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DOST" \rqCI{ET,T "\-,
ATTOB\HYS A1'LAW
17 North Second Street12th FloorHarrisburg, PA 1 71 01 -1601
717-731-1970 Main717-731-1985 Main Faxwww.Dostschell.com
Anthony D. Kanagy
[email protected] Direct
i:r!fl;|,'"'i'r?1T"""
July 13,2012
Rosemary ChiavettaSecretaryPennsylvania Public Utility CommissionCommonwealth Keystone Building400 North Street, 2nd Floor NorthP.O. Box 3265Harrisburg, PA 17105-3265
RE: UGI Utilities, Inc. - Gas Division Supplement No. 95 to UGI Tariff Gas -Pa. P.U.C. No. 5Docket No. R-2012-
Dear Secretary Chiavetta:
Enclosed for filing on behalf of UGI Utilities, Inc. - Gas Division ("UGI" or the "Company'') areeight (8) copies of Supplement No. 95 to UGI Tariff Gas - Pa. P.U.C. No. 5 ("supplement No.95"). Supplement No. 95 is being filed with an issue date of July 13, 2012 and an effective dateof September 11, 2012.
In this filing, UGI is proposing to unbundle natural gas procurement costs from distribution ratesand recover these costs through a gas procurement charge that will be included in its Price toCompare. UGI is making this filing pursuant to the Pennsylvania Public Utility Commission's("Commission") Revised Final Rulemaking Order at Docket No. L-2008-2069114 entered onJune23,20l1 and the Commission's Secretarial Letter issued on May 25,2012, in the sameproceeding.
This filing is organized as follows:
l. Statement of Reasons
UGI Attachment 1: Supplement No. 95
UGI Attachmerfi2: Company responses to the Commission's filingrequirements contained in 5i2 Pa. Code g 53.52(a)and (b)
ALLENToWN HARRTSBURG LANCASTER PHTLADELPHTA prfisBURGH pRrNcEToN WASHTNGToN. D.c.
A PENNSYLVANIA PRoFESSIoML CoRPoRATIoN
9736995v1
Rosemary ChiavettaJuly 13,2012Page2
2. UGI Statement No. l. the Direct Testimonv of Shaun M. Hart
3. UGI Statement No. 2, the Direct Testimony of David E. Lahoff, including UGIExhibit DEL-I
In addition, the Company requests that the following be entered as counsel for the Company inthis proceeding:
Mark C. Morrow (ID # 33590)UGI Corporation460 North Gulph RoadKing of Prussia, PA 19406Phone: 6l 0-337-1 000Fax: 610-992-3258E-mail: [email protected]
David B. MacGregor (I.D. #28804)Post & Schell, P.C.Four Penn Center1600 John F. Kennedy BoulevardPhiladelphia, PA I 91 03-2808Voice: 215.587.1197Fax:215.320.4879E-mail : [email protected]
Anthony D. Kanagy (ID # 85522)Post & Schell, P.C.l7 North Second Street, 12th FloorHarrisburg, PA 17101-1601Phone: 717-731-1970Fax: 717-731-1985E-mail : akanagy@postschell. com
UGI's attorneys are authorizedto receive all notices and communications regarding this filing.
cttully Submitted,
ony D. Kanagy
ADK/skrEnclosurescc: Certificate of Service
9736995v1
CERTIFICATE OF SERVICEUGI Utilities,Inc. - Gas Division
Supplement No.95 to UGI Tariff Gas - Pa. P.U.C. No. 5
I hereby certify that a true and correct copy of the foregoing document has been
served upon the following persons, in the manner indicated, in accordance with the
requirements of $ 1.54 (relating to service by a participant).
VIA FIRST CLASS MAIL:
Steven C. GrayAssistant Small Business AdvocateOffice of Small Business AdvocateCommerce Building, Suite 1102300 North Second StreetHarrisburg, PA 17101
Johnnie E. Simms, DirectorBureau of Investigation & EnforcementPennsylvania Public Utility CommissionP.O. Box 3265Harrisburg, PA I 71 05 -3265
Gateway Energy Services Corp.400 Rella Blvd.Suite 300Montebello, NY 10901
UGI Energy Services, Inc. d/b/a UGIEnergylinkOne Meridian Blvd.Suite 2C01Wyomissing, PA 19610
Glacial Natural Gas Inc.24 Route 6,4'
Sandwich, Mass 02653Attn: Adam Gusman, Corporate Counsel
Irwin A. PopowskyTanya J. McCloskeySenior Assistant Consumer AdvocateOffice of Consumer Advocate555 Walnut Street5ft Floor, Forum PlaceHarrisburg, PA 17101-1923
Washington Gas Energy Services, Inc.13865 Sunrise Vallev DriveSuite 200Hemdon, VA20l7lAttn: Leah Gibbons, Director,Regulatory & Legislative Affairs
Rhoads Energy Corporation625 South Prince StreetP.O. Box I198Lancaster, PA 17608
Hess Corporation985 Berkshire BlvdSuite 201
Wyomissing, PA 19610
Shipley Energy550 E. King StreetP.O. Box 946York. PA 17405
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PEPCO Energy Services, lnc. Compass Energy Gas Services, LLC1300 N. 17th St. 95 Hiehland AvenueSuite 1600 Suite 160Arlington, VA22209 Bethlehern, PA 18017
Metromedia Energy, Inc. CenterPoint Energy Services, Inc.6 Industrial Way West Z98lBlizabethtown Rd.Eatontown,NJ 07724 Suite 200Attn: GordonPozza, Director of Hershey, PA 17033Regulatory Affairs Attn: Scott Tunnell
Atmos Energy Marketing, LLC Black Hills Energy Resources, Inc.2000 Warrington 5100 Tilghman Sheet, Suite 150Suite 230 Allentown. PA 18104LouisvilleKY40222
BP Energy Company Colonial Energy, Inc.501 Westlake Park Boulevard 3975 Fair Ridge DriveHouston, TX77079 Suite T-10 North
Fairfax, YA22033
Columbia Energy Services Corp. Conectiv Energy Supply, Inc.13880 Dulles Corner Lane P O BOX 6066Herndon, VA20l7l Neward, DE 19714-6066
ConEdison Solutions, Inc. ConocoPhillips Company100 Summit Lake Drive 600 North Dairy AshfordValhalla, NY 10595 Houston, TX77079
Constellation New Energy - Gas Division, Delta Energy, LLCLLC 52}ABlazer Parkway9960 Corporate Campus Dr (DA-3)Suite 2000 Dublin, OH 43017Louisville, KY 40223
Direct Energy Dominion Peoples Plus d/b/a Dominion12 GreenwayPlaza Energy SolutionSuite 600 PO Box 298Houston, TX77046 Pittsburgh PAl5230-0298
Equitable Energy Equitable Gas Company110 Allegheny Center Mall 200 Allegheny Center MallPittsburgh, PAl52l2 Pittsburgh, PAl52l2-5352
9'7370llvl
Exelon Energy Companyl0 South Dearborn Street 37th FloorPO Box 805398Chicago, IL 60680-5398
LC. Thomasson Associates. Inc.2950 Kraft DriveSuite 500Nashville, TN 37204
Diversified EnergyJ. F. Energy Corporation12348 Cloverleaf RoadMount Joy, PA 17552
Metromedia Energy, Inc.6 Industrial WayEatontown,NJ 07724
National Fuel Resources. Inc.PO BOX 9074Williamsville, NY | 423 | -907 2
On-Demand Energy, Inc.PO BOX 869300 Corporate Drive Suite 50Moon Township, PA 15108
Petrocom Energy Group LTD1330 Post Oak Blvd.Suite 2350Houston, TX77065
Sernpra Energy Trading LLC58 Commerce RoadStamford, CT 06902
Service, Tech & Research Corp.t/a Starcorp lnt'lP O Box 1086Dubois, PA 15801
First Energy Solutions Corp.341 White Pond DnveAkron, OH44320
Iberdrola USA Solutions. Inc.31 Lewis StreetSuite 401
Binghamton, NY I 3901 -3058
Markwest Hydrocarbon, Inc.1515 Arapahoe StreetTower Two Suite 700Denver, CO 80202
Pennsylvania Gas & Electric290 North West l65th Street PH5North Miami Beach, FL 33169
PPL Energy,LLCTwo North 9th StreetAllentown, PA 18101
Provident Energy Consulting, LLC70 Palmers Mill RoadMedia, PA 19063
Prospect Resources, Inc.8170 McCormick Blvd.Suite 107
Skokie, IL 60076
Sequent Energy Services, Inc.NUI Energy Inc.550 Route 202-206PO Box 760Bedminster, NJ 07921 -07 60
Shell Energy North America (US) LP909 Fannin StreetPlazalevel IHouston. TX77010
9737011v1
South Jersey Energy Company Sprague Energy Corp.I South Jersey PlazaRoute 54 Two International DriveFolsom, NJ 08037 Suite 200
Portsmouth, NH 03801
Texon Distributing, L.P., d/b/a Texon L.P. Tiger Natural Gas, Inc.11757 Katy Freeway P O Box 702437Suite 1400 Tulsa, OK74l70Houston, TX77079
Unitil Resources, lnc., d/bla Usource ValuSource Energy Services, LLC6 Liberty Lane West One North ShoreHampton, NH 03842-1720 Pittsburgh, PA 15230
Virginia Power Energy Marketing, Inc. Williams Energy Marketing and TradingDominion Sales and Marketing Company120 Tredegard Street P O Box 3448Richmond, VA232l9 One Williams Ctr.
Tulsa, OK 74101
Integrys Energy Service, Inc. Greenmountain.com Company6797 N. High Sheet Suite 100Suite 314 3815 Capital of Texas HwysWorthington, OH 43085 Austin, TX78704
Amerigreen Energy, Inc. Better Cost Control d/bla55 Doe Run Road Ardor EnergyManheim, PA 17545 2274Washington Street
Newton, MA 02462
Cokinos Energy Crop. Energetix, Inc.t/a cokinos Natural Gas 50 Methodist Hill Drive, suite 15005718 Westheimer, Suite 900 Rochester. Ny 14623Houston, TX 77057
Kevin J. Cobb & Asso. Major Energy Services, LLCd/b/a Quest Energy solutions 100 Dutch Hill Road, Suite 3r0203 Southbridge Street Orangeburg, Ny 10962Auburn, MA 01501
Mid-Atlantic Cooperative Solutions NRGING LLC d/bladlbla Aero Energy Netgain Energy Advisors230 Lincoln way East 177 5 wiehle Avenue, Suite 3 l0New Oxford, PA 17350 Reston. VA 20190
97370llvl
Oasis Power LLC dlblaOasis EnergyIIl52 Westheimer Road, Suite 901Houston, TX 77042
Planet Energy (Pennsylvania) Corp.800-10 Kingsbridge Garden CircleMississauga, Ontario L5R 3K6
Spark Energy Gas LP2105 CityWest Blvd., Suite 100Houston, TX 77042
Titan Gas,LLC d,lblaTitan Gas & Power3355 W. Alabama, Suite 1170Houston. TX 77098
Dated: July 13,2012
Palmco Energy PA, LLC1350 60 StreetBrooklyn, NY I1219
Power Brokers, LLC dlblaPB2 Texas,LLC5440Hawest Hill Road. Suite 260Dallas, TX 75230
The Legacy Energy Group, LLCd/b/aLegacy Energy32 Waterloo Street, 3'd FloorWarrenton, VA 20186
Worley and Obetz, lnc.85 White Oak RoadP.O. Box 429Manheim, PA 17545
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UGISupplement No.
