico Attorney General’s Office, the City of Albuquerque, the New Mexico Industrial Energy Consumers, U.S. Department of Energy for all federal facilities, the Southwest Public Service Company, and the Incorporated County of Los Alamos, only the City of Albuquerque is currently is opposed to the proposed Stipulated Settlement terms.
It is important to note that NMGC has provided it is agreeable to this lower increase now, because the company will file a larger rate case in 2020 which the company will seek to more accurately realign certain fixed and the overall allocation of costs to customer classes. In essence, this is a temporary necessary increase to get the company through the interim period until the later rate filing.
The Council has three alternatives available to it regarding the proposed NMGC Stipulated Settlement. These are: 1) to formally support the stipulation, 2) to formally oppose the stipulation, or 3) take no position.
Alternatives
As provided above, the Council can choose to either approve, oppose, or take no position on the settlement. Irrespective of our position or that of the other parties, the Hearing Officer at the September 24th public hearing will make a recommendation to the PRC to either accept or deny the proposed stipulated settlement. If the Hearing Officer recommends the Settlement, then the Commission can either reject or accept her recommendation. If the PRC rejects the recommendation for settlement, then the Hearing Officer will reset the schedule for a full hearing on the merits of the original petition. It is possible that the County may or may not receive a better allocation of costs and a final increase in Rate Schedule No. 61 at full hearing.
Fiscal and Staff Impact/Planned Item
If the Council agrees to the Stipulated Settlement and the Hearing Officer and PRC accept the Stipulated Settlement, the impact to the transportation portion of any customer bill (see attachment Detailed Gas Rate Calculation Worksheet, third column from left), will increase 4.18%, or from $0.0241 to $0.0251 per Therm delivered. If the Council opposes the Stipulated Settlement or takes no position, then the Hearing Officer and PRC could accept or reject the proposed action; which could either increase, decrease, or have no impact to Rate Schedule No. 61.
Attachments
A - Final NMGC Stipulated Settlement Agreement
B - Detailed Gas Rate Calculation Worksheet (as of September 2018)
C - Monthly Gas Rate Schedule (as of September 2018)