OAH Docket No.
7-2500-20907-2
PUC Docket Nos.
G-022/GR-09-962 and G-022/MR-09-983
STATE OF
OFFICE OF
ADMINISTRATIVE HEARINGS
FOR THE
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In the Matter of the Application of Greater Minnesota Gas,
Inc., for Authority to Increase Rates for Natural Gas Service in the State of
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SUMMARY OF TESTIMONY AT PUBLIC HEARING |
A
Public Hearing was conducted in this matter by Administrative Law Judge (ALJ)
Richard C. Luis, pursuant to appropriate notice, at the
The
Public Hearing is part of the process by which the Minnesota Public Utilities
Commission will determine, based on the record developed in the entire
proceeding, whether or not to grant a rate increase in the amount(s) requested
by Greater Minnesota Gas, Inc. (Company, GMG, Utility). The formal parties to the evidentiary portion
of this matter, GMG, the Office of Energy Security (OES) and the Office of the
Attorney General (OAG), have agreed to confer among themselves and arrive at a settlement
for the consideration of the ALJ and the Public Utilities Commission. Pursuant to the agreement of all parties, no
Evidentiary Hearing has been convened.
At
the Public Hearing GMG was represented by Warren Satterlee, its Interim President
and Chief Executive Officer (CEO) and Anne Tessier, a consultant retained by
GMG for purposes of assisting in its rate-case Application. The OES was represented at the Public Hearing
by Rates Analyst Adam Heinen. Consumer
Complaint Mediator Tracy Smetana appeared on behalf of the Staff of the Public
Utilities Commission (Staff).
Approximately
20 people attended the Public Hearing.
Public witnesses Math Sirek, Jr., John Weis, Jane Hoffman-Weis, Will
Rancour and Dan Engel offered testimony.
The testimony at the Public Hearing in this case is summarized below in
numbered paragraphs, summarizing the statements made in approximate
chronological order:
TESTIMONY
1.
Warren Satterlee explained that the Utility had filed
this requested rate increase in order to raise revenue sufficient to cover
current expenses, including the capitalization of a large “Plant-In-Service”
item of gas pipeline that was purchased several years ago but was not yet
earning a return. Earlier this decade,
the Company went into debt of approximately $2 million for the purchase of gas
pipeline inventory, which it believed would be utilized shortly thereafter
because of population growth foreseen at the time in the Company’s primary
service area (between Jordan and Elko New Market) in south-central Scott
County.
2.
Mr. Satterlee pointed out also that the Company would
be justified to increase its rates by more than the (overall) 13.6% requested
in this matter, which will account for only 60% of the rate of return needed to
finance its rate base fully. He and
Ms. Tessier explained also that the Company has been granted an interim
rate increase of 16%, and that any differential for customers between the
interim rates and final rates collected since the effective date of interim
rates would be refunded to the customer.
3.
Both Will Rancour and Jane Hoffman-Weis inquired
whether or not the final rates granted could be in an amount greater than the Interim
Rates now being collected in customer billing.
In addition, Mr. Rancour inquired about the principle of interim rates,
and Ms. Tessier explained that their purpose was to provide capital to the
Company during the period between filing for the rate increase and the granting
of the final rate increase.
4.
In a response to a question from Dan Engel, Ms.
Tessier explained that any information regarding the development of the rate
case, including pre-filed testimony, could be found on the Internet,
specifically at the site of the Public Utilities Commission.
5.
Math Sirek, Jr., pointed out his history as a rate
payer for the company. Mr. Sirek lives in
a rural area near the town of
6.
Mr. Sirek, who now depends financially on the fixed
income provided by monthly Social Security checks, requested specifically that
his billing cycle be adjusted so that he can pay his gas bill after the time of
the month when he receives his Social Security check. Cathy Glaubitz of GMG noted that the Company
had the option to set specific due dates on individual bills.
7.
After Ms. Tessier explained the Company’s brief
history of rate case filings,[1]
noting particularly that it did not receive, nor did it ask for, an amount
sufficient to cover what was justified by the size of its rate base at the time
of its Application in 2006. The same is
true in this case. GMG’s intent is to
phase increases in gradually, to avoid rate shock.
8.
When he WAS informed that utility companies generally
are granted the opportunity to receive an assured return on equity which, if
covered by sufficient revenue, would “guarantee” a profit, John Weis characterized
that arrangement as a “sweet deal.” The
ALJ explained to Mr. Weis that the United States Supreme Court established the
principle of allowing public utilities a rate of return sufficient to cover their
expenses in the 1920s.
9.
Mr. Heinen informed the public that the Company has
asked for an overall rate of return of 10%, and Ms. Tessier explained that if
the request is granted, the Company actually expected only to receive
approximately a 4% return on equity.
10.
Mr. Weis also asked for an explanation of the
“distribution charge,” and it was explained to him that this rate increase
request was primarily affected only by the expenses that go into that item. It was noted that most of any customer’s
bills from GMG are accounted for by the cost of gas, which is “passed through”
to the consumers at the same cost paid by GMG, and that those costs are not
considered in rate increase cases.
11.
Jane Hoffman-Weis suggested that the Company finance
more of its revenue needs by taking loans out from banks. Mr. Satterlee explained that the Company has
a large amount of bank debt now, and stated that more revenue is needed now to
service its debts, to pay operating expenses, and to cover the total
investment.
12.
Also in response to Ms. Hoffman-Weis, it was
explained that the Company’s $8 per month “facility fee” is charged to every
customer on the system in order to be “hooked up” for natural gas service. Mr. Satterlee noted that the Company’s
request for an increase in the facility fee, to $10 per month, is likely to be
dropped to an increase of 50 cents per customer, an $8.50 monthly facility
charge for residential customers, going forward from the date after which the
Public Utilities Commission grants its final rate increase in this matter.
13.
Ms. Tessier explained that the pipeline inventory
built up by GMG early this decade was an investment made on the assumption that
residential housing would increase more than it has during the decade of the
2000s in the prime territory serviced by GMG in southern
Dated: June
29, 2010
/S/
Richard C. Luis
_________________________
RICHARD
C. LUIS
Administrative
Law Judge
[1] Utility companies are not subject to rate regulation
by the PUC until they serve over 2000 customers. GMG did not cross that threshold until year
2002. Before then, the Company negotiated
rates separately with municipalities and townships.