Utilities,Inc. - Gas Division95 to UGI Tariff Gas - Pa. P.U.C. No. 5
Statement of Reasons ForUGI Utilitiesr lnc. - Gas Division's
Natural Gas Procurement Cost Unbundling Filing
I. INTRODUCTION
In this filing, UGI Utilities, Inc. - Gas Division ("UGI") is proposing to unbundle natural
gas procurement costs from distribution rates and recover these costs through a gas procurement
charge ("GPC") that will be included in its Price to Compare ("PTC"). UGI is making this filing
pursuant to the Pennsylvania Public Utility Commission's ("Commission's") Revised Final
Rulemaking Order at Docket No. L-2008-2069114 entered on June 23, 2011 ("June 2011
Order") and the Commission's Secretarial Letter issued on May 25, 2012, in the same
proceeding.
In the June 201 I Order, the Commission noted that its primary goal with respect to gas
supply cost unbundling is to create a level playing field for all market competitors. June 201I
Order, p. 24. In particular, the Commission seeks to avoid situations where shopping customers
pay twice for commodity related costs. 1d With that goal in mind, the Commission identified
certain gas procurement costs directly associated with the NGDC's natural gas procurement
function to be shifted from the delivery rates to commodity rates, including the following items:
o Natural gas supply service acquisition and management costs, including natural gassupply bidding, contracting, hedging, credit, risk management costs and workingcapital.
o Administrative, legal regulatory and general expenses related to those natural gasprocurement activities, excluding those related to the administration of firm storageand transportation capacity.
Id.;52 Pa. Code S 62.223(b).
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In accordance with the Commission's direction, UGI is proposing in this filing to remove
gas supply procurement costs from base rates and to recover these costs in a GPC in order to
attempt to create the level playing field sought by the Commission. Specifically, UGI is
proposing to remove from base rates the labor and benefits costs associated with the procurement
of gas supply, including the accounting, intemal legal, regulatory and management support
functions related to gas procurement, as well as the outside legal costs incurred in connection
with the Company's Purchased Gas Cost ("PGC") activities.
UGI's affiliated natural gas distribution companies ("NGDCs"), UGI Penn Natural Gas,
Inc. ("PNG") and UGI Central Penn Gas, Inc. ("CPG") (collectively with UGI the "UGI
NGDCs" or the "Companies"), are also simultaneously making gas cost unbundling filings in
compliance with the June 201I Order. [n order to create administrative efficiencies, the UGI
NGDCs share employees to perform many functions and also share costs for many functions,
including gas procurement functions. Because many costs are shared and it is difficult to
estimate shared costs by individual company, the UGI NGDCs have estimated their total costs
for the shared gas procurement functions and are spreading them across the three Companies
pursuant to the Modified Wisconsin Formula, which is explained in more detail below.
Therefore, in this filing, UGI also shows certain costs for the other UGI NGDCs so that the
Commission and parties can see the total level of shared costs and how the total shared costs
were spread across the three Companies.
While UGI is proposing to remove its gas supply procurement costs from base rates,
there are certain capital costs that are appropriate to remain in base rates. First, UGI is not
proposing to remove working capital costs associated with gas in storage inventory from base
rates. As explained in more detail below, UGI and its affiliated NGDCs do not release storage
9750525v1
capacity to natural gas suppliers ("NGSs" or "Suppliers") but instead manage storage capacity on
behalf of NGSs, in accordance with Commission-approved settlernents in respective PGC
proceedings. The UGI NGDCs bear all of the working capital costs for gas in storage, and NGSs
do not bear separate costs for this working capital. Therefore, it is appropriate for the UGI
NGDCs to keep working capital costs related to storage in base rates.
Additionally, the UGI NGDCs are not proposing to remove from base rates any portion
of the capital costs related to the IT gas management system used to support the gas procurement
function (which shall be referred to herein as the "Gastar System"). As explained in more detail
below, the UGI NGDCs' Gastar System is used for many different functions other than gas
procurement activities. Accordingly, the Gastar System benefits all customers, including both
shopping and non-shopping customers. In addition, the Gastar System costs are fixed and do not
vary with the level of shopping. Moreover, because the UGI NGDCs utihze the Gastar System
for storage gas procurement and management activities, the procurement function of this system
is still required regardless of the level of shopping. Therefore, it is appropriate to keep the
Gastar System costs in base rates.
lnits June 201I Order, the Commission advised NGDCs that gas procurement costs must
be shifted from distribution rates to the GPC on a revenue neutral basis to avoid the prospect of
single issue raternaking. June 201I Order, p. 25. As explained below, UGI's unbundling
proposal is revenue neutral. In addition, the Commission held that gas procurement costs should
not be reconciled, and that the GPC should remain constant on an Mcf or Dth basis until it is
updated in a subsequent base rate proceeding. Id. Consistent with this Commission direction,
UGI proposes to implement a constant, non-reconcilable GPC charge in this proceeding. The
GPC will be updated hereafter in future general base rate filings.
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Furthermore, in the June 201I Order, the Commission advised NGDCs that if an NGDC
makes changes to it operations and systems as a result of this rulemaking, it may request from
the Commission authority to defer those costs on its books and seek to recover them in a base
rate proceeding. Id. at 50. UGI and its affiliated NGDCs anticipate that they will have to make
measurable changes to their operations as a result of this rulemaking due to increases in Choice-
related activity. These changes will increase the Companies' costs related to managing greater
numbers of Choice related NGSs and Choice customers. Consistent with the Commissio n's June
2011 Order, the UGI NGDCs may request Commission authority to defer increased costs
associated with competition-related activities in the future, when these costs are more material.
The UGI NGDCs may then thereafter present a claim for recovery of such costs in their next
base rate proceedings. At this time however, no such deferral is being requested.
In the June 201 I Order, the Commission also required NGDCs to implement Merchant
Function Charges ("MFC"). The MFC unbundles uncollectible costs associated with natural gas
supply rates from base rates and includes these costs in the PTC. UGI and its affiliated NGDCs
have already implemented MFCs, and the MFCs are included in each of the Companies' PTCs
today.r
Finally, this filing requests approval for adding language to UGI's tariff explaining and
clarifying the PTC by identifuing the various components in the calculation of the PTC. As a
result of the June 201I Order and this filing, the impact to the PTC based on the inclusion of the
GPC and the "e-factor" will be substantial. Currently, UGI's PTC includes the current cost of
gas, conrmonly referred to as the "c-factor" and the MFC. The June 20II Order calls for the
t UGI's MFC was approved by Commission Order entered on August 23,2010. See Petition of UGIUtilities, Inc. - Gas Division for Approval to Voluntarily Implement a Purchase of Receivables Programand Merchant Function Change and of a Potential Affitiated Interest Agreement Between UGI rJtitities,Inc. - Gas Division and Affiliated Entities, Docket No. P-2009-2145498.
49750525v1
addition of the over/under reconciliation, or "e-factor," and the newly created GPC to the PTC.
These additions to the PTC create greater headroom for Suppliers' service offerings and should
lead to a materially greater level of customer shopping. By way of example, including the
current "e-factor," the current MFC and the newly created GPC in the PTC adds 65 cents or
ll.I% to the current residential PTC for UGI.
For the reasons explained herein and in the testimony that is being submitted in
conjunction with this filing, UGI's proposal to unbundle gas procurement costs from base rates
and include these costs in a GPC charge is in the public interest and should be approved.
IL PROCEDURAL BACKGROUND
On March 27,2009, the Commission entered its Proposed Rulemaking Order which was
designed to promote competition for natural gas supplies. Natural Gas Distribution Companies
and the Promotion of Competitive Retail Markets, Docket No. L-2008-2069114 ("March 2009
Order"). Therein, the Commission noted that there was not effective competition in the retail
natural gas supply market and that the Commission was taking several rulemaking actions to
further promote competition. This rulemaking addressed five issues, including: (1)
reformulation of the PTC, (2) purchase of receivables, (3) mandatory capacity assignment, (4)
NGDC costs of competition related activities, and (5) regulatory assessments. In its March 2009
Order, the Commission also directed interested parties to file comments with respect to the
issues identified therein.
On August 25, 2009, the UGI NGDCs, along with other interested parties, filed
Comments in response to the March 2009 Order. Lr Comments, the UGI NGDCs addressed
various aspects of the Commission's March 2009 Order. Relevant to this filing, the UGI
NGDCs noted that the level of natural gas procurement costs included in base rates, apart from
uncollectible expenses, was very small compared to total PGC costs.
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On August 10, 2010, the Commission issued its Advance Notice of Final Rulernaking
Order ("ANOFR"). Therein, the Commission explained that it made several changes to the
proposed regulations based upon the Comments that it received. In part, the Commission noted
that it was: (1) requiring NGDCs to remove all of their gas procurement costs from base rates,
(2) requiring a MFC to address uncollectible cost issues,2 and (3) requiring unbundling issues to
be addressed in a Section 1308(a) tariff filing. In the ANOFR, the Commission sought
additional comments on the revisions to the proposed regulations.
On September 9, 2010, the UGI NGDCs, along with other interested parties, filed
Comments in response to the ANOFR. In Comments, the UGI NGDCs noted that they were
already taking steps to promote competition in their service territories, including implementing
MFCs. In addition, the UGI NGDCs noted their concerns with the Commission's proposed
capacity assignment rules, which would require NGDCs to release capacity associated with new
or renewed contracts for firm storage or transportation capacity. The UGI NGDCs specifically
noted their concerns regarding system reliability and whether the mandatory capacity release
provisions were consistent with the Pennsylvania Public Utility Code and with FERC rules.
By Order entered February 23,2011, the Commission issued its Final Rulemaking Order.
Therein, the Commission noted that it was making further changes to the regulations based on
Comments that it had received in response to the ANOFR. In particular, the Commission revised
the regulations to include the development of the PTC that will appear on NGDCs bills, clarified
the POR program rules, and revised the capacity release rules to be consistent with the language
of the Pennsylvania Public Utility Code.
1' As explained above, the UGI NGDCs have already implemented MFC charges and include thesecharges in their respective PTCs.
69750525v1
By Order entered June 23, 2011, the Commission issued its Revised Final Rulemaking
Order. Therein, the Commission noted that it had submitted its Final Rulemaking Order to the
Independent Regulatory Review Commission ("IRRC"). However, the Commission withdrew
the Final Rulemaking Order based on comments that it had received, including comments from
IRRC, In the Revised Final Rulemaking Order, the Commission made certain clarifications and
corrections to address parties' comments.
The Revised Final Rulemaking Order was published in the Pennsylvania Bulletin on
April 14, 2072, and the regulations became effective on that date. On May 25, 2012, the
Commission issued a Secretarial Letter setting forth the schedule for NGDCs to make Section
1308(a) tariff filings to remove gas procurement costs from base rates and recover these costs
through a GPC that would be reflected in the NGDC's PTC. 66 Pa. C.S. $ 130S(a). The UGI
NGDCs were assigned a Group One filing date of July 13,2012.
Pursuant to the Commission's Orders entered at Docket No. L-2008-2069114, the
Secretarial Letter issued on May 25, 2012, and 52 Pa. Code g 62.223, UGI hereby makes its
Section 1308(a) filing to remove gas procurement costs from base rates and to recover these
costs as part of its PTC. As explained below, UGI is making this filing on a revenue neutral
basis and is not proposing to reconcile recovery of gas procurement costs.
III. GAS PROCUREMENT CHARGE PROPOSAL
A. INTRODUCTION
UGI's GPC proposal is set forth below and in the testimony that accompanies this filing.
