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Mich. Staff Briefs Proposed Reservation Charge at Michigan Gas Utilities
August 23, 2011
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The Michigan PSC should authorize Michigan Gas Utilities Corporation to implement a Reservation Charge of $0.6844 per Mcf applicable to both Gas Cost Recovery (GCR) and Gas Customer Choice (GCC) customers, PSC Staff said in a post-hearing brief (U-16481).
See 6/29 for background on the case
The Reservation Charge also includes the current balancing fee of $0.42 per Mcf.
"Staff maintains that MGU is currently satisfying its supplier of last resort requirements and as long as MGU can demonstrate that it is meeting this obligation, GCC [choice] customers should also contribute to recovery of these costs," Staff said in support of the Reservation Charge.
Staff's proposed charge of $0.6844 per Mcf is lower that MGUC's sought $0.8014 per Mcf, reflecting Staff's removal of costs related to the Washington 10 Storage. Staff noted that MGUC has acknowledged that the company will likely not utilize Washington 10 during the GCR year, and that MGUC will pursue a secondary market for the storage.
However, Staff would retain in the Reservation Charge revenue requirement $253,200 in transport costs associated with Washington 10 storage service. Retail suppliers had advocated removing such costs from the Reservation Charge. Staff said that the costs reflect MichCon Transport, which is available to move gas to all areas of the MGUC system, not just to Washington 10.
The Michigan Gas Customer Choice Association questioned the sought level of the Reservation Charge, arguing that MGUC initially said that SOLR costs consisted solely of back-up assets for defaulting suppliers or customers returning to utility sales service, but later also included a balancing component under the definition of the SOLR function.
The Choice Association pointed to the incongruity in MGUC's position in that MGUC originally said suppliers were not paying any SOLR costs, then included balancing as a SOLR cost, and conceded that suppliers do pay balancing charges currently.
The Michigan Gas Customer Choice Association also sought to remove from the Reservation Charge calculation $2.5 million in costs of transportation for 6.2 Bcf of fixed price supply for GCR customers.
Staff noted that MGUC, "advocates that both GCR and GCC customers share in the responsibility for full recovery of the [SOLR] costs, but does not advocate for any credit to GCC customers for any credits or revenues that may be associated with these costs [such as through capacity sales."
As a result, Staff recommended, "that the Company submit a proposal with its next GCR plan case to address these inequities."
Staff further said that a "reasonable" approach is for MGUC to address excess capacity, excess storage and over/under recovery of the Reservation Charge during future GCR plan filings, through a reconciliation and true-up of these revenues.
On the latter point (over/under recovery of the Reservation Charge itself rather than excess capacity), MGUC said in its brief that, "GCC customers are unlikely to pay more than their fair share of the costs comprising the Reservation Charge because they will only pay according to the actual Mcf they consume."
An annual true-up of the Reservation Charge is thus not necessary, MGUC said.
Furthermore, MGUC said that choice customers should not share in released capacity credits for the 2011-2012 period, because, "a Commission order approving implementation of the Reservation Charge is not likely to be in place before the end of 2011." Choice customers would not have fully contributed to the SOLR costs for which they are sharing in refunds, MGUC argued.
However, the Michigan Gas Customer Choice Association stressed that, "GCC customers should not be asked to pay the costs of SOLR, but then be denied any offsetting benefit in the event that MGUC resells pipeline or storage capacity that is used to provide SOLR."
Regarding the moratorium on choice enrollments previously proposed by MGUC, for which it later said it was not seeking approval in the GCR case, most parties did not address the issue in briefs given MGUC revised its testimony to say it was only studying the issue.
However, the Residential Ratepayer Consortium, which had initially proposed the moratorium, urged the PSC to make a finding that, "the evidence in this case shows that MGUC cannot provide safe and reliable service to the GCR customers at the existing levels of GCC participation," due to various operational issues associated with choice volumes. Although RRC did not seek an actual moratorium in its requested relief, its requested finding would support the establishment of a moratorium in a future case.
Staff said that the Reservation Charge should appear as a separate line item on both GCR and GCC bills. "[T]he line item billing is transparent for customers to compare the GCC rate with the GCR rate of gas as suggested on the Commission's Consumer Alert on Gas Choice," Staff said.
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