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6-2500-16163-2 G-022/GR-04-667 |
STATE OF MINNESOTA
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE PUBLIC UTILITIES COMMISSION
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In the Matter of a Petition by Greater Minnesota Gas, Inc. for Authority to Establish Natural Gas Rates in Minnesota |
FINDINGS OF FACT, CONCLUSIONS, RECOMMENDATION AND MEMORANDUM |
In this proceeding, Greater Minnesota Gas is not seeking a rate increase. Instead, it is requesting approval of its existing rates, along with approval of its bookkeeping systems, schedule of investments and equipment, and similar items which are used in rate regulation.
Public hearings were held on November 9, 2004, in Mankato Township and St. Peter. No person appeared at those public hearings to testify on the company’s proposals.
The parties (the Company and the Department of Commerce) have negotiated all issues to their mutual agreement, and have recommended that this matter be forwarded to the Commission for its review.
Appearing on behalf of the Company, Greater Minnesota Gas, Inc. (GMG or the Company) was Eric F. Swanson of the firm of Winthrop & Weinstine, 225 South 6th Street, Suite 3500, Minneapolis, MN 55402-4629.
Appearing on behalf of the Minnesota Department of Commerce was Assistant Attorney General Julia Anderson, 1400 NCL Tower, 445 Minnesota Street, St. Paul, MN 55101.
Robert C. Harding and Gerald C. Dasinger, 121 E. 7th Place, Suite 350, St. Paul, MN 55101-2147 participated on behalf of the staff of the Minnesota Public Utilities Commission.
The record in this matter closed on February 16, 2004, upon receipt of a letter from the Company’s counsel.
Based upon all of the files and proceedings herein, the Administrative Law Judge makes the following:
FINDINGS OF FACT
1. In September of 2002, Greater Minnesota Gas, Inc. notified the Department of Commerce and the Commission that it would no longer qualify for an exemption from Commission rate regulation under Minn. Stat. § 216B.16, subd. 12, because the Company had reached the 2000 customer mark.
2. On August 28, 2003, the Commission issued its Order that required the Company to file a general rate case no later than February, 2004 (later extended). The Commission allowed the Company to continue charging its current rates.
3. On April 30, 2004, the Company filed its general rate case. Despite a stated test-year revenue deficiency of approximately $528,000, the Company did not propose to change its rates in this proceeding. Instead, the company proposed to establish its current rates as authorized “base” rates and tariffs. They proposed a projected test year ending December 31, 2004.
4. In addition to the initial petition filed on April 30, 2004, the company filed supplemental direct testimony and additional information on August 26, 2004.
5. On September 14, 2004, the Commission issued its Order Suspending Proposed Rates and Adopting Interim Rates. In that Order the Commission determined that the 10-month time period for deciding the merits of the Company’s filing commenced as of August 26, 2004. The Commission also determined that interim rates were required by statute, and ordered that current rate levels be used as the interim rates. It further referred the matter to the Office of Administrative Hearings for record development and settlement discussions. On that same date, the Commission issued its Notice and Order for Hearing setting a prehearing conference for September 22, 2004 in St. Paul.
6. On September 22, 2004, a prehearing conference was held, and a schedule was agreed upon. Because of the unusual nature of this case, the schedule set forth a series of status reports and meetings, with the final report due on January 26, 2005. The scheduling order that followed that prehearing conference also set public hearings for Mankato Township and St. Peter to be held on November 9, 2004.
7. On October 27, 2004 the Department filed its First Rate Review Status Report. The report indicates that discovery and discussions have been ongoing, and that a meeting was scheduled for November 4 to identify outstanding issues and explore means to address them.
8. On November 9, public hearings were held in Mankato Township and in St. Peter. No member of the public appeared to comment on the proposal.
9. On December 9, 2004, the Department filed its Second Rate Review Status Report. The report indicates that the November 4 meeting did take place, and that negotiations were continuing on certain issues which had not yet been resolved. The report identified a number of issues which had been agreed upon, and also the ones that required further work.
10. On January 26, 2005, the Department filed its Final Rate Review Status Report. In that report, the Department concluded that it had found no reason to challenge the rates proposed by the Company, but that it did have several recommendations for the Company to follow on a going-forward basis. The Department took issue with a number of specific expenses claimed by the Company, but due to offsets, the net difference between the Company’s initial proposed revenue deficiency ($527,563) and the revised revenue deficiency ($513,176) was minimal, and under any circumstances the revenue deficiency is still a deficiency in the range of $500,000. This deficiency is based upon an overall rate of return of 6.58%, a 73/27% debt to equity ratio, a 5.28% cost of debt and a 10.00% cost of equity.
11. On February 10, 2005, a telephone conference call was held among the Company, the Department, the Commission staff, and the Administrative Law Judge. It was determined that there was no reason to hold any evidentiary hearing or to take any other steps prior to submitting this matter to the Commission. The Commission staff indicated that it might have some clarifying questions for the Company prior to presenting the matter to the Commission, but that it did not believe that questions were such that any formal proceedings involving the Administrative Law Judge were necessary.
12. On January 31, 2005, the Company’s counsel sent an email message to the Administrative Law Judge and the other parties indicating that the Company had no objections to the Department’s recommendations as set forth in the final report. This was confirmed during the telephone conference of February 10 and in counsel’s final letter of February 14.
Based upon the foregoing Findings of Fact, the Administrative Law Judge makes the following:
CONCLUSIONS
1. The Commission and the Administrative Law Judge have jurisdiction over this matter pursuant to Minn. Stat. § § 216B.16 and 14.50.
2. All relevant substantive and procedural requirements of law and rule have been complied with so as to permit the Commission and the Administrative Law Judge to proceed.
3. By accepting the Department’s recommendations as set forth in its final report, as well as other agreements reached prior to issuance of the final report, the Company has complied with all relevant requirements of law and rule to justify its proposed rates (which are, in fact, its current rates.) Due to the substantial revenue deficiency produced by those rates, no refund is necessary.
Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:
IT IS HEREBY RECOMMENDED: That the Commissioner adopt the recommendations of the Department’s Final Rate Review Status Report as well as the other matters covered by the Second Rate Review Status Report, and that the Company be permitted to continue charging its current rates until further order of the Commission.
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Dated this |
17th |
day of |
February |
2005. |
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S/ Allan W. Klein |
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ALLAN W. KLEIN |
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Administrative Law Judge |
MEMORANDUM
This was a somewhat unusual case because Greater Minnesota Gas was the first exempt gas utility to come under the Commission’s rate regulation as a result of growing up to the 2000 customer level. The Commission ordered the Company to file a rate case, and the Company chose to file a cased based upon its current rates, without requesting any increase. The Department’s investigation confirmed the Company’s assertion that its current rates were producing a substantial revenue deficiency. The two parties set about fashioning a record-keeping and accounting regime that would permit necessary review by the Department and the Commission when the Company next filed a request for a rate increase. That goal has been met, at least to the satisfaction of the Department, and the Company has agreed to the Department’s recommendations. Therefore, the Administrative Law Judge sees no purpose in proceeding any further with this matter. The only possible outstanding issues are those which might be raised by the Commission staff, but staff has indicated that its concerns are more those of clarification rather than substantial concern with any of the issues raised in the proceeding. Staff believes its needs can be met without any further formal proceedings before the Administrative Law Judge, and the Company has agreed to forego any further proceedings.
A.W.K.