UGI believes that its GPC proposal is consistent with the Commission's directives in the June
2011 Order to create a level playng field for market competitors. The cost elements are also
explained in further detail below and in the testimony that accompanies this filing. As explained
above, UGI and its affiliated NGDCs share employees and other costs in order to create
9750525v1
administrative efficiencies. The Companies have estimated total shared costs for many of the
cost categories described below and are spreading shared costs across the three Companies
according to the Modified Wisconsin Formula. UGI Attachment I to this filing is the tariff
supplement for UGI, which includes the GPC charge and also includes the reduction to base rates
to reflect the removal of gas procurement costs that are currently imbedded in base rates, on a
revenue neutral basis. UGI Attachmerfi.2 to this filing includes the Company's responses to the
Commission's filing requirements contained in 52 Pa. Code $ 53.52(a) and (b). UGI has also
included the written direct testimony of Shaun M. Hart, UGI Statement No. l, and David E.
Lahoff, UGI Statement No. 2, with this filing.
As noted above, UGI and its affiliated NGDCs are in the Group One filing schedule. The
only other NGDC in the Group One schedule is Peoples Natural Gas Company ("Peoples Gas"),
which made its gas procurement unbundling filing in its current base rate proceeding at Docket
No. R-2012-2285985. The UGI NGDCs are using a similar approach to GPC development as
used by Peoples Gas, with certain differences to reflect the UGI NGDCs' specific circumstances.
Below, UGI explains the specific gas procurernent cost elements that it is proposing to
remove from base rates and recover through its GPC. The Company explains how these costs
were estimated and how rates were developed to reflect the removal of these costs from base
rates and to reflect the new GPC. In addition, the Company explains why it is proposing not to
remove certain costs from base rates, including working capital costs associated with gas in
storage inventory and Gastar System costs.
B. LABOR AND BENEFITS COSTS
UGI is proposing to remove from base rates labor and benefits costs associated with gas
procurement activities. The gas procurement labor and benefits costs fall under five separate
functional categories, which are as follows: (1) gas supply, (2) accounting, (3) internal legal, (4)
9750525v1
regulatory, and (5) management. For categories with shared costs, UGI and its affiliated NGDCs
relied on the Modified Wisconsin Formula to allocate shared costs to a particular NGDC that
could not be directly assigned. The UGI NGDCs have used the Modified Wisconsin Formula to
allocate costs among the Companies in their recent base rate proceedings. The Modified
Wisconsin Formula achieves equitable allocation of common expenses among the UGI NGDCs
based on the relative activity and size of each NGDC to the total of all of the NGDCs, where
"activity'' is measured by total revenues and total operating expenses and "size" is measured by
tangible net assets employed (excluding acquisition goodwill).
The first category of labor and benefits costs is gas supply. The total labor and benefits
cost for the three Companies is approximately $198,000. The UGI NGDCs propose to spread
these costs across the three UGI NGDCs by using the Modified Wisconsin Formula. UGI's
portion of the annual labor and benefits costs for gas supply is approximately $84,000.
The second category under labor and benefits is accounting support. The total annual
labor and benefits cost for the three Companies is approximately $57,000. The allocation across
the UGI NGDCs of these costs was done according to the Modified Wisconsin Formula. UGI's
portion of the annual labor and benefits costs for accounting support is approximately $24,000.
The third category under labor and benefits is internal legal support. Internal legal
support includes time spent to prepare and litigate PGC filings as well as time spent to negotiate
gas procurement contracts; including capacity and storage contracts. The annual estimated labor
and benefits costs for internal legal support for the three Companies is approximately $32,000.
The UGI NGDCs also propose to spread this cost across the three UGI NGDCs pursuant to the
Modified Wisconsin Formula. UGI's portion of the annual labor and benefits costs for internal
legal support is approximately $13,000.
99750525v1
The UGI NGDCs note that these internal legal support costs include time spent to address
both: (1) gas supply procurement, and (2) capacity and storage planning and procurement. Due
to the low level of total costs and the difficulty in separately estimating time spent on gas
procurement issues versus capacity and storage issues, the UGI NGDCs have not attempted to
break out these two types of costs separately and have included all related legal support costs as
items included in the GPC to be unbundled from base rates, even though only those related to gas
supply procurement should be removed from base rates pursuant to the Order.
The fourth category under labor and benefits is regulatory support. Regulatory support
costs include Company activities to prepare PGC filings. The annual total cost associated with
regulatory support for the three Companies is approximately $68,000. The UGI NGDCs propose
to spread these costs across the three UGI NGDCs pursuant to the Modified Wisconsin Formula.
UGI's portion of the annual labor and benefit costs for regulatory support is approximately
$28,000.
The fifth category under labor and benefits is management support. Management support
costs are related to activities performed by the UGI NGDC management team to supervise gas
procurement activities. In order to determine management support gosts, the Companies
estimated the number of managernent hours spent on PGC activities and multiplied the number
of hours by estimated salary and benefits costs for management level employees that work on
PGC filings and gas procurement contracting. The total cost for management support activities
is estimated to be approximately $39,000 for all three Companies. Like the other labor and
benefit costs, the UGI NGDCs propose to spread these costs across the three Companies
pursuant to the Modified Wisconsin Formula method described earlier. UGI's portion of the
annual labor and benefits costs for management support is approximately $16,000.
9750525v1 t0
C. EXTERNAL LEGAL COSTS
UGI also proposes to remove approximately $60,000 of PGC-related external legal costs
from base rates. UGI's outside legal costs are the PGC-related outside legal costs that were
reflected in the Company's most recent base rate proceeding. See Pa. P.U.C. v. UGI Utilities,
Inc., D ocket No. R-0095 3 29 7, Order entered August 3 l, 199 5 .
Similar to the proposed adjustment described above for intemal legal costs, extemal legal
support costs include time spent to address both: (1) gas supply procurement, and (2) capacity
and storage planning and procurement. Due to the low level of total costs and the difficulty in
separately estimating time spent on gas procurement issues versus capacity and storage issues,
UGI has not attempted to break out these costs separately and has included all related legal
support costs as iterns included in the GPC to be unbundled from base rates, even though only
those related to gas supply procurement should be removed from base rates pursuant to the June
201I Order.
D. EXCLUSION OF CERTAIN CAPITAL COSTS
1. Working Capital For Gas In Storage Inventory
UGI and its affiliated NGDCs are not proposing to remove working capital storage
inventory costs from base rates because the UGI NGDCs do not release storage capacity to
NGSs. As noted above, the UGI NGDCs are among the first NGDCs to submit gas procurement
unbundling proposals to the Commission. Peoples Gas has submitted an unbundling proposal in
its current base rate proceeding at Docket No. R-2012-2285985. In its unbundling proposal,
Peoples has proposed to remove working capital storage inventory costs from base rates and
recover these costs through its GPC. The UGI NGDCs note that their specific circumstances are
different from Peoples Gas because Peoples Gas releases storage capacity to NGSs. See e.g.,
Peoples Natural Gas Company, LLC Tariff Gas - PA P.U.C. No. S-2, Original Page No. 19
il9750525v1
through Second Revised Page No. 35. The UGI NGDCs, in contrast, do not release storage
capacity to NGSs and, as such, all working capital costs for gas in storage inventory on the
Company's systern remain with the UGI NGDCs. See UGI Gas Choice Supplier Tariff Pa.
P.U.C. No 5-S, Second Revised Page No. 139 through First Revised Page No. 140(b). In other
words, NGSs that operate on the UGI NGDCs' systern do not incur these costs. Accordingly, the
UGI NGDCs are not proposing to remove working capital storage inventory costs from base
rates.
As background, in the UGI NGDCs recent PGC settlements, the parties have agreed that
the UGI NGDCs will not release actual storage capacity to NGSs. See Pa. P.U.C. v. UGI
Utilities, Inc. - Gas Division, Docket Nos. R-201l-2238953, et al., Order approving Settlernent
entered October 14, 20Il; Pa. P.U.C. v. UGI Penn Natural Gas, Inc., Docket Nos. R-2011-
2238943, et al., Order approving Settlement entered October 74,2071; and Pa. P.U.C. v. UGI
Central Penn Gas, Inc., Docket Nos. R-201I-2238949, et al., Order approving Settlernent
entered October 14,2011. Instead, the UGI NGDCs give NGSs the option to receive bundled
city gate sales service at summer index prices for a portion of their gas supplies. This gives
NGSs the seasonal storage benefit of acquiring winter supplies at summer prices, while
preserving the UGI NGDCs' ability to retain storage to retain system reliability and comply with
applicable FERC rules regarding capacity release, as explained more fully in the Direct
Testimony of Shaun Hart. Under this approach, NGSs receive the benefits of storage but do not
actually retain actual gas in storage on the UGI NGDCs' system and thus do not have working
capital costs related to storage inventory on the Companies' system.
Under the June 201I Order, the Commission noted that the purpose of the unbundling
rules was to create a level playng field for all market competitors. Because NGSs on the UGI
9750525v1 T2
NGDCs' systems do not incur working capital costs related to gas in storage inventory, it is
appropriate for the UGI NGDCs to leave these costs in base rates. If these costs were removed
from base rates, it would create an uneven playing field because shopping customers would
receive the benefits of the UGI NGDCs' storage system but would not pay working capital costs
for this storage inventory, resulting in a subsidy of Choice customers by PGC customers.
Because the UGI NGDCs do not release actual storage capacity to NGSs, it is appropriate to
leave working capital costs for storage inventory in base rates.
2. Gastar System Costs
The UGI NGDCs use their Gastar System for many different functions other than gas
procurement activities, including:
o caPacity planning and capacity management activities;
. managrng supplier nominations, supplier pooling activities, supplier imbalances,supplier billing and suppli er communi cations ;
o managing key account contracts,3 key account contacts, key account billing, keyaccount communications, key account metering and meter reading activities; and
. managlng customer intemrptions and maintaining intemrption records.
All supplies delivered into the UGI NGDC systems are tracked and managed through the
Gastar Systern. In particular, the use of the Gastar System is critical for the management of NGS
delivered supplies, identified by pipeline delivery point and transportation customer, pool goup
or Choice customer goup destination. NGSs track and manage all supplies to UGI NGDC
systems via web-enabled interfaces to Gastar which provide both a basic interface to the UGI
NGDCs for data delivery as well as edit and error checking functions. Moreover, the tracking of
these supplies to and through final disposition, including tracking necessary for customer billing
3 K"y u""o.tnts are those accounts that require execution ofa contract in order to receive service andinclude service provided under rate schedules DS, LFD, XD and IS/IL,
9750525v1 l3
and Supplier billing as well as imbalance management and reconciliation, is performed within
the Gastar Systern.
Accordingly, and as noted in the Direct Testimony of Shaun Hart, UGI Statement No. l,
UGI and its affiliated NGDCs are not proposing to rernove Gastar System costs related to gas
procurement activities from base rates in this filing. The Gastar Syston is a fixed cost for the
Companies, and the costs for the Gastar System, in particular, do not decrease with increased
shopping. In addition, the Companies must have the Gastar System to perform system reliability
functions, which benefits all customers, including both shopping and non-shopping customers.
Moreover, the UGI NGDCs would still utilize the Gastar System for storage gas procurement
and management activities even if all customers shopped. For these reasons, the Companies do
not believe that it is appropriate to remove Gastar System costs from base rates.
E. RATE CALCULATIONS
1. Gas Procurement Charge
Explanation of and details regarding the development of the GPC for UGI is set forth in
the Direct Testimony of David E. Lahoff, UGI Staternent No. 2. In summary, the GPC charge
was calculated by taking the total estimated GPC costs for the Company and dividing the costs
by the estimated sales volumes for the time period ending November 30,2013, as reflected in the
Company's current PGC filing, adjusted to reflect projected increases in Choice volumes in the
following year. The unit rate is $0.01 14 per Mcf for UGI. In addition, in order to be consistent
with the Commission's Orders and regulations, UGI is not proposing to reconcile costs under the
GPC, and the GPC unit rate will rernain constant until updated in subsequent base rate
proceedings.
