national fuel gas distribution corporation …on june 29, 2010 the commission approved the...
TRANSCRIPT
TESTIMONY OF SHEILA SUAREZ
IN BEHALF OF
PGC Statement No. 6
NATIONAL FUEL GAS DISTRIBUTION CORPORATION
PENNSYLVANIA PUBLIC UTILITY COMMISSION v.
NATIONAL FUEL GAS DISTRIBUTION CORPORATION (PURCHASED GAS COSTS -- 66 PA.C.S. SECTION 1307(f)),
DOCKET NO. R-2013-2341534
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22.
23
24
Q.
A.
Q.
A.
Q.
A.
Q.
DIRECT TESTIMONY OF SHEILA SUAREZ
State your name and business address.
My name is Sheila Suarez. My business address is 6363
Main Street, Williamsville, New York 14221.
By whom are you employed and in what capacity?
I am employed by National Fuel Gas Distribution
Corporation ("Distribution") as a Senior Rate Analyst
in Distribution's Rates and Regulatory Affairs
Department.
Describe briefly your educational background and
experience.
I graduated from Canisius College in 1986 with a
Bachelor of Science Degree in Accounting. In 1993 I
completed a Master of Business Administration Degree at
the State University of New York at Buffalo. In June
1986, National Fuel Gas Distribution Corporation
("Distribution") employed me as a Junior Rate Analyst
in the Valuation Department, which has since been
reorganized into the Rates and Regulatory Affairs
Department. I was promoted in March 1990 to Rate
Analyst II, in July 1993 I was promoted to Rate Analyst
III, in June 2001 I was promoted to Rate Analyst IV,
and in May 2010 I was promoted to Senior Rate Analyst
my present position.
What is the purpose of your testimony?
-1-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A.
Q.
A.
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
I am testifying in support of PGC Exhibit Nos. 2
(partial), 3 (partial), 13, 13A, 24A, 28, 29, 33, 34
and 35. I will also provide a general description of
the Company's rates for recovery of purchased gas costs
charged to transportation customers.
Please explain PGC Exhibit 2, Schedule 4 and PGC
Exhibit No. 3, Schedule 4.
PGC Exhibit No. 2, Schedule 4 reflects a projection of
the value of capacity releases of $3,158,581 for the
link period, the eight months ending July 31, 2013.
PGC Exhibit No. 3, Schedule 4 reflects a projection of
$4,541,690 for the rate year period, the twelve months
ending July 31, 2014. These values include releases by
Distribution of part of its EFT transportation and ESS
storage entitlements on Supply to the Small Aggregation
Transportation Supplier ("SATS") Service marketers, as
well as releases to others. The total value of such
capacity released to the SATS marketers is projected to
be $2,481,992 for the link period and $3,565,092 for
the rate period.
Please explain the rate structure changes included in
PGC Exhibit No. 13.
Distribution has implemented a system-wide customer
choice program in compliance with the Natural Gas
Choice and Competition Act ("Act") (66 Pa. CS. §§ 2201-
-2-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
DIRECT TESTIMONY OF SHEILA SUAREZ
12). This program provides an opportunity to all of
Distribution's small volume customers (except those
served under the Low Income Residential Assistance Rate
Schedule) for aggregated transportation services.
On October 1, 1999 Distribution filed its
restructuring case in compliance with the Act (Docket
R-994785). On June 8, 2000 the Commission adopted an
Order in Distribution's restructuring case.
On June 29, 2010 the Commission approved the
Company's Purchase of Receivable program.
Under Distribution's system-wide choice program,
qualified natural gas suppliers ("NGSs") are able to
serve the aggregated gas supply requirements of their
customers. Customers receive transportation service
under Distribution's Small Aggregation Transportation
Customer Service Rate Schedule("Rate Schedule SATC").
NGSs are required to qualify for service under SATS.
Under the SATS tariff, Distribution is the
Supplier of Last Resort ("SOLR") . In order to promote
competition without compromising reliability and system
operational integrity, Distribution retains upstream
capacity necessary ·for operational purposes.
Distribution releases to NGSs sufficient pipeline
capacity to meet the requirements of customers that
have chosen to be served by the NGSs.
