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RCA accepts agreement on Enstar rates Says ‘black box settlements’ acceptable in some cases, but not automatic, and will not be acceptable for 2016 Enstar rate case KRISTEN NELSON Petroleum News
The Regulatory Commission of Alaska has accepted an agreement reached by Enstar Natural Gas Co. and objecting parties on permanent rates for Oct. 1 through Dec. 31, and interim rates effective Jan. 1, 2016. The interim rates will be refundable pending resolution of the 2015 test year rate case Enstar is required to file by June 1, 2016.
RCA said in a Sept. 29 decision that the parties agreed to settle all issues in the proceeding. Parties to the agreement were Enstar and Alaska Pipeline Co., a division and subsidiary, respectively, of Semco Energy Inc.; the Attorney General; Chugach Electric Association Inc.; Matanuska Electric Association Inc.; the Municipality of Anchorage doing business as Municipal Light & Power; Homer Electric Association Inc. and its wholesale power supplier Alaska Electric and Energy Cooperative Inc.; and Titan Alaska LNG LLC.
The commission said it determined that “with the settlement of all issues by all parties of record the public interest does not require this proceeding to continue.”
The agreement between the parties is on rates and a revenue requirement, RCA said, but does not address the components making up Enstar’s revenue requirement, the components of its rate base or its rate of return. The commission referred to it as a “black box settlement,” and said while it has seen an increasing number of such settlements in recent years, and they “may be acceptable in certain circumstances,” it is not “our settled precedent to accept black box settlements in all instances.”
Rate case in 2016 RCA said it has not adjudicated an Enstar rate case since 2002, and will not accept a black box settlement in Enstar’s 2016 rate case. The commission said it expects “transparency and a robust record” on Enstar’s return on equity and capital structure in the 2016 rate case, along with “appropriate revenue requirement treatment for reservation and capacity fees related to stored gas.”
“These issues are overdue for a full adjudication by this commission.”
The black box issue was the basis for a dissent by Commissioner Stephen McAlpine, who said parties need to “articulate their agreed upon return-on-equity (ROE) in any stipulation.”
The establishment of just and reasonable rates is “the fundamental task” of RCA, McAlpine said, striking a balance between the regulated company’s financial interests and relevant public interests.
“To determine rates we must know the costs of operation and maintenance and a reasonable rate of return” and the settlement approved by the commission “offers little in the nature of the components” making up Enstar’s revenue requirements, nothing on components of its rate base and “no mention of a reasonable rate of return.”
McAlpine commended the parties in reaching settlement.
“However,” he said, “I would not want to leave anyone with the impression that this methodology has become a well-accepted practice before this commission.” He said that without information on components of Enstar’s revenue requirement and a reasonable rate of return, he would require a full hearing “to illuminate the reasons for any proposed rate change.”
The agreement The agreement between the parties was filed with RCA Aug. 21, following mediation which occurred in July.
The Oct. 1-Dec. 31 rates are based on an Enstar revenue requirement of $81,088,932, excluding gas cost. The agreement says residential customers will experience an overall increase of 3.1 percent in annual gas bills, with higher volume transportation customers averaging an increase of 13 percent.
For residential customers the base rate will be $15 per month, with a base service charge of 12.754 cents per hundred cubic feet of gas.
Beginning Jan. 1, interim rates will be based on an Enstar revenue requirement of $83,288,932, excluding gas, with average residential customers experiencing an increase of 3.9 percent annually, 0.8 percent over the October-December rates, and high volume transportation customers experiencing an increase of 17.7 percent, 3.9 percent over the October-December rates.
For residential customers the base rate starting in January will be $16 per month, with a base service charge of 12.682 cents per hundred cubic feet of gas.
Notification required RCA is requiring Enstar to notify customers prior to the Jan. 1 increases.
The interim rates effective Jan. 1 are refundable pending the outcome of the 2016 rate case.
As part of the settlement, effective Oct. 1 Enstar will waive contract demand penalties for economy energy sales in its very large firm transportation tariff, and will allow ML&P, Chugach, MEA and HEA/AEEC “to exchange gas volumes for economy energy generation and transport them to a different power plant if delivery point facilities, pipeline and/or displacement capacity is available.”
Enstar has also agreed to convene a transportation tariff shippers meeting within six weeks of the commission’s decision on the tariff filing by Kenai Beluga Pipeline LLC which was required when the commission approved consolidation and transfer of a controlling interest in four Cook Inlet natural gas pipelines owned directly or indirectly by Hilcorp Alaska LLC to its subsidiary Kenai Beluga Pipeline LLC. The purpose of the meeting is to harmonize operational concepts between Enstar and KBPL tariffs.
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