9750525v1 t4
2, Base Rate Reduction Calculation
Details and supporting testimony regarding the development of the reduction to base rates
are set forth in the Direct Testimony of David E. Lahoff, UGI Statement No. 2. In order to
develop the base rate reduction, UGI divided its total estimated GPC costs by the sales volumes
reflected in the Proof of Revenues submitted with the Settlement of the Company's most recent
base rate proceeding. See Pa. P.U.C. v. UGI Utilities, Inc., Docket No. R-00953297, Order
entered August 31, 1995. The current base rate reduction is $0.0067 per Mcf for UGL
3. Revenue Neutrality
The total amount of gas procurement costs imbedded in UGI's base rates which are being
removed by a reduction in distribution charges is 5226,692. This same amount is equal to the
revenues projected to be generated from the GPC. In summary, UGI will be removing $226,692
from base rates and is projecting to recover $226,692 from the GPC. Further explanation is
provided in the Direct testimony of David E. Lahoff, UGI Statement No. l.
F. EFFECT ON THE PRICE TO COMPARE
The impact to the PTC based on the inclusion of the GPC and the "e-factor" will be
substantial. Currently, UGI's PTC includes the current cost of gas, commonly referred to as the
"c-factor" and the MFC. The June 201I Order calls for the addition of the over/under
reconciliation, or "e-factor" and the newly created GPC to the PTC. These additions to the PTC
create greater headroom for Suppliers' service offerings and should lead to a greater level of
customer shopping. By way of example, including the current "e-faclor," the current MFC and
the newly created GPC in the PTC adds 65 cents or llj% to the residential PTC for UGI. It
should also be noted that this filing requests approval for adding language to UGI's tariff
explaining and clarifying the PTC by identifying the various components in the calculation of the
PTC. These changes will support customer awareness and understanding of the PTC and
9750525v1 l5
relevant components. See UGI Attachment I to the Statement of Reasons for the tariff language
clarifying the changes to the PTC.
G. COSTS OF COMPETITION.RELATED ACTIVITIES
In its Initial Proposed Rulemaking Order, the Commission proposed a surcharge
mechanism to allow NGDCs to recover increased costs associated with promoting natural gas
competition. March 2009 Order, p.7. However, the surcharge mechanism was excluded from
the Final Regulations. [n the June 20] I Order, the Commission noted its concerns that a
surcharge mechanism may be subject to claims of single issue ratemaking. In order to address
the cost issues associated with promoting competition, the Commission stated in the June 20lI
Order that if an NGDC makes changes to its operations and systems as a result of this
rulemaking and incurs increased costs for competition-related activities, the NGDC may request
Commission authority to defer recovery of these costs and seek to recover them in a base rate
proceeding. June 201 I Order, p. 50.
UGI and its affiliated NGDCs anticipate that they will incur additional competition-
related costs associated with implementing the rulemaking that are not included in the
Companies' base rates. The UGI NGDCs project increases in workload on a prospective basis in
groups such as gas supply, customer accounting, customer call center, choice coordination and
information services that would result as more Suppliers enter its service territories and more
customers shop. Pursuant to the Commission's June 20ll Order and Section l70l of the Public
Utility Code, 66 Pa. C.S. $ 1701, the UGI NGDCs may request Commission authority to defer,
for financial and accounting purposes, the Companies incrernental costs in implementing
competition-related activities in the future. The UGI NGDCs may then seek to recover these
costs in their next base rate proceedings, pursuant to Section 1308(d) of the Public Utility Code,
9750525v1 t6
66 Pa. C.S. $ 1308(d). UGI and its affiliated NGDCs are not requesting authority to defer such
costs in these unbundling proceedings.
Iv. CONCLUSION
For the reasons stated herein and in the testimony that is accompanying this filing, UGI
respectfully requests that the Pennsylvania Public Utility Commission approve the Company's
Section 1308(a) filing to remove gas procurement costs from base rates and include these costs
in a GPC charge.
9750525v1 t7
UGI Affachment I
( UGI Tariff Supplement No. 95 )
SupplementNo.95 toGas Pa. - P.U.C. No. 5
UGI UTILITIES,INL.
GAS TARIFF
INCLUDING THE GAS SERVICE TARIFF
AND
THE CHOICE SUPPLIER TARIFF
Rates and Rules
Governing the
Furnishing of
Gas Service and Choice Aggregation Service
in the
West Region East Region
Including Territory Described on Pages 8 and 9
Issued: Iuly 13,2012 Effective for Service Renderedon and after September 17,2012,in accordance withCommission's Order enteredJune 23, 2011, atDocket No. L-2008-2069114.
By: Paul J. SzykmanVice President - Rates2525 N, l2h Sr.. Suite 360Post Ofiice Box 12677Reading, PA19612-2677
NOTICETHIS TARIFF MAKES CHANGES, INCREASES AND DECREASES IN EXISTING RATES (See Page I)
UGI UTILITIES,INC.
SupplementNo.95 toGas Pa. - P.U.C. No. 5
Ninety-Fifth Revised Page ICanceling Ninety-Fourth Page I
LIST OF CHAI\GES MADE BY THIS SUPPLEMENT(Page Numbers Refer to Official TarifD
Table of Contents, Pase 6.
Procurement Charge and Price to Compare.
Rider GPC - Gas Procurement Charge and Price to Compare. Page 38(a).
Rate R - General Service - Residential. Pages 64 and 65.
Charge, and Rider GPC has been added to the list of surcharges applicable to this rate.
Rate RT - General Service - Residential Transportation. Paee 66.
Charge.
Rate N - General Service - Non-Residential. Pages 70 and 71.
Charge, and Rider GPC has been added to the list of surcharges applicable to this rate.
Rate NT - General Service - Non-Residential Transportation. Paee 72.
Charge.
Rate CIAC - General Service - Commercial and Industrial Air Conditionine. Page 78.
Charge, and Rider GPC has been added to the list of surcharges applicable to this rate.
Rate CT - General Service - Commercial and Industrial Air Conditionine - Transportation. Page 79.
Effective for ServiceRendered on and after
September ll,2012
Issued: July 13,2012
UGI UTILITIES. INC.
SupplementNo.95 toGas Pa. - P.U.C. No. 5Ninth Revised Page 6
Canceling Eighth Revised Page 6
TABLE OF CONTENTSSection A - Gas Service TariffList of Changes Made by This SupplementThis Page Reserved for Future UseTable of ContentsDescription of Territory:
West RegionEast Region
Rules and Regulations:l. The Gas Service Tariff2. Contract for Gas Service3. Guarantee of Payment4. Service - Supply Facilities5. Extensions6. Customer's Facilities7. Customer's Responsibility for Company's Property8. Meter Reading9. Billing and Payment10. TestsThis Page Reserved for Future UseI L Termination or Discontinuance of Service12. General13. PurchasedGasCostl3.A Merchant Function Charee
(C) l3.B Rider GPC - Gas ProcurJment Charee(C) 13.C Price to Compare
14. State Tax Surcharge14.A. Rider LISHP15. Emergency Service and Curtailment of ServiceThis Page Reserved for Future Use17. General Terms for Delivery Service18. CapacityRelease of Interstate Pipelines
Rate R - General Service - ResidentialRate RT - General Service - Residential TransportationRate GL - Gas Light ServiceRate N - General Service - Non-ResidentialRate NT - General Service - Non-Residential TransportationRate GBM - Gas Beyond the MainsThis Pages Reserved for Future UseRate CIAC - General Service - Commercial and Industrial Air ConditioningRate CT - General Service - Commercial and Industrial Air Conditioning - TransportationThis Page Reserved for Future UseRate PV - Propane Vaporization ServiceRate SS - Storage ServiceRate DS - Delivery ServiceThis Page Reserved for Future UseRate NNS - No-Notice ServiceRate MBS - Monthly Balancing ServiceThis Page Reserved for Future UseRate IS - Intemrptible Service - Small Volume
(C)IndicatesChange
Page Number
1
2-56-7
8
8-9
10
l0-t Ir2-14l516-18l920202t -24252627-282829 -373838(a)38(a)39a0 - a0(a)4r-4647 -5253-626364-6566-6768-6970 -71
74-757677 -7879-80
81 - 83
84-8586-8889-909l92 -9394 -95969'7 -99
Issued: July 13,2012 Effective for ServiceRendered on and after
September ll,2012
Supplement No. 95 toGas - Pa. P.U.C. No. 5
UGI UTILITIES,INC. Original Page 38(a)
RULES A}[D REGULATIONS
(C) 13.B Rider GPC - GAS PROCUREMENT CHARGE
Applicabilitv
This non-reconcilable Rider shall be applied to rates for each Mcf ( I ,000 cubic feet) of gas supplied under RateSchedules R, N, and CIAC of this Tariff, and shall be reflected in the Price to Compare . Effective September I I ,2012, Rider GPC shall be a volumetric charge as described below, and shall remain in effect until reviewed andupdated in the Company's next base rate case.
Rider GPC Charee
( I ) Rates: R, N and CIAC: $ 0.0114 per Mcf
(C) r3.C PRICE TO COMPAR,E
The Price to Compare ("PTC") is composed of the Natural Gas Supply Charge, Gas Cost Adjustment, GasProcurement Charge and Merchant Function Charge, The PTC rate will change whenever any components ofthe PTC change. The current PTC rate is detailed below:
Price to CompareNatural Gas Supply ChargeGas Cost AdjustmentGas Procurement ChargeMerchant Function chargeTotal Price to Compare
( C ) Indicates Change ( I ) Indicates Increase
Rate R / Ccf$ 0.58846$ 0.04996$ 0.00114$ 0.01398$ 0.65354
Rate N / Mcf$ 5.8846$ 0.4922$ 0.0114$ 0.0230s 6.4112
Rate CIAC / Mcf$ 5.7306$ (o.35lo)$ 0.0114$ 0.0194$ 5.4104
Effective for ServiceRendered on and after
September 11,2012
Issued: July 13,2012
UGI UTILITIES.INC.
Supplement No. 95 toGas Pa. - P.U.C. No. 5
Fourth Revised Page 64Canceling Third RevisedPage 64
RATE R
GENERAL SERVICE _ RESIDENTIAL
AVAILABILITY
This Rate applies to all Residential Customers in the entire gas service territory of the Company. AResidential Customer shall be defined as a Customer using natural gas in (l) a one or two-family dwelling, (2)separately metered apartments of a multiple dwelling, or (3) premises used as a single family dwelling and forone or more business uses, provided the proprietor of the business resides in the srngle family dwelling, andthe business uses less than fifty percent of the anticipated gas usage served through a single meter. Servicewill be supplied only where the Company's facilities are suitable to the service desired.
STANDBY AVAILABILITY
Where service is provided under this Rate to any Residential Customer utllizingnatural gas as a backup,auxiliary or temporary fuel, a Standby Surcharge shall apply. For purposes of applying the StandbySurcharge, backup, auxiliary or temporary functionality shall be determined at the Company's sole discretionwhere natural gas is being utilized as a backup heating fuel to any other fuel service.
MONTHLY RATE TABLE
Customer Charee:
$8.55 per customer
Plus
Distribution Charge:
( D ) First 5,000 cubic feet - $0.33307 per 100 cubic feet( D ) Over 5,000 cubic feet - $0.26859 per 100 cubic feet
Plus
Natural Gas Supply Charge:
As Siated in Section 13.1
Plus
Gas Cost Adjustment
As stated in Section 13.l
Plus, if Standby:
Customer Charge Surcharge: $6.764 per CustomerPlus
Commodity Charge Surcharge: $0.0600 per 100 cubic feer
(D)IndicatesDecrease
Effective for ServiceRendered on and after
September ll,2012
Issued: July 13,2012
UGI UTILITIES.INC.