-3-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
The total capacity requirements of the NGSs are
calculated based on 62 heating degree days during the
rate year. The 62 degree day factor was determined by
deducting the 12 degree days associated with capacity
retained for temperature swing/peaking from the extreme
design peak day degree day level of 74 degree days.
The costs of retained capacity are recovered from NGSs
through SATC rates.
Are the gas costs incurred in order to provide this
service reflected in this filing?
Yes, the proposed SATS and SATC rates provide for
recovery of gas costs incurred in order to support the
system-wide customer choice service. Distribution has
retained a portion of storage capacity and associated
transmission capacity based on 12 degree days for its
small volume aggregation customers in order to maintain
reliability and meet operational and flexibility needs.
The capacity is needed for all small volume customers
regardless of whether the customers receive service
under a Distribution tariffed sales rate schedule or
receive gas supply service from another supplier. The
capacity retained and included in the SATC rate
includes a portion of the EFT capacity from National
Fuel Gas Supply Corporation ("Supply"). Because the
retained capacity is required by both sales and SATC
-4-
1
2
3 Q.
4
5
6 A.
7
8
9
10
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Q.
27
28
29
30 A.
31
32
DIRECf TESTIMONY OF SHEILA SUAREZ
customers, the costs of capacity are recovered through
both sales and SATC customer delivery rates.
Has Distribution proposed to modify the mix of capacity
allocated to SATS service based on capacity changes
anticipated in the rate year?
Yes, changes in capacity contracts during the rate year
have caused distribution to update the SATS capacity
allocations. The reasons for these changes are
addressed in Mr. Michalski's testimony. The allocation
projections effective for the rate year are as follows:
Percent of Peak Day Met by Upstream Capacity
1. 60%
2 • 40%
3. 0%
Capacity
Supply storage and associated transmission released to NGSs
Mandatory release of capacity upstream of Supply
Capacity retained by Distribution and included in SATC rates
Do the rates proposed by Distribution in this
proceeding reflect the system-wide customer choice
program filed by Distribution and approved by the
Commission in compliance with the Act?
Yes. The rates filed by Distribution in this
proceeding are consistent with Distribution's system-
wide customer choice program under the Act, as updated
-5-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Q.
A.
Q.
DIRECT TESTIMONY OF SHEILA SUAREZ
for capacity modifications effective during the rate
year.
What amount is included in SATC rates for the recovery
of such retained capacity?
PGC Exhibit No. 13A provides the calculation of the
distribution charge demand cost rates ("Demand-De
rates") for SATC service on or after August 1, 2013.
Sheet 1 of PGC Exhibit No. 13A provides the calculation
of the Demand-De rate included in SATC rates of $0.2618
per Mcf. The pipeline demand rates summarized on PGC
Exhibit No. 13A are the costs of upstream pipeline
capacity retained by Distribution in order to preserve
reliability and for the management of temperature
swing/peaking requirements based upon 12 degree days.
The EFT Capacity and ESS Delivery and Capacity includes
an allocated amount of contingency capacity.
The total Demand-De charge included in SATC rates
reflects an amount associated with undercollected gas
costs from previous periods. PGC Exhibit 21, Schedule
1, Sheet 3 provides total demand cost of gas recovered
through SATC rates of $0.2648 per Mcf.
Please provide a general description of the Company's
rates charged to customers to recover purchased gas
costs.
-6-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
The Company recovers its purchased gas costs through
the purchase gas cost rates it charges sales and
transportation customers. Total purchase gas costs
projected to be incurred for the twelve months ending
July 2014 are forecasted. Projected sales and
transportation volumes for the twelve months ending
July 2014 are used to determine forecasted gas costs.
For purposes of the forecast of sales and
transportation total requirements, a .31% system wide
lost and unaccounted for ("LAUF") gas factor is used.
The calculation of 0.31% for LAUF is explained in Ms.
Zablonski's testimony. The portion of purchased gas
costs incurred to support transportation services is
assigned to transportation service rates with the
remaining purchase gas costs recovered through rates to
sales customers.
