UGI Central Penn Gas Proposes to Revise Rate Classes to Mirror Affiliates, Would Revise Choice, Transportation Rates

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January 24, 2011

UGI Central Penn Gas has proposed significant changes in its rate classifications to align the classes with those used at affiliates UGI Utilities and UGI Penn Natural Gas, as part of a newly field rate case before the Pennsylvania PUC (R-2010-2214415).

Additionally, Central Penn Gas would adopt the supplier choice tariff and related procedures in use at its two affiliates.

"The Company also believes that the standardization of the three tariffs should make it easier for suppliers to provide service and should foster greater competitive choices for customers," Central Penn Gas said in testimony.

At a high level, the proposed Central Penn Gas rate design would include general bundled service rates for both residential and non-residential customers (Rates R and N, respectively), as well as Choice rates for these customers (Rate RT and NT).  The new structure would also include three levels of firm commercial and industrial transportation rates -- Rate DS (Delivery Service), Rate LFD (Large Firm Delivery Service) and Rate XD (Extended Volume Large Delivery Service) -- as well as a rate for interruptible transportation service (Rate IS - Interruptible Transportation Service).

More specifically, Rate DS is the basic transportation service rate schedule for non-residential customers and requires a minimum one year contract term.  Rate LFD is a transportation service available to non-residential customers who enter into a contract for not less than three years and elect a Daily Firm Requirement (DFR) of not less than 50 Mcf.  Rate XD is a negotiated transportation service available to non-residential customers with annual requirements over 200,000 Mcf who execute a service agreement for a minimum of three years.  Rate IS is a negotiated interruptible transportation service rate with a minimum term of one year.

Rate Schedule G is Central Penn Gas' current general non-residential sales service rate.  As part of migrating customers to new rate schedules, Central Penn Gas will perform rate evaluations for all Rate Schedule G customers.  While Central Penn Gas expects the vast majority of Rate G customers will be most economically served under Rate N (and will automatically move these customers to Rate N), Central Penn Gas expects that certain Rate G customers could be more economically served under a new choice or transportation rate (NT, DS, LFD or XD).

In such cases, Central Penn Gas will send the customer a letter explaining the rate choices and what is required in order to select the more economic rate.  Central Penn Gas will not automatically enroll Rate G customers on a transportation rate schedule since these rate schedules require the election of an alternate supplier and require a written contract signed by the customer.

Central Penn Gas expects that 56 Rate Schedule G customers would be more economically served under Rate DS (Delivery Service) and 32 Rate Schedule G customers would be more economically served under Rate LFD (Large Firm Delivery Service).

Customers on current non-residential Choice Rate Schedules SGMD and GMD will automatically be moved to new Choice Rate NT.  If choice customers on Rate Schedules SGMD and GMD would be more economically served under a new transportation rate, Central Penn Gas would notify customers of their options, but would not automatically change the customer from choice service to transportation service, because the non-choice transportation rate schedules require a written contract signed by the customer, have higher customer charges, and require longer-term commitments.

Customers on existing transportation schedules GD and L for whom transportation (rather than choice) service remains the most economic option will be moved to Rate DS, absent an alternative election by the customer (such as LFD or XD).

Central Penn Gas is also moving all rate classes toward more closely being aligned to cost of service, and the new transportation rate classes represent more strictly defined options.

Central Penn Gas testified that the current transportation options available to customers are not well defined by customer size or usage characteristics.  "As a result, customers can elect different rate schedules for service, without substantial restriction.  This affects the ability to develop differentiated 'cost based' rates for the commercial and industrial rate schedules," CPG said.

"Restructuring the current non-choice transportation rate schedules into three separate rate schedules of DS, LFD and XD creates more distinct class cost of service categories and offers CPG and its customers the rate flexibility to negotiate terms and conditions with very large customers having a variety of competitive alternatives.  As a result, 88 current retail customers representing in excess of 0.5 Bcf of annual usage are represented in this filing as new transportation customers," Central Penn Gas said.

Similar to balancing procedures at the other UGI companies, Central Penn Gas will offer optional balancing service elections under Rate NNS (No Notice Service) and Rate MBS (Monthly Balancing Service).  Central Penn Gas said that the changes, "expand the current limited daily and monthly balancing tolerances to tolerances that customers and Natural Gas Suppliers ('NGSs') should find more flexible, fair and attractive."

Central Penn Gas will also implement a system management concept which employs Critical versus Non-Critical Day designations, providing for commensurate changes in overrun charges.  "This will make inadvertent Non-Critical Day overruns less burdensome for customers and NGSs, and at the same time, provide an additional safeguard against intentional system arbitrage that could negatively impact system reliability; adopting similar rules and procedures for residential and small commercial 'choice' transportation that currently exist on the UGI and PNG systems will allow the NGSs who are currently active and serving in excess of 20,000 customers on the UGI and PNG systems to readily utilize existing communication protocols with UGI on the CPG system," Central Penn Gas said.

Central Penn Gas will establish a Cash-Out mechanism which is based on a published local market index to provide for, "greater transparency and equity compared to the current Cash-Out pricing structure."

Central Penn Gas applied to update the percentages of the Merchant Function Charges to reflect the actual uncollectible expense experienced by the company during the most recent five years.  Based on this updated data, the MFC for the residential class will decrease from 2.6% to 2.26%.  The MFC for the commercial class will be unchanged at 0.14%.

Central Penn Gas would also change the unit of measurement shown on customers' bills from dekatherms to a volumetric measurement using cubic feet.  The change will not impact the amount on bills, and Central Penn Gas will continue to apply a BTU factor, adjusted monthly, to calculate the number of dekatherms consumed by the customer.

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