SupplementNo.95 toGas Pa. - P.U.C. No. 5
Thirty-Seventh Revised Page 65Canceling Thirty-Sixth Revised Page 65
RATE R (Continued)
GENERAL SERVICE . RESIDENTIAL
(C) Rider MFC, Rider GPC, the State Tax Surcharge, and the Surcharge for Recovery of Transition Costs and theRider LISHP, as set forth in the Rules and Regulations apply to the above rates.
A late payment charge of l-U4% per month is due on all amounts unpaid after the due date.
MINIMUM BILLS
Customer Charge set forth above.
TOTAL SPACE CONDITIONING OPTION
For Customers who take service under Rate R and have associated gas cooling use billed under this option,the above rates shall be PGC(2) based and shall be reduced by $0.10046 per 100 cubic feet to reflect rheassociated gas cost. This option is available only to customers who: 1) utilize natural gas as the primaryenergy source for space conditioning requirements - heating and cooling, 2) utllize natural gas for waterheating purposes, and 3) maintain one or more additional gas appliances (range, dryer, cooktop or oven.) Thequaliflng natural gas cooling unit must be installed and operational and be of a make/manufacture approvedby the Company. Customers receiving service under this option agree to allow the company, at its option, toinstall load monitoring facilities.
LOW INCOME SELF-HELP PROGRAM (LISHP)
This Low Income Self-Help Program is available to a maximum of 10,000 customers.
(C) Indicates Change
Issued: July 13,2012 Effective for ServiceRendered on and after
September 11,2012
Supplement No. 95 toGas Pa. - P.U.C. No. 5
Fifth Revised Page 66UGI UJILITIES, INC. Canceling Fourth Revised page 66
RATE RT
GENERAL SERVICE _ RESIDENTIAL TRANSPORTATION
AVAILABILITY
This Rate applies to all Residential Customers in entire gas service territory of the Company who are servedby a qualified Choice Supplier receiving service under Rate AG. A Residential Customer shall be defined asa Customer using natural gas in (l) a one or two-family dwelling, (2) separately metered apartments of amultiple dwelling, or (3) premises used as a single family dwelling and for one or more business uses,provided the proprietor of the business resides in the single family dwelling, and the business uses less thanfifty percent of the anticipated gas usage served through a single meter. Service will be supplied only wherethe Company's facilities are suitable to the service desired.
STANDBY AVAILABILITY
Where service is provided under this Rate to any Residential Customer utilizing natural gas as a backup,auxiliary or temporary fuel, a Standby Surcharge shall apply. For purposes of applying the StandbySurcharge, backup, auxiliary or temporary functionality shall be determined at the Company's sole discretionwhere natural gas is being utilized as a backup heating fuel to any other fuel service.
MONTHLY RATE TABLE
Customer Charge:
$8.55 per customer
Distribution Charge:
First 5,000 cubic feet - $0.33307 per 100 cubic feetOver 5,000 cubic feet - $0.26859 per 100 cubic feet
Plus, if Standby:
Customer Charge Surcharge: $6.764 per Customer
Plus
Delivery Charge Surcharge: $0.0600 per 100 cubic feet
The State Tax Surcharge, the Surcharge for Recovery of Transition Costs, the Migration Rider Surcharge andthe Rider LISHP, as set forth in the Rules and Regulations apply to the above rates.
D ) Indicates Decrease
D)D)
Effective for ServiceRendered on and after
September ll,2012
Issued: July 13,2012
UGI UTILITIES, INC.
Supplement No. 95 toGas Pa. - P.U.C. No. 5
Fourth Revised Page 70Canceling Third Revised Page 70
RATE N
GENERAL SERVICE - NON-RESIDENTIAL
AVAILABILITY
This Rate applies in the entire territory served by the Company and is available to all Customers, exceptResidential Customers, using gas for any purpose. Service will be supplied only where the Company'sfacilities and the available quantity of gas are suitable to the service desired. Rate N service may not beapplied to supplement or back up intemrptible service under Rates IS, IL or DS, except to the extent of needsfor plant protection use. Service to the same customer under Rates N and Rates IS, IL or DS, or service to anew customer having an annual usage of 4,000 Mcf or greater after October I , 2000, or, transfers of acustomer or customer load from Rates IS or IL or DS to Rate N or transfers of a customer having an arulualuse of 4,000 Mcf or greater from Rates NT to Rate N shall be permitted only as determined by the Company,and subject to reasonable limitations.
STANDBY AVAILABILITY
Where service is provided under this Rate to any non-residential customer utilizing natural gas as a backup,auxiliary or temporary fuel, a Standby Surcharge shall apply. For purposes of applying the StandbySurcharge, backup, auxiliary or temporary functionality shall be determined at the Company's sole discretionwhere natural gas is being utilized as a backup heating fuel to any other fuel service.
MONTHLY RATE TABLE
Billing Period:
(D)
(D)
(D)
Customer Charge:
PlusDistribution Charge:
First 25 MCF @ $4.0493 per MCF
Next 475 MCF @ $3.5534 per MCF
Over 500 MCF @ 52.3127 per MCF
Plus
Natural Gas Supply Charge:
As Stated in Section l3.l
Plus
Gas Cost Adjustment:
As Stated in Section 13.1
(D)IndicatesDecrease
April through October
58.55 per Customer
November tlrouqh March
$8.55 per Customer
First 25 MCF @ $4.0493 per MCF
Next 475 MCF @ $3.5534 per MCF
Over 500 MCF @ 52.4599 per MCF
Effective for ServiceRendered on and after
September ll,2012
Issued: July 13,2012
UGI UTILITIES. INC.
SupplementNo.95 toGas Pa. - P.U.C. No. 5
Fourteenth Revised P age 7 1
Canceling Tlurteenth Revised P age 7 1
RATE N (Continued)
GENERAL SERVICE - NON-RESIDENTIAL
Plus, if Standby:
Customer Charge Surcharge: $42.37 per Customer
Plus
Commodity Charge Surcharge: $0.478 per MCF
( C ) Rate MFC, Rider GPC, the State Tax Surcharge, and the Surcharge for the Recovery of Transition Costs as setforth in the Rules and Regulations applies to the above rates.
LATEPAYMENT CHARGE
5o/o on all amounts unpaid after the due date, and an additional l-U2o/o per month for each month thereafter.
MINIMUM BILLS
Where gas is used for space heating or other use directly related to weather conditions and no gas is separatelymetered and billed to other Customers on the premises, the bill is 3% of the average monthly use duringJanuary, February, and March billing periods of each year, as estimated by the Company.
For all others, the Customer Charge set forth above.
TOTAL SPACE CONDITIONING OPTION
For customers who take service under Rate CIAC and have associated use billed under this option andmaintain a load factor consistent with the average PGC(2) group, the above rates shall be PGC(2) based andshall be reduced by $0.9972 per Mcf to reflect the associated gas cost. This option is available only tocustomers who utilize natural gas as the primary energy source for space conditioning requirements. Annualload factors shall be reviewed at the end of the October billing period to determine customer eligibility for thefollowing year. Customers receiving service under this option agree to allow the company, at its option, toinstall load monitoring facilities.
(C)IndicatesChange
Issued: July 73,2012 Effective for ServiceRendered on and after
September ll,2012
Supplement No. 95 toGas Pa. - P.U.C. No. 5
Fourth Revised Page72UGI UTILITIES, INC. Canceling Third Revised Page 72
RATE NT
GENERAL SERVICE - NON-RESIDENTIAL TRANPORTATION
AVAILABILITY
This Rate applies in the entire territory served by the Company and is available to all Customers who areserved by a Choice Supplier receiving service under Rate AG, except Residential Customers, using gas forany purpose. Service will be supplied only where the Company's facilities and the availablE quantity of gasare suitable to the service desired. Rate NT service may not be applied to supplement or back up intemrptibleservice under Rates IS, IL or DS, except to the extent of needs for plant protection use. Service to the samecustomer under Rate NT and Rates IS, IL or DS and transfers of a customer or customer load from Rates IS,IL or DS to Rate NT shall be permitted only as determined by the Company, and subject to reasonablelimitations.
STANDBY AVAILABILITY
Where service is provided under this Rate to any non-residential customer utilizing natural gas as a backup,auxiliary or temporary fuel, a Standby Surcharge shall apply. For purposes of applying the StandbySurcharge, backup, auxiliary or temporary functionality shall be determined at the Company's sole discretionwhere natural gas is being utilized as a backup heating fuel to any other fuel service.
MONTHLY RATE TABLE
Billing Period:April through October November throueh March
Customer Charge: $8.55 per Customer $8.55 per Customer
PlusDistribution Charge:
( D ) First 25 MCF @
( D ) Next475 MCF @
( D ) Over 500 M)F @
Plus, if Standby:
Customer Charge Surcharge: $42.37 per Customer
Plus
Commodity Charge Surcharge: $0.478 per MCF
The State Tax Surcharge, the Surcharge for the Recovery of Transition Costs and the Migration RiderSurcharge as set forth in the Rules and Regulations applies to the above rates.
(D)IndicatesDecrease
Effective for ServiceRendered on and after
September ll,2012
$4.0493 per MCF First 25 MCF @$4.0493 per MCF
$3.5534perMCF Next475 MCF @$3.5534 perMCF
S2.3127perMCF Over500MCF @$2.4599perMCF
Issued; July 13,2012
UGI UTILITIES.INC.
Supplement No. 95 toGas Pa. - P.U.C. No. 5
Second Revised Page 78Canceling First Revised Page 78
RATE CIAC (Continued)
GENERAL SERVICE--COMMERCIAL AIIDINDUSTRIAL AIR CONDITIONING
MONTHLY RATE TABLE
Customer Charge: $8.55 per Customer
Plus
( D ) Distribution Charge: $1.9432 per MCF
Plus
Natural Gas Supply Charge as Stated in Section 13.l
Plus
Gas Cost Adjustment as Stated in Section l3.l
( C ) Rider MFC, Rider GPC the State Tax Surcharge, and the Surcharge for the Recovery of Transition Costs asset forth in the Rules and Regulations applies to the above rates.
LATE PAYMENT CHARGE
5o/o on all amounts unpaid after the due date, and an additional l-ll2%o per month for each month thereafter.
MINIMUM BILL
Customer Charge set forth above.
( C ) Indicates Change ( D ) Indicates Decrease
Effective for ServiceRendered on and after
September ll,2012
Issued: July 13,2012
UGI UTILITIES, INC.
Supplement No. 95 toGas Pa. - P.U.C. No. 5
Second Revised Page79Canceling First Revised Page 79
RATE CTGENERAL SERVICE--COMMERCIAL
AND INDUSTRIAL AIR CONDITIONING - TRANSPORTATON
AVAILABILITY
This Rate applies in the entire territory served by the Company and is available to any commercial orindustrial Customer, served by a Choice Supplier receiving service under Rate AG, using gas for airconditioning purposes when Customer has a written agreement contracting for use of gas under the terms ofthis Tariff. Service will be supplied only where the Company's facilities and available quantities of gas aresuitable to the service desired. The number of Customers to receive service under this Rate mav be limited bvthe Company.
The use of gas under this Rate will only be available beginning with the April billing period and ending withthe October billing period.
TERMS AND BILLING
Service shall be for a period of not less than one (l) year with monthly payments for service taken. Gas soldunder this Rate Schedule shall be determined and billed by the Company upon the basis of:
(a) Gas used in excess of the estimated use for purposes other than air conditioning, or
(b) Gas used for air conditioning separately metered where it is practical and economical.
Where gas is also used for space heating service under Rate N or NT and CT usage during the billing monthis equal to or greater than3Yo of the average Rate N or NT gas usage during January through March, then allair conditioning usage will be billed under Rate CT, if less than3o/o of the average is consumed, then airconditioning usage will be billed under Rate CT, and the difference will be billed under Rare N or NT.