Historic purchase gas costs for the twelve months
ending July 2013 are reconciled with purchase gas cost
revenues from sales and transportation customers for
the twelve months ending July 2013. Any over or under
collection of purchased gas costs is either credited or
surcharged to sales customers through the gas
adjustment charge rate ("GAC") included in purchase gas
cost rates. In limited circumstances the GAC is also
charged to transportation customers. Such
-7-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
circumstances occur when a sales customer migrates to
transportation service. Under the Company's existing
tariff, customers that migrate to transportation
service are charged the currently effective GAC rate
for a twelve month period.
Please explain PGC Exhibit No. 24.
PGC Exhibit No. 24 is a summary of data and
calculations which support Distribution's Monthly
Metered Transportation ("MMT") and Daily Metered
Transportation ("DMT") service rates. Information on
the design peak day included in PGC Exhibit No. 24 will
be provided in Mr. Michalski's testimony.
Please provide a general description of Distribution's
existing MMT and DMT rates.
MMT rates include a purchased gas cost component
designed to recover the costs of balancing the
difference between MMT customers' daily deliveries and
daily usage. As the MMT service name implies,
customers receiving service under the MMT rate schedule
have their meters read on a monthly basis. Since MMT
customers' meters are read monthly, actual daily
consumption data for MMT customers are not available.
Therefore, an estimate of peak day transportation usage
and deliveries is used to calculate the costs of
providing balancing service to MMT customers.
-8-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
Q.
DIRECT TESTIMONY OF SHEILA SUAREZ
Purchased gas costs are excluded from the DMT unit
transportation rate. To be a DMT customer, it is
necessary for daily metering and communications
equipment to be installed not only at the customer's
premises, where it receives service from Distribution,
but also at the point of delivery of the customer's gas
supplies into Distribution's system. Since DMT
customer deliveries and usage are monitored on a daily
basis, the purchased gas costs associated with
balancing for DMT services are recovered through the
overdelivery and sales rates charged to the DMT
customer based upon the customer's actual daily usage
of the sales and overdelivery services.
What are the purchased gas capacity costs that
Distribution expects to incur to provide transportation
services?
PGC Exhibit No. 24A provides a calculation of the
purchased gas capacity costs Distribution expects
transportation customers to cause it to incur. Tables
I through V of Appendix I of PGC Exhibit No. 24A
provide an estimate of purchased gas capacity costs
expected to be incurred to provide transportation
customers with service.
How does Distribution recover these costs from
transportation customers?
-9-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
A.
Q.
A.
Q.
DIRECT TESTIMONY OF SHEILA SUAREZ
As explained in PGC Exhibit No. 24, the purchased gas
costs associated with providing service to
transportation customers are recovered from MMT
transportation customers through the MMT charges.
At page 6 of PGC Exhibit No. 24, it is explained that
the design peak day deficiency of DMT customers has
been excluded from the storage delivery calculation
because a DMT customer's access to peak day storage
deliverability is, in effect, interruptible. Please
explain why such access to storage deliverability is
effectively interruptible.
The DMT service tariff includes an Operational Flow
Order provision whereby Distribution may restrict the
daily metered customers' access to banked gas supplies.
This provision is in place to ensure that adequate
supplies of gas are delivered to Distribution by DMT
customers. The restriction of the DMT customers'
access to banked supplies allows Distribution to
restrict the DMT customers' use of storage
deliverability so that such storage deliverability can
be used for the benefit of sales customers.
What is the proposed charge to recover purchased gas
costs associated with transportation service included
in the MMT rate schedule?
-10-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A.
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
The transportation rates for MMT service include a
component for the recovery of purchased gas capacity
costs. The unit cost as shown in PGC Exhibit No. 24A,
is $0.2568 per Mcf. The Company is proposing to
decrease the MMT rate from $0.2700 per Mcf to $0.2600
per Mcf.
Explain the DMT rate schedule.
The DMT rate schedule is available to transportation
customers that transport volumes to Distribution,
either directly or by displacement, on a firm or
interruptible basis. Customers under the DMT rate
schedule will not be charged the current $0.2700 per
Mcf which is charged MMT customers. Excess deliveries
for DMT customers, however, are charged a greater
amount than MMT customers, as explained in further
detail below. The DMT customer's deliveries and usage
must be metered on a daily basis. If, in any day, the
DMT customer uses more gas from Distribution than the
sum of any overdelivery volumes at the beginning of the
day, the volume of gas, after line losses, delivered to
Distribution for the customer's account on that day,
and two percent of the total daily usage, such use in
excess of the volume of gas available for
transportation service is a sale of gas by Distribution
to the DMT customer under the applicable sales rate
-11-
DIRECT TESTIMONY OF SHEILA SUAREZ
1 schedule and shall not be recharacterized as
2 transportation service under any circumstances.
