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PSC Rules WGL's Use of Cash-Out for Supplier Imbalances Was Contrary to Tariff
September 9, 2011
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Washington Gas Light, "acted outside the provisions of its tariff," by utilizing a cash-out procedure to reconcile retail supplier delivery imbalances for the period January through March 2009, the Maryland PSC said in an order Friday (Case 9509 (d)).
The order came in a review of WGL's Purchased Gas Adjustment for the period from September 1, 2008 through August 31, 2009.
The at-issue cash-outs were provided to retail suppliers for the period January through March 2009 to remedy retail supplier over-deliveries resulting from an error in the model that determined the suppliers' daily delivery requirements for the winter 2008-2009. The cash-outs to suppliers resulted in an increase in WGL gas costs which could not be adjusted for in summer rates without undue rate shock to customers.
WGL said that its tariff does not require the use of a volumetric adjustment to suppliers' deliveries to address imbalances, and said that the cash-out was a fair and reasonable result for suppliers, customers, and the utility.
However, the PSC ruled that, "Rate Schedule No. 8, the Delivery Service Gas Supplier Agreement in the Company's tariff requires imbalances to be adjusted by future volume requirements, and not by cash payments to suppliers."
Although the tariff provides that the imbalance account "may" be adjusted volumetrically, "this use of the permissive tense merely indicates the Company is not required to make minor adjustments rather than indicating the Company can elect to use other methods not included in any tariff provision," the PSC continued.
"[W]e conclude that the Company lacks the discretion to utilize the cash-out procedure. Instead, since there is no 'cash-out' option under WGL’s tariff, the Company was required to use the volumetric adjustment approach in reconciling CSP [competitive service provider] imbalances in this case," the PSC added.
The PSC accordingly remanded the case to the Hearing Examiner Division to calculate what WGL's PGA position would have been had it made the necessary volumetric adjustment to each retail supplier's DRV [daily required volume] requirement or storage volumes as of April 2009, rather than the cash-out.
The remand shall also address the calculation of the excess cost paid by WGL to the retail suppliers in the April 2009 cash-out that should be disallowed as part of WGL's 2010 Maryland Actual Cost Adjustment (ACA).
Additionally, the remand shall address whether penalties shall be imposed on WGL pursuant to PUA Sec. 13-201 for not following its tariff. "[T]he most significant beneficiary of the WGL’s cash-out was the Company’s affiliate, Washington Gas Energy Services," the PSC said, stating that that WGL has acknowledged that part of the impetus for using the cash-out procedure was the request made by the retail suppliers, the largest of which was its affiliate.
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