All other gas used, including gas used for air conditioning purposes during months other than the billingperiods of April through October, shall be paid for under other rates applicable to Customer.
MONTHLY RATE TABLE
Customer Charge: $8.55 per Customer
Plus
(D) DistributionCharge: $1.9432 per MCF
The State Tax Surcharge, Surcharge for the Recovery of Transition Costs and the Migration Rider, as set forthin the Rules and Regulations applies to the above rates.
(D)IndicatesDecrease
Issued: July 13,2012 Effective for ServiceRendered on and after
September ll,2012
UGI Attachm ent 2
Company Responses to52Pa. Code $53.52(a) and (b).
UGI Attachment 2
UGI Utilities, IncGas Procurement Charge - Filing Requirements
$53.52(a)(1) The Specific reasons for each change.
RESPONSE:
Please see the Statement of Reasons for UGI Utilities. Inc.'s Natural Gas ProcurementCost Unbundling Filing.
$53.52(a)(2) The total number of customers served by the utility.
RESPONSE:
Number of customers as of March 31. 2012:
Residential
Commercial
Industrial
Other
Total 350.003
$53.52(a)(3) A calculation of the number of customers, by tariff subdivision, whosebills will be affected by the change.
3l4,0rg
34,509
1,476
RESPONSE:
Rate R
Rate RT
Rate N, CIAC
Rate NT, CT
Total
287,086
26,913
24,692
10,269
348,960
$53.52(a)(a) The effect of the change on the utility's customers.
RESPONSE:
The base rates will decrease for all customers served under Rates R, RT, N, NT, CIACand CT, by an amount equal to the Distribution Charge Reduction, and the rates willincrease for customers served under Rates R, N and CIAC, by an amount equal to the GasProcurement Charge.
$53.52(a)(5) The direct or indirect effect of the proposed change on the utility'srevenues and expenses.
RESPONSE:
Per the Revised Final Rulemaking Order at Docket No. L-2008 -2069114 entered on June23,2011 ("June 201I Order"),the Gas Procurement Charge is designed to be revenueneutral, thus having no direct or indirect effect on the utility's revenues and expenses.
$53.52(a)(6) The effect of the change on the service rendered by the utility.
RESPONSE:
The change will not affect the service rendered by the utility.
$53.52(a)(7) A list of factors considered by the utility in its determination to makethe change. The list shall include a comprehensive statement about why thesefactors were chosen and the relative importance of each. This subsection does notapply to a portion of a tariff change seeking a general rate increase as defined in 66Pa.C.S. S 1308.
RESPONSE:
Please see the Statement of Reasons for UGI Utilities. Inc.'s Natural Gas ProcurementCost Unbundling Filing.
$53.52(a)(8) Studies undertaken by the utitity in order to draft its proposed change.This paragraph does not apply to a portion of a tariff change seeking a general rateincrease as defined in 66 Pa.C.S. S 1303.
RESPONSE:
The June 201I Order did not require studies to be undertaken by the utility, and theCompany has not undertaken any studies.
$53.52(aX9) Customer polls taken and other documents which indicate customeracceptance and desire for the proposed change. If the poll or other documentsreveal discernible public opposition, an explanation of why the change is in thepublic interest shall be provided.
RESPONSE:
The June 201I Order did not require customer polls to be taken by the utility, and theCompany has not conducted any polls.
$53.52(a)(10) Plans the utilify has for introducing or implementing the changes withrespect to its ratepayers.
RESPONSE:
The Company will file a compliance filing with the Commission to implernent theproposed tariff and rates contained therein when it receives an order from theCommission to do so and will follow any specific communications required by theCommission as part of implementing the changes.
$53.52(a)(11) FCC, FERC or Commission orders or rulings applicable to the filing.
RESPONSE:
The Commission order applicable to the filing is the June 201I order, and thecommission's Secretarial Letter issued May 25,2012, in the same proceeding.
$53.52(bxl) The Specific reasons for each change.
RESPONSE:
Please the Staternent of Reasons for UGI Utilities. Inc.'s Natural Gas Procurement CostUnbundling Filing.
$53.52(bX2) The operating income statement of the utility for the l2-month period,the end of which may not be more than 120 days prior to the firing.
RESPONSE:
Please see UGI Schedule A attached hereto containing the operating income statement forthe l2-month period ending March 31,2012.
S53.52(bX3) A calculation of the number of customers, by tariff subdivision, whosebills will be increased.
RESPONSE:
Please see the Company's response to $53.52(a)(3), for Rate R, Rate N and Rate CIAC.
$53.52(bX4) A calculation of the total increases, in dollars, by tariff subdivision,projected to an annual basis.
RESPONSE:
Rate lncreases
Rate R
Rate N
Total Increases
Rate Decrease
Rate R / RT
Rate N / NT
Total Decreases
Volumes
14,696,650
5,229,917
19,926,567
Volumes
17,526,860
16,269,809
33,796,669
Rate
Chanqe
$ 0.0114
$ 0.0114
Rate
Chanqe
$ (0.0067)
$ (0.0067)
Amount
$ 167,195
$ 59,497
_$ 226,692_
Amount
$ (1 17,562)
$ (109,130)
_$@qfga__
$53.52(b)(5) A calculation of the number of customers, by tariff subdivision, whosebills will be decreased.
RESPONSE:
Please see the Company's response to $53.52(a)(3), for Rate RT, Rate NT and Rate CT.
S53.52(bX6) A calculation of the total decreases, in dollars, by tariff subdivision,projected to an annual basis.
RESPONSE:
UGI Utilities, Inc. (Gas Division)
Operating I ncome Statement12 Months Ended March 31,2012
( $ in Thousands )
Response to 52 Pa. $53.52 (bX2)
Total Operating Revenues
Total Sales Revenues
Other Operating Revenues
Total Revenues
Total Operating Expenses
Operation & Maintenance Expenses
Depreciation Expense
Depreciation & Amortization on Common Plant
Amortization of Regulatory Assets
Taxes Other Than Income TaxesTotal Operating Expenses
Operating Income Before Income Taxes (OlBlT)
Income Taxes:
State and Federal Income Taxes
Net Utility Operating Income
UGI Schedule A
389,383
389,383
272,131
23,447
1,756
5.232
302,566
86.818
26,068
60,750$
BEFORE THEPENNSYLVANIA PUBLIC UTILITY COMMISSION
UGI Utilities,Inc. - Gas DivisionSupplement No. 95 to UGI Tariff Gas - Pa. P.U.C. No. 5
TESTIMONY OF SHAUN M. HART
UGI Statement No. 1
Dated: Jlly 13,2012
9752685v1
1 Q. Please state your name and address.
2 A. Shaun M. Hart; my business address is UGI Utilities, Inc.,2525 North 12ft Street, Suite
3 360, Reading, Pennsylvania 19612.
4
5 Q. By whom are you employed, and in what capacify?
6 A. I am employed by UGI Utilities Inc. as Manager - Supply.
7
8 Q. Please briefly describe your responsibilities in that capacity.
9 A. As Manager - Supply, I am responsible for gas supply scheduling, planning, and
l0 procurement for UGI Utilities, [nc. - Gas Division ("UGI" or the "Company''), UGI Penn
11 Natural Gas, Inc. ("PNG"), and UGI Central Penn Gas, [nc. ("CPG"), (collectively, the
12 "UGI NGDCs" or the "Companies").
l3
14 a. What is your professional and educational background?
l5 A. Please see my resume that is attached as Appendix UGI-SMH-I.
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17 a. Have you testified previously before the Pennsylvania Public Utility Commission?
18 A. Yes. I previously provided testimony in the 2011 and 2012 purchased gas cost ("PGC")
19 proceedings for UGI, PNG, and CPG.
20
2l a. What topic shall you address in your direct testimony?
22 A. My testimony addresses the Company's development of costs for the Gas Procurement
23 Charge ("GPC") for UGL
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Please describe the GPC cost components.
The GPC is comprised of: (1) labor and benefits costs, which includes the salaries and
benefits attributable to the Company unployees participating in the procurement of
natural gas commodity for PGC customers, inclusive of natural gas supply bidding,
contracting, hedging, credit and risk management activities, ild the associated gas
procnrement PGC activities ("Procurement"), and (2) outside legal costs related to the
UGI NGDCs' PGC activities.
Do PGC activities encompass more than Procurement?
Yes. In addition to Procurement, PGC activities include reliability planning and capacity
planning, as well as other non-procurement activities such as Choice and non-Choice
transportation activities, customer intemrptions, storage activity, asset management
agreernents, transportation agreernents, rate structure changes, tariff changes, and FERC
proceedings ('hon-Procurement"). Reliability planning is vital to ensure sufficient
capacity is contracted and available to meet firm peak day requirements as well as
seasonal requirements. Capacity planning includes the decisions to enter into contracts
for firm transportation, local delivered supply (Marcellus), storage, and peaking services.
The decisions of which are typically based on Request for Proposal issuances and results.
As the supplier of last resort for all core market customers, which specifically includes
Choice customers, each UGI NGDC is obligated to perform supply related reliability and
capacity planning requirements. As a result, the labor and benefits costs related to non-
Procurement activities will continue to be incurred and are appropriate component costs
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to remain in base rates. Therefore, the Company is not proposing to remove costs for
non-Procurement functions from base rates.
Please describe how labor and benefits costs were determined.
There are five functional categories of Company employees who perform or support
Procurement: (1) gas supply, (2) accounting support, (3) internal legal support, (4)
regulatory support, and (5) management support. The labor and benefits costs for the five
functional categories were based on an analysis by each department to determine the
number of annual hours spent on Procurement for all three Companies. The annual hours
were divided by 2,080 hours, which is the product of 40 hours per week multiplied by 52
weeks per year, in order to determine the number of full time equivalent employees
needed for these functions. Since Company employees are responsible for Procurement
for all three UGI NGDCs, the number of full time equivalent employees associated with
Procurement was allocated to each UGI NGDC by using the Modified Wisconsin
Formula ("MWF") as the Company relies on the MWF to allocate costs that cannot be
directly billed to a particular UGI NGDC, such as these. The MWF allocates common
expenses based on the relative activity and size of each NGDC to the total of all of the
NGDCs. Activity is measured by total revenues and total operating expenses and size is
measured by tangible net assets ernployed (excluding acquisition goodwill). The
applicable MWF allocation percentages utilized herein are as follows: 55% UGI,29yo
PNG, andl6%oCPG.
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In the first category of gas supply, how many full time equivalents are needed for
Procurement and what is the total annual cost for this category?
The Companies currently use three full time ernployees or employee equivalents in gas
supply for Procurement for the three UGI NGDCs. The Companies used the MWF to
allocate these full time equivalents across the three UGI NGDCs. In determining cost,
the Companies then applied the appropriate salary level (grades 15 and 16 on UGI's wage
scale) to these full time employee equivalents. Salaries were calculated as of the year for
each respective UGI NGDC's most recent base rate case ("BRC"), so they are unique to
each UGI NGDC, with specific salary levels determined by using the average of the
Company's current salary mid-points for grade levels 15 and 16 and dividing it by a
factor of the corporate salary increase percentages since the BRC filing to arrive at an
estimate of the salary embodied in the BRC cost of service. These salaries were then
grossed up by 40%o for benefits to derive the total labor and benefits cost associated with
gas supply. The total annual labor and benefits cost associated with these three gas
supply employees is $198,087. UGI's allocated portion of the annual labor and benefits
cost for gas supply is $84,210, as shown on UGI Exhibit DEL-I, which is attached to the
Direct Testimony of David E. Lahoff (UGI Statement No. 2).
In the second category of accounting support, how many full time equivalents are
needed for Procurement and what is the total annual cost for this category?