3 Q. Please explain the charges for overdeliveries under the
4 DMT rate schedule.
5 A. The overdelivery charges for DMT customers are based on
6 the maximum cumulative daily overdelivery for DMT
7 customers. For a maximum cumulative overdelivery
8 volume between 2% and 37% of the volume of DMT service
9 gas transported by Distribution to the customer in the
10 billing month, the charge for overdeliveries is $0.6351
11 per Mcf. For overdeliveries equal to or more than 37%
12 of the volume of DMT service gas transported to the
13 customer by Distribution during the billing month, the
14 charge for such overdeliveries shall be $0.7624 per
15 Mcf.
16 Q. If a transportation service customer reverts back to
17 sales service and, as a result, Distribution does not
18 recover capacity costs from the transportation service .
19 customer, would an underrecovery of purchased gas costs
20 result?
21 A. No. Customers are free to switch back and forth
22 between sales and transportation service when
23 Distribution has sufficient gas supply and pipeline
24 transmission capacity to accommodate the return of
25 transportation customers to sales service. If a
-12-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
Q.
DIRECT TESTIMONY OF SHEILA SUAREZ
present transportation customer decides to switch back
to sales service, the result would be simply that the
same customer would contribute to recovery of purchased
gas costs through payment of rates for sales service
instead of through payment of transportation service
rates.
Why has the Company proposed no change in retention
rates for transportation service in this case?
The Company reviewed its current MMT and DMT service
rates to determine whether the current recovery of
purchased gas cost rates and the current .31% charged
transportation customers to compensate for line losses
and company usage ("transportation retention rate")
continue to be appropriate. This review concluded that
current purchased gas cost rates included in charges to
MMT customers should be decreased from the current rate
of $0.27 per Mcf to $0.26 per Mcf, while the imbalance
service rates charged transportation customers and the
currently effective line loss retention rates should
not be changed. This proposal for services provided to
transportation customers reasonably balances the
purchased gas cost recovery obligation of sales and
transportation customers.
What issues did the Company consider when making its
proposal for MMT and DMT transportation service rates?
-13-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A.
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
The Company considers the issues of the appropriate
purchase gas cost ("PGC") rates to be charged
transportation customers, the appropriate balancing
rates to be charged transportation customers, and the
appropriate retention rates to be charged
transportation customers for line loss to be matters of
rate design. Given that this is largely a rate design
issue, the Company utilized the appropriate criteria in
designing utility rates in analyzing the reasonableness
of existing transportation PGC, balancing, and
retention rates.
PGC Exhibit No. 33, Schedule 1 provides a summary
of the criteria of a sound rate structure. The Company
believes that its existing and proposed charges to
transportation customers are consistent with these
criteria.
Is there any evidence that the current and past rates
charged MMT and DMT customers, including retainage
rates, have been an impediment to transportation
service on the Company's system?
No, the evidence is clearly contrary to any suggestion
that the Company's MMT and DMT rates and the retainage
rates charged transportation customers have been an
impediment to transportation service. Transportation
service over the past 29 years has grown to 56% of
-14-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
total system throughput. Nearly all industrial and
public authority customers have migrated from sales
service to transportation service.
It is clear from this evidence that the
transportation service and retainage rates have fairly
balanced the interests of transportation service
customers.
Does the Company's proposal in this proceeding fairly
allocate costs incurred by the Company to provide
service to transportation service customers?
Yes, the proper allocation of purchased gas costs to
transportation customers has been an issue in the
Company's purchased gas cost proceedings since the
implementation of Order 636 which was issued by the
Federal Energy Regulatory Commission in 1993. See PGC
Exhibit No. 24, starting at line 10 of page 1 for the
list of 1307(f) cases where this issue was addressed.
