John L. West west@millernash.com November 23, 1998 VIA FACSIMILE Carole J. Washburn Executive Secretary Washington Utilities and Transportation Commission 1300 S. Evergreen Park Drive S.W. Post Office Box 47250 Olympia, WA 98504-7250 Subject: Rules Relating to Transfer of Property Chapter 480-143 WAC Docket No. A-980084 Dear Ms. Washburn: On behalf of Cascade Natural Gas Corporation ("Cascade"), we submit the following comments to the above proposed rules. As requested in your November 9, 1998 letter, we are filing an original and 10 copies of these written comments and have enclosed an electronic copy of such comments on a 31/2-inch disk in ASCII text. Summary of Comments. 1. WAC 480-143-060. Cascade submits that the definition of "necessary or useful property" proposed in WAC 480-143-060 should not contain a specific dollar value or percentage of rate base above which public service company ("PSC") property is automatically deemed to be necessary or useful. If a specific amount is used, it should be much higher than that provided in the proposed definition. 2. WAC 480-143-010. Cascade submits that the definition of "transfer" proposed in WAC 480-143-010 should not cover accounting reclassifications of property from utility to non-utility. Cascade believes that implementing the rules as proposed would increase the costs and administrative burdens associated with certain property transfers without providing a corresponding benefit to ratepayers or the public. Accordingly, Cascade respectfully submits that the proposed rules should be modified as suggested. Comments. 1. WAC 480-143-060. The definition of "necessary or useful" in proposed WAC 480-143-060 appears to be unnecessarily broad. Under the proposed rule "necessary or useful" includes all property unless the item meets the following requirements: (a) It has an individual market value less than 0.1% of the PSC's rate base or $20,000 (whichever is greater); and (b) Either: (i) Substitutes for or replaces an item of equal or greater value or usefulness; (ii) Is a surplus and unneeded asset for which full value is received; (iii) Is obsolete; or (iv) Is excluded from the PSC's rate base by commission order, or otherwise. The proposed rule will significantly increase the number of PSC properties deemed to be necessary or useful. Under the proposed rule, any sale of property whose value exceeds $20,000 or 0.1% of the PSC's rate base must be the subject of a formal application for authority from the Commission and an order approving the sale. This application and approval procedure introduces additional transactional costs which will necessarily impact customer rates. See, e.g., WAC 480-143-010 (application for approval must include detailed facts and circumstances concerning the transaction and must be accompanied by exhibits including the contracts, a financial statement of the PSC as of the latest possible date, a profit and loss statement for the previous year, a detailed statement of all accounts payable, notes and other liabilities, and a summary of all outstanding securities). Furthermore, the increased administrative burdens associated with the transaction and the approval process will reduce the PSC's ability to effectively negotiate with all parties and obtain the best price, because not all buyers will be willing to wait for the administrative approval process to run its course. Furthermore, the Commission's current oversight of PSC property disposition under WAC 480-143-060 and -070 adequately protects ratepayers and the public. Current rules require PSCs to file an annual list of all property disposed of without Commission authorization, including an affidavit of a responsible PSC officer that the items were not necessary or useful and that the PSC received reasonable market value for the items disposed of. Accordingly, the proposed rule would add administrative complications and costs without providing significant benefits to ratepayers or the public. 2. WAC 480-143-010. The proposed definition of "transfer" in WAC 480-143-010 has been expanded to cover accounting reclassifications of property from utility to non-utility. This proposed change will increase the administrative burdens and costs associated with PSC reclassifications of property by subjecting such transactions to a formal Commission approval process. These new administrative burdens and expenses will increase costs to PSCs and will ultimately impact customer rates. The new applications for approval will also increase the Commission's workload, limiting the Commission's ability to effectively address other matters and/or requiring additional Commission resources and budget to handle the increased workload. Finally, the current mechanisms in place for the Commission to review PSC books provide significant Commission oversight over PSC property reclassifications, indicating that proposed WAC 480-143-010 should not be expanded to include accounting reclassifications within the definition of a "transfer" requiring a separate approval process. Conclusion. For the foregoing reasons, Cascade respectfully requests that proposed WAC 480-143-060 and 480-143-010 be amended as described above. Very truly yours, John L. West cc: Cascade Natural Gas Corporation bcc: Mr. W. Brian Matsuyama Mr. John T. Stoltz WEST:rer File No.: 501010-2001 Doc ID: SEADOCS:12789.1 11/24/98 2:13 PM