The Companies currently use one full time employee or employee equivalent to provide
accounting support for Procurement. The allocation across the UGI NGDCs of this one
full time equivalent and associated payroll costs for grade level 14 was done according to
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the same MWF method described above for the gas supply ernployees. The total annual
labor and benefits cost associated with this employee is $56,870. UGI's allocated portion
of the annual labor and benefits cost for accounting support is $24,176, as shown on UGI
Exhibit DEL-I.
In the third category of internal legal support how many full time equivalents are
needed for Procurement and what is the total annual cost for this category?
The Companies currently use one quarter of a full time employee or employee equivalent
to provide internal legal support, which includes time spent to negotiate gas procurernent
contracts as well as time spent to prepare and litigate PGC filings. The UGI NGDCs note
that these internal legal support costs related to PGC activities include time spent to
address both Procurement and non-Procurement activities. However, due to the low level
of total costs and the difficulty in separately estimating time spent on Procurement versus
non-Procurernent activities, the UGI NGDCs have not attempted to break out these two
types of costs separately and have included all PGC-related legal support as costs in the
development of the GPC, even though only those related to Procurement should be
removed from base rates. Like the other labor and benefit costs, the Company proposes
to spread these costs across the three UGI NGDCs pursuant to the MWF described
earlier, with the total annual labor and benefits cost amounting to $31,996. UGI's
allocated portion of the annual labor and benefits cost for internal legal support is
$13,431, as shown on UGI Exhibit DEL-1.
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In the fourth category of regulatory support, how many full time equivalents are
needed for Procurement and what is the total annual cost for this category?
The Companies currently use three quarters of one full time employee or employee
equivalent to provide regulatory support for Procurement. Regulatory support costs
include Company activities to prepare PGC filings. The allocation across the UGI
NGDCs of this employee equivalent and associated payroll costs for grade level 18 was
done according to the same method described above for the gas supply employees. The
total annual labor and benefits cost associated with this employee equivalent is $67,463.
UGI's allocated portion of the annual labor and benefits cost for regulatory support is
$28,461, as shown on UGI Exhibit DEL-I.
In the fifth category of management support, how many full time equivalents are
needed for Procurement and what is the total annual cost for this category?
Management support costs are related to activities performed by the Company's
management team to supervise and manage Procurement activities, In order to determine
management support costs, the Company estimated the number of management hours
spent on PGC activities and multiplied the number of hours by estimated salary and
benefits costs for management level employees that work on PGC filings. The total
annual labor and benefits cost for management support is estimated to be $39,385. Like
the other labor and benefit costs, the Companies proposes to spread these costs across the
three UGI NGDCs pursuant to the MWF. UGI's allocated portion of the annual labor
and benefits cost for management support is $16,414, as shown on UGI Exhibit DEL-I.
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What assumptions were made in regards to the Company's Choice programs
associated with the five categories comprising labor and benefits costs?
Calculations of Procurement costs for all five categories assume that there will be some
level of Procurernent activity required even with 100% Choice participation. A level of
Procurement is required to fill and manage storage for purposes of making bundled city
gate supply sales to Choice suppliers, as offered by the UGI NGDC Choice tariffs in
accordance with Commission approved settlernents in respective PGC proceedings. See
Pa. P.U.C. v. UGI Utitities, Inc. - Gas Divtision, Docket Nos. R-20ll-2238g51 et al.,
Order approving Settlement entered October 14,20ll; Pa. P.U.C. v. UGI Penn Natural
Gas, Inc., Docket Nos. R-2011-2238943, et al., Order approving Settlement entered
October 14,2011; and Pa. P.U.C. v. UGI Central Penn Gas, Inc., Docket Nos. R-2011-
2238949, et al., Order approving Settlement entered October 14, 201I. Since UGI
NGDCs do not release storage capacity to Choice suppliers, but instead manage storage
capacity on behalf of Choice suppliers, the UGI NGDCs would continue to incur
Procurement costs for filling and managing storage. Therefore, labor and benefits costs
related to Procurement to fill storage are not included in the GPC.
Please describe how outside legal costs, the second component of the GPC, were
determined.
The only significant outside legal costs associated with Procurement are those incurred
with respect to annual PGC filings. UGI is proposing to include the outside legal costs
reflected in its most recent base rate proceeding for these activities, which is $60,000, as
shown in UGI Exhibit DEL-I. Similar to the proposed adjustment described above for
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intemal legal costs, outside legal support costs include time spent to address both
Procurement and non-Procurement activities. Due to the low level of total costs and the
difficulty in separately estimating time spent on Procurement versus non-Procurement
activities, the UGI NGDCs have not attempted to break out these costs separately and
have included all PGC-related legal support costs as iterns included in the GPC, even
though only those related to Procurement should be removed from base rates.
How did the Company account for working capital for gas in storage inventory?
The Company is not proposing to remove costs for working capital for gas in storage
inventory from base rates. Since UGI NGDCs do not release storage capacity to Choice
suppliers, but instead manage storage capacity on behalf of Choice suppliers, the UGI
NGDCs bear all of the working capital costs for gas that is stored on the UGI NGDCs'
system, and Choice suppliers do not bear separate costs for this working capital. In the
UGI NGDCs'recent PGC settlements, the parties have agreed that the UGI NGDCs will
not release storage capacity to Choice suppliers. See Pa. P.U.C. v. UGI Utilities, Inc. -Gas Division, Docket Nos. R-201I-2238953, et al., Order approving Settlement entered
October 14,20ll; Pa. P.U.C. v. UGI Penn Natural Gas, Inc., Docket Nos. R-2011-
2238943, et al., Order approving Settlernent entered October 14, 20ll; and Pa. P.(1.C. v.
UGI Central Penn Gas, Inc., Docket Nos. R-2011-2238949, et al., Order approving
Settlernent entered October 14,2011. Instead, the UGI NGDCs give Choice suppliers the
option to receive bundled city gate sales service at summer index prices for a portion of
their gas supplies. This gives Choice suppliers the seasonal benefit associated with
storage of acquiring winter supplies at summer prices, while preserving the UGI NGDCs'
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ability to retain storage and peaking assets to ensure system reliability and comply with
FERC rules. Under this approach, Choice suppliers receive the benefits of storage but do
not actually own gas in storage on the UGI NGDCs' systern or have working capital costs
related to storage inventory on the Company's system. Since Choice suppliers on the
UGI NGDCs' systems do not incur working capital costs related to gas in storage
inventory, but are able to receive the benefits of the storage comparable to that received
by PGC customers, it is appropriate for the UGI NGDCs to leave these costs in base
rates. Stated another way, if working capital costs were rernoved from base rates and
placed on PGC customers alone, shopping customers would receive the benefits of the
UGI NGDCs' storage systern but would not pay working capital costs for this storage
inventory, resulting in a subsidy of Choice customers by PGC customers. Therefore, it is
appropriate for the UGI NGDCs to keep working capital costs for storage inventory in
base rates.
Were any other cost components considered for the GPC?
Yes. The Company considered but is not proposing to remove from base rates the capital
costs related to the IT gas management system used to support the gas procurernent
function (which shall be referred to herein as the "Gastar System"). The Company uses
the Gastar System for Procurement activities, but will still need this functionality to
account for Procurement to fill storage. In addition, the Company's Gastar System is
used for many different functions other than gas procurement activities, including:
. capacity planning and capacity management activities;
o managlng supplier nominations, supplier pooling activities, supplier imbalances,supplier billing and supplier communications ;
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. managing key account contracts,' key account contacts, key account billing, keyaccount communications, key account metering and meter reading activities; and
. managrng customer intemrptions and maintaining intemrption records.
All supplies delivered into the UGI NGDC systems are tracked and managed
through the Gastar System. In particular, the use of the Gastar System is critical for the
management of natural gas supplier ("NGS") delivered supplies, identified by pipeline
delivery point and transportation customer, pool goup or Choice customer group
destination. NGSs track and manage all supplies to UGI NGDC systems via web-enabled
interfaces to Gastar which provide both a basic interface to the UGI NGDCs for data
delivery as well as edit and error checking functions. Moreover, the tracking of these
supplies to and through final disposition, including tracking necessary for customer
billing and supplier billing as .well as imbalance management and reconciliation, is
performed within the Gastar System. These functions benefit all customers, including
PGC, Choice and non-Choice transportation customers. In addition, the Gastar Systern
costs are fixed costs and do not vary with the level of Choice participation. Therefore, it
is appropriate to keep the Gastar System costs in base rates.
Does this conclude your direct testimony?
Yes
I K"y accounts are those accounts that require execution ofa contract in order to receive service andinclude service provided under rate schedules DS, LFD, XD and IS/IL.
a.
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9752685v1l0
APPENDIX UGI-SMH-I
(Resume and Educational Background)
9752685v1
Appendix UGI-SMH-I
Shaun HartManager - Supply
Work Experience
November 2010 - present Manager - SupplyUGI Utilities, Inc., Reading, PA
2008 - 2010 Manager, Natural Gas TradingUGI Energy Services, Inc., Wyomissing, PA
2005 - 2008 Supply AnalystUGI Energy Services, Inc., Wyomissing, PA
2003 - 2005 Application Systems AnalystUGI Energy Services, Inc., Wyomissing, PA
Education
M.B.A. from Villanova University, 2012B.S. in Computer Science from Penn State University, 2003
9752685v1
BEFORE THEPENNSYLVANIA PUBLIC UTILITY COMMISSION
UGI Utilities,Inc. - Gas DivisionSupplement No. 95 to UGI Tariff Gas - Pa. P.U.C. No. 5
TESTIMONY OF DAVID E. LAHOFF
UGI Statement No. 2
Dated: July 13,2012
975 I 589v1
I Q. Please state your name and business address.
2 A. My name is David E. Lahoff. My current business address is2525 N. 12th Street,
3 Suite 360, Reading, Pennsylvania19612.
4
5 Q. By whom are you employed and in what capacity?
6 A. I am employed by UGI Utilities, Inc as Manager, Rates.
7
8 Q. Please provide your educational background.
g A. I received an undergraduate degree in business from The Pennsylvania State
l0 University and a Masters Degree in Business Administration from The University
11 of Connecticut.
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l3 a. Please provide your professional experience.
14 A. ln 2002,I was named Manager, Special Projects for UGI Utilities. In 2003, I
15 became Manager, Customer Accounting Services for UGI Utilities, where my
16 responsibilities included the administration of all customer accounting functions.
17 Beginning in 2007, I returned to the position of Manager, Special Projects to
18 oversee a customer information system conversion project. Following the
19 completion of that project, I was named Manager of Rates.
20
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What are your current areas of responsibility?
My current responsibilities include all aspects of rates management,
administration, regulatory support and Choice adminishation for all UGI
operating companies.
Have you previously testified as a witness before the Pennsylvania Public
Utility Commission?
Yes, I have testified in the following dockets: UGI Central Penn Gas, Inc. 2009
Base Rate Case, Docket No. R-2008-2079675, UGI Penn Natural Gas, Inc. 2009
Base Rate Case, Docket No R-2008-2079660, UGI Utilities 2009 Annual Gas
Cost Filing, Docket No R- 2009-2105911, UGI Utilities Petition to Implement a
Purchase of Receivables Program and Merchant Function Charge, Docket No P-
2009-2145498 and UGI Central Penn Gas, Inc. 2011 Base Rate Case, Docket No
R-2010-2214415.
Please describe the purpose of your testimony.
I will address the following issues in my testimony: (l) the calculation of the
reduction to base rates for UGI related to costs identified in the Direct Testimony
of Shaun Hart (uGI Statement No. 1); and (2) the calculation of the Gas
Procurement Charge ("GPC") for UGL
tariff
utility
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Are you providing any supporting documents with your testimony?
Yes, I am providing UGI Exhibit DEL-I, showing the calculation of the GPC and
the reduction in base rates on a volumetric basis.
