BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION WASHINGTON UTILITIES AND ) TRANSPORTATION COMMISSION, ) DOCKET NO. UG-970932 ) Complainant, ) SECOND SUPPLEMENTAL ) ORDER REJECTING TARIFF vs. ) FILINGS AND AUTHORIZING ) REFILING; AND ORDER NORTHWEST NATURAL GAS ) APPROVING AND ADOPTING COMPANY, ) SETTLEMENT AGREEMENT Respondent. ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ) SUMMARY PROCEEDINGS: On May 30, 1997, the Northwest Natural Gas Company (NW Natural After this rate request was filed, the Company changed its d/b/a from Northwest Natural Gas Company to NW Natural. or the Company) filed with the Commission certain tariff revisions designed to effect a general increase in its rates for natural gas service. The stated cumulative effect of these tariff revisions increases annual revenue by approximately $1,201,404 plus an amount to amortize deferred Financial Accounting Standards (FAS) 106 expense. The Commission suspended the operation of these tariff revisions by order entered June 25, 1997. On October 3, 1997, the parties filed with the Commission a Settlement Agreement constituting a complete settlement of all issues raised by the Company in this docket. The Settlement Agreement proposes to increase total annual revenues in Washington by approximately $608,000, effective no later than November 1, 1997. HEARINGS: The Commission held a prehearing conference on September 17, 1997, in Olympia, Washington and held a hearing on October 20, 1997, in Vancouver, Washington. The hearing was held before Chair Anne Levinson and Commissioner William R. Gillis, and Administrative Law Judge C. Robert Wallis. PARTIES: In this proceeding, Susan Bergles, attorney, Portland, Oregon, represented NW Natural; Robert Cedarbaum, assistant attorney general, Olympia, represented the Staff of the Washington Utilities and Transportation Commission (Commission Staff); Robert Manifold and Simon ffitch, Assistant Attorneys General, Public Counsel Section, Seattle represented the public; and Paula Pyron, attorney, Portland, Oregon, represented intervenor Northwest Industrial Gas Users (NWIGU). COMMISSION: The Commission accepts the parties’ Settlement Agreement as a complete resolution of all issues raised in this docket by the Company’s filing. Consistent with the Agreement, the Commission rejects the proposed tariff revisions filed May 30, 1997, and authorizes the Company to refile tariffs consistent with the Settlement Agreement and this Order, and reflecting a total increase in annual revenues of approximately $608,000 The exact sum is obtained by the mathematical calculations expressed in the settlement. Statements of the total vary between $606,000 and $608,000 depending on rounding. with a stated effective date that allows Commission Staff no less than one complete working day to review the filing. MEMORANDUM I. PROCEDURAL HISTORY On May 30, 1997, the Company filed revisions to its existing tariffs to effectuate a general increase in rates of $1,201,404 plus an amount to recover deferred FAS 106 expense, with a stated effective date of July 1, 1997. The Commission suspended the operation of the proposed tariff revisions by order dated June 25, 1997. A prehearing conference on September 17, 1997, resolved preliminary and procedural matters. The parties filed their Settlement Agreement, included in the record as Exhibit 22, on October 3, 1997, as a complete and integrated settlement of all issues raised by the Company’s filing in this proceeding. The Commission held a hearing on October 20, 1997, in Vancouver, Washington, to hear testimony on the Settlement Agreement. Company witness Bruce DeBolt and Commission Staff witnesses Henry McIntosh and James Russell testified in support of the Settlement Agreement. Public Counsel witness James Lazaar also testified in support of the agreement. Counsel for NWIGU stated her client’s support for the agreement, noting that the Agreement provides that the settlement has no precedential value for any of the substantive issues resolved therein. None of the members of the public who were present chose to offer testimony. II. SETTLEMENT AGREEMENT The parties’ Settlement Agreement is summarized as follows: Revenue Requirement and Rate Spread: The Company’s general revenues in Washington will increase annually by $549,192, to be applied on an equal percent of distribution margin basis. The effective date of tariffs to implement this change is November 1, 1997, at the latest. Rate Design: Tariffs are revised to make them more readily understandable. The therm usage components embedded currently in the customer charge of residential Schedules 2 and 24, and commercial Schedule 3, are removed. Residential customer charges under Schedules 2 and 24 are set at $4.00 per month. Commercial customer charges under Schedule 3 are set initially at $6.00 per month, increasing to $8.00 per month in 1998 and $10.00 per month in 1999. These increases in commercial customer charges will be offset exactly by decreasing Schedule 3 energy charges based upon normalized volumes for the June 30, 1996, test year that is adopted for this case. Other existing schedules are eliminated or new schedules added, as more fully described in the Settlement Agreement. The Schedule 55 sales rate is replaced with a transportation rate that includes an optional sales service for eligible customers. Main Extension Policy: The Company’s main extension policy is revised to include a construction allowance of 5.0 times base distribution rate. The parties will then seek to develop a customer rate surcharge to reflect the additional cost to serve new residential and commercial customers who desire gas service, but not under the terms of the revised main extension policy. The Commission supports and encourages the parties’ discussions and expects that it will result in an early agreement for Commission consideration. Amortization of Deferred FAS 106 Expense: This adjustment refers to Decision No. 106 of the Financial Accounting Standards Board and relates to the funding of pensions. Previously deferred FAS 106 expense is amortized through a temporary surcharge until the account balance, which will generate interest at the Company’s short-term cost of money, is fully recovered (approximately 5 years). At the time the Settlement Agreement was filed, the annual amount to be amortized was approximately $58,800. Ongoing FAS 106 expense will be included in permanent rates. No further deferrals of FAS 106 expense will be made. III. PUBLIC COMMENT No member of the public chose to present oral testimony at the hearing. The Commission received as Exhibit No. 23 an illustrative exhibit consisting of the written comments to the Commission from members of the public regarding this docket. The Commission directed that the record be held open for three days so that any additional written comments could be included in the record. IV. COMMISSION DISCUSSION AND DECISION The Commission must review the Settlement Agreement pursuant to applicable statutory standards. Under RCW 80.01.040(3), the Commission shall regulate in the public interest, as provided by the public service laws, the rates, services, facilities and practices of all persons engaging in the business of supplying any utility service or commodity to the public for compensation, and related activities, including gas companies. Chapter 80.28 RCW regulates the operation of gas companies; specifically, RCW 80.28.010 provides that charges by gas companies shall be just, fair, reasonable and sufficient. All parties to this proceeding have signed the Settlement Agreement. The agreement was presented to the Commission for its approval as an integrated, comprehensive settlement of all issues raised in this case. The Commission has reviewed the Settlement Agreement, the prefiled evidence, the testimony of witnesses, the written comments of members of the public, and the comments of counsel. The Commission is satisfied that the parties’ agreement is consistent with the public interest, that it meets all pertinent statutory and regulatory standards, and that it will result in rates that are fair, just, reasonable and sufficient. The Commission adopts and approves the Settlement Agreement in its entirety, and will order the filing of tariffs to reflect the Company’s new revenue requirement consistent with the Settlement Agreement and this Order. FINDINGS OF FACT 1. The Washington Utilities and Transportation Commission is an agency of the state of Washington vested by statute with the authority to regulate the rates, rules, regulations, practices, accounts, securities, and transfers of public service companies, including gas companies. 2. NW Natural is engaged in the business of furnishing gas service within the state of Washington as a public service company. 3. On May 30, 1997, NW Natural filed certain tariff revisions designed to effect a general increase in its rates for gas service, the cumulative effect of which is to increase annual revenues by $1,201,404 plus an amount to amortize deferred FAS 106 expense. The Commission entered an order on June 25, 1997, suspending the operation of these tariff revisions. 4. On October 3, 1997, the parties filed a Settlement Agreement proposing to resolve all issued raised by the tariff filing in this docket. The Settlement Agreement proposes a general increase in annual revenues in Washington of $549,192 to be applied on an equal percent of distribution margin basis, effective no later than November 1, 1997. The Settlement Agreement also proposes a temporary surcharge of approximately $58,800 annually to amortize deferred FAS 106 expense, as well as changes to residential and commercial customer charges, changes to main extension policy, and the elimination and addition of other identified schedules. In total, the Company’s annual revenue requirement increases by approximately $608,000 under the Settlement Agreement. CONCLUSIONS OF LAW 1. The Washington Utilities and Transportation Commission has jurisdiction over the subject matter and the parties in this proceeding. 2. The Settlement Agreement contained in Exhibit 22 and resolving all issues in these proceedings is consistent with the public interest. 3. The tariff revisions filed by the Company on May 30, 1997, now under suspension should be rejected. The Company should be authorized to refile tariff revisions consistent with the Settlement Agreement and this Order. 4. The Settlement Agreement should be approved and adopted in its entirety. Tariff revisions prepared in accordance with the Settlement Agreement and this Order will result in rates that are just, fair, reasonable and sufficient. ORDER 1. The Settlement Agreement is approved and adopted in its entirety as a full resolution of all issues in these proceedings. 2. The proposed tariff revisions filed in this proceeding are rejected in their entirety. The Company is authorized to refile tariffs consistent with the resolution of this matter contained in the Settlement Agreement and this Order, and to reflect an increase in the Company’s annual revenue requirement in Washington of approximately $608,000 to become effective on a date that allows Commission Staff no less than one complete day to review the filing. 3. The compliance filing required by this Order is limited in scope strictly to effectuate the terms of the Commission’s Order. The refiled tariff pages should bear the notation that filing is by authority of the Commission’s SECOND SUPPLEMENTAL ORDER IN DOCKET NO. UG-970932, and should be filed to permit Commission Staff one working day to review the tariff pages prior to their effective date. 4. The Commission retains jurisdiction to effectuate the provisions of this Order. DATED at Olympia, Washington, and effective this 22nd day of October 1997. WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION ANNE LEVINSON, Chair WILLIAM R. GILLIS, Commissioner NOTICE TO PARTIES: This is a final order of the Commission. In addition to judicial review, administrative relief may be available through a petition for reconsideration, filed within 10 days of the service of this order pursuant to RCW 34.05.470 and WAC 480-09-810, or a petition for rehearing pursuant to RCW 80.04.200 and WAC 480-09-820(1).