Are you submitting testimony in UGI's affiliated natural gas distribution
companies' GPC filings?
Yes. I am also submitting testimony for UGI's affiliated natural gas distribution
companies ('NGDCs"), UGI Central Penn Gas, Inc. ("CPG") and UGI Penn
Natural Gas, Inc. ("PNG") (collectively with UGI, the "UGI NGDCs" or the
"Companies").
Please explain the calculation of the reduction in base rates for Rates R, RT,
N, NT, CIAC and CT.
Details regarding the development of the reduction to base rates are set forth in
UGI Exhibit DEL-1. The derivation of the total GPC-related costs shown on UGI
Exhibit DEL-I are detailed in the Direct Testimony of Shaun Hart, UGI
Statement No. l. As shown in UGI Exhibit DEL-I, in order to develop the base
rate reduction on a volumetric basis, the total GPC-related costs, which are
imbedded in current base rates for each UGI NGDC, were divided by the sales
volumes for each UGI NGDC; with such sales volumes equating to those
reflected in the respective Proof of Revenue submitted with the Settlements for
each of the UGI company's most recent base rate proceeding . See Pa. P.U.C. v.
UGI Central Penn Gas, Inc., Docket Nos. R-2010-2214415. et. al.. order entered
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August I9,20ll1, see also Pa. P.U.C. v. UGI Penn Natural Gas, Inc., Docket Nos.
R-2008-2079660 et. al. Order entered August 27, 2009; see also Pa. P.U.C. v.
UGI Utilities, Inc., Docket No. R-00953297, Order entered August 31, 1995. For
UGI, this results in a reduction of $0.0067 per Mcf to the current distribution
charge for rates R, RT, N, NT, CIAC and CT. Please see Tariff Supplement No.
95, which is UGI Attachment I to the Statement of Reasons, for the resulting
proposed distribution charges by rate schedule. This rate reduction effectuates the
removal of $226,692 from the base rates of UGI.
Please explain the development of the GPC rate for UGI.
The total GPC cost described above, 5226,692, was divided by the projected sales
volumes for the time period ending November 30, 2013, as reflected in UGI's
current PGC filing, less an estimate for increased shopping volumes in the
following year which reflects the anticipated increase in shopping levels as a
result of this compliance filing. The resulting calculation is shown in detail on
UGI Exhibit DEL-I and yields a GPC rate of $0.0ll4per Mcf for UGI.
Is the GPC designed to be revenue neutral?
Yes. The total amount of gas procurement costs imbedded in the base rates of
UGI as of its last base rate case, which are being rernoved by a reduction in
distribution charges, is $226,692. This same amount is equal to the revenues
projected to be generated from the GPC. In total, UGI will be removin9S226,692
from base rates and is projecting to recover $226,692 from the GPC.
a.
A.
975 I 589v1
I
2
J
4
5
6
7
8
9
10
l1
I2
l3
l4
15
l6
T7
18
I9
20
2l
22
23
a.
A.
What will be the total impact to UGI's price to compare ("PTC") with all of
the changes being proposed by UGI in this compliance filing?
The impact to the PTC will be substantial. Currently, UGI's PTC includes the
current cost of gas, commonly referred to as the "c-factor," as well as a Merchant
Function Charge ("MFC"). The Commission's Revised Final Rulernaking Order
at Docket No. L-2008-2069114, entered on June 23,2011 ("June 2011 Order")
calls for the addition of both the over/under reconciliation, or "e-factor," and the
newly created GPC to the PTC. These additions create greater headroom for
Natural Gas Supplier ("NGS") service offerings and are anticipated to lead to a
greater level of Choice shopping. Specifically, including the current "e-factor,"
MFC and GPC in the residential PTC adds 65 cents per Mcf to the residential
PTC for UGI, or 1l.I% It should also be noted that this petition requests
approval for adding language to the UGI tariff explaining and clarifying the PTC
by identifying the various components in the calculation of the PTC. Please see
UGI Attachment 1 to the Statement of Reasons for the proposed tariff language
changes.
Please explain the development of the sales volumes used to develop the GPC.
The Companybelieves the proposed changes contained in the June 20ll Order
will have a significant impact on the number of customers who decide to shop for
gas. As specified in the rulemaking, the PTC will be modified to include not only
the MFC but also the GPC and the reconciliation for over and under collections.
commonly referred to as the "e-factor." These additions to the PTC should serve
a.
A.
975 I 589v1
I
2
J
4
5
6
7
8
9
l0
l1
t2
13
l4
t5
t6
t7
18
t9
20
2l
22
a.
A.
to accelerate the rate of growth in Choice, much like the increase in electric
Choice shopping seen following the removal of rate caps. This increase in Choice
volumes will result in fewer rernaining PGC customers and consequently lower
PGC volumes to which the GPC will be applied. As such, the Company has
adjusted the future annual sales volume used in developing the GPC to account
for the expected increase in customer shopping. The annual adjustment to PGC
volumes for UGI in this analysis is a reduction of 6,624,097 Mcf. See UGI
Exhibit DEL-I for the resulting volumes used to develop the GPC.
How did you determine the adjustment to be made to sales volume to account
for the expected increase in customer shopping?
In recognition of the expected increases over the aheady healthy current growth
rates in Choice activity, Choice volumes for each of the UGI NGDCs were
adjusted in the future period in order to reflect total Choice shopping levels of
33Yo for the residential market and 660/o for the commercial market. This
compares to the current levels at UGI of llo/o for the residential market and 55oh
for the commercial market. As indicated, current growth rates are already robust.
For example, the growth in residential customers for the last 12 months alone was
130% at UGI and 92Yo at PNG. In addition, current commercial shopping levels
at PNG and CPG are 38Yo and 47%o, respectively. Although current levels of
residential choice customers at CPG and PNG are low, the overall levels of
Choice shopping at CPG and PNG are expected to reach levels similar to UGI
6975 I 589v I
I since CPG and PNG have modified their Choice programs in recent years to more
2 closely match the UGI program.
J
4 a. Has the Company proposed the creation of a Merchant Function Charge in
5 this filing in accordance with the June 20II Order?
6 A. No. UGI established a MFC in its 2009 petition to implement a Purchase of
7 Receivables Program and Merchant Function Charge at Docket No. P-2009-
8 2145498. The MFC was approved by Commission Order entered on August 23,
9 2010. Accordingly, UGI is already compliant with that provision of the June
l0 201I Order.
11
12 a Does this conclude your testimony?
13 A. Yes.
t4
975 l589vl
UGI Exhibit DEL-I
UGI Exhibit DEL-1
UGI CompaniesDevelopment of the Gas Procurement Charge
and Reduction of Base Rates
(1)
(2)(3)
(4)(5)
(6)
(7)
Line Labor and BenefitsGas SupplyAccounting SupportInternal Legal SupportRegulatory SupportManagement Support
Total Labor and Benefits Costs
Non-Labor CostsOutside Services - Legal Support
Total Base Rate Reduction
Sales Volumes lMcf 1l
Distribution Charge Reduction / Mcf
CPG PNG UGIU Total
42,571 $ 71,306 $ 84,210 $198,09712,222 $ 20,472 $ 24,176 $56,8707,78O $ 10,785 $ 13,431 $ 3i,996
14,476 $ 24,526 $ 28,461 $ 67,4638,777 $ 14,194 $ 16,414 $39,385
(6) = (1 )+(2)+(3)+(a)+(s) $ 85,826 $ 141,283 $ 166,692 $393,801
$ 27,887 $ 11,000 $ 60,000 $ 98,887
(8) = (6)+(7) $113,713 $ 152,283 $ 226,692 $492,688
$
$
$$$
(8)
(e)
(10) (10) = (8)/ ( s)
7,875,378 19,822,293 33,796,669
$ 0.0144 $ 0.0077 $ 0.0067
(11) Total GPC Costs to be Recovered (11)= (6)+(7)
(12) Sales Volumes (Mct) !(13) GPC Unit Rate / Mcf (13) = (11) t(12,)
$ 113,713 $ 152,293 $ 226,692 $ 492,699
$ 0.0191 $ 0.0129 $ 0.0114
Sales Volumes from the most recent Base Rate Case Settlement Proof of Revenue includingRate R, Rate N and Rate CIAC.
Rates R, N and clAc sales volumes from the June 1,2012, pGC Book ll, schedule A,as adjusted for expected customer Choice sales volume growth for the 12 month periodbeginning November 30, 2013.
5,945,167 1 1,799,906 19,926,569
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No
Gas Procurement Charge Labor and Benefits
Modified AllocatedGas Suppty Wisconsin People People Salary Benefits Total
CPG
PNG
UGI
AccountingCPG
PNG
UGI
RegulatoryCPG
PNG
UGI
Management (A)CPG
PNG
UGI
Management (B)CPG
PNG
UGI
0.16
0.29
0.55
3
3
3
0.48 $ 30,407.76 $12,163.10 $ 42,570.86
0.87 $ 50,932.85 $20,373.14 $ 71,305.99
1.65 $ 60,149.93 $24.059.97 $ 84.20e.90
3.00 $141,490.54 $56,596.21 $198,086.751.00
0.16
0.29
0.55
1
1
1
o.75
0.75
0.75
0.16 $ 8,730.08 $ 3,492.03
0.29 $ 14,622.67 $ 5,849.07
0.55 $ 17,268.35 $ 6,907.34
$
$
$
12,222.11
20,471.74
24,175.69
1.00
0.16
0.29
0.55
o.12 $
o.22 $
1.00 $ 40,621.10 $16,248.44 $ 56,869.54
0.41 $
10,339.86 $ 4,135.94 $ 14,475.80
17,518.27 $ 7,007.31 $ 24,525.58
20,329.44 $ g,tOt.ZA $ 28,461.22
0.75 $ 48,187.57 $19,275.03 $ 67,462.601.00
0.16 0.23
0.29 0.23
0.55 0.23
1.00
0.16 0.23
0.29 0.23
0.55 0.23
0.04 $ 6,268.93 $ 2,507.57
0.07 $ 10,138.35 $ 4,055.34
0.13 $ 11,724.21 $ 4,689.68
$
$
$
8,776.50
14,193.69
16,413.89
0.24 $ 28,131.49 $11,252.59 $ 39,384.08
0.04
o.o7
0.13
$
$
$
1,217.90 $
1,969.64 $
487.16
787.86
1,705.06
2,757.50
3,188.842,277.74 $ gr r.rO
$
$
$
1.00 0.24$ 5,465.28 $2,186.12 $ 7,651.40
Senior Gounsel0.02 $
0.03 $
0.06 $
CPG
PNG
UGI
0.02
0.03
0.16 0.10
0.29 0.10
0.55 0.10
3,252.42 $ 1,300.97 $
4,508.52 $ 1,803.41 $
5,614.80 $ 2.245.92 $
4,553.39
6,311.93
7,860.72
1.00
Associate CounselcPG
- 0.16
PNG O.29
uct 0.55
1.00
Total Inside Leqal CounselCPG
PNG
UGI
0.11 $ 13,375.74 $ 5,350.30 $ 18,726.04
0.10
0.10
0.10 0.06
$ 2,304.86 $ 921.94 $ 3,226.80
$ 3,195.00 $ 1,278.00 $ 4,473.00
$ 3,979.08 $ 1,591.63 $ 5,520.21
0.16 0.10
0.29 0.10
0.55 0.10
0.11 $ g,+za.g+ $ 3,791.57 $ 13,270.51
$ 5,557.28 $ 2,222.91 $ Z,ZgO.tg
$ 7,703.52 $ 3,081.41 $ 10,784.93
$ 9,593.88 $ 3,837.55 $ 13,431 .43
0.11 $ 22,854.68 $ 9,141.87 $ 31,996.55
o.o2
0.03
0.06
1.00