In order to support transportation services, the
Company incurs costs in the way of capacity costs,
principally on its affiliated pipeline, Supply. The
precise measurement of these costs is impossible since
a precise measurement would require daily measurement
on all transportation customers as well as all gas
receipt points into the Company's system, including
local gas production meters (see PGC Exhibit No. 24,
-15-
DIRECT TESTIMONY OF SHEILA SUAREZ
1 starting at line 15 of page 4). Therefore, the
2 calculation relies on estimates. Any attempt to
3 determine the exact cost of servicing transportation
4 customers would require resolving a number of ancillary
5 issues including, for example, previous period
6 reconciliation, that only add to the overall complexity
7 and cost of determining and administering any mechanism
8 designed to precisely quantify and recover those costs.
9 It is useful to place the overall magnitude of
10 purchase gas cost recovery rates for sales and
11 transportation customers and actual sales and
12 transportation volumes into context. Table SS-1
13 demonstrates that, from the perspective of overall gas
14 cost recovery, gas cost revenues associated with
15 transportation service represent a small fraction of
16 overall gas costs.
Table SS-1 Volumes Gas Cost
Mcf % $ % Sales 18,335,882 44.4 122,842,597 97.8 MMT 8,373,598 20.3 2,177,135 1.7 SATC 2,385,520 5.8 624,529 0.5 DMT 12,197,486 29.5 0 0.0 Total 41,292,486 100.0 125,644,261 100.0
17
18 While one can argue about the allocation of gas
19 costs to transportation services, the overall impact on
20 natural gas energy bills charged by the Company to
21 customers is not likely to be significant (i.e.,
22 overall changes in gas cost allocation, even if capable
-16-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
of being precisely measured, are likely to be around
2% of overall gas cost).
Why is the Company proposing to maintain existing
transportation overdelivery rates?
Transportation overdelivery.rates present a unique
issue associated with transportation services.
Transportation overdeliveries, the rates charged for
those over deliveries, and the costs incurred by the
Company due to those over deliveries cannot be
reconciled in a traditional cost based rate perspective
because transportation over and under delivery rates
are not designed solely to recover specific
identifiable costs incurred by transportation
customers. Instead, the over and under delivery rates
on the Company's system are designed for the additional
purpose of providing an incentive to transportation
customers and their suppliers to deliver sufficient
supplies to meet their customers' daily requirements so
that the reliability of gas supply service of the
overall distribution system is maintained. As
mentioned starting at line 22 of page 11 of PGC Exhibit
No. 24, imbalance rates were not designed to provide
transportation customers with storage service.
Instead, they are designed to provide sufficient
incentive for transportation customers and their
-17-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
natural gas suppliers to remain in balance. Existing
overdelivery rates have been sufficient to provide such
incentive.
Because costs of providing transportation service
cannot be quantified precisely and because they are
designed also to create incentives, reasonable judgment
is required to establish reasonable transportation
rates that are fair to all customers on the system
including sales and transportation customers.
Distribution believes that its proposal for MMT and DMT
rates achieve this objective.
Please describe PGC Exhibit No. 28.
Exhibit No. 28 is the Company's proposed tariff. The
normal rate changes are in Supplement No. 139
associated with changes in gas cost.
Is the Company proposing to make changes in how
pipeline refunds may be passed back to customers?
Yes, the Company is proposing under Rider A changes to
the period in which refunds are passed back. Currently
supplier refunds are refunded in the E-factor. Refunds
and interest will be included in the C-factor of the
first available filing (Annual or Quarterly) after such
refund is received if the amount of the refund is
material, i.e., exceeds $10,000. This represents a
more timely passback of material refunds received. If
-18-
1
2
3
4
5
DIRECT TESTIMONY OF SHEILA SUAREZ
the amount of the refund is immaterial or less than
$10,000, the Company will reflect it in the E-factor in
the next Annual filing because this level of refund
will not significantly affect the C-factor, and this
will reduce administrative burdens on the Company.
6 Q. Is the Company proposing to modify how it calculates
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A.
the rate impact of changes in C-Factor costs included
in its quarterly gas cost filings?
Yes, the Company is proposing to calculate the November
and February quarterly filings using remaining sales
volumes. For the May quarterly filing, the Company will
continue to use the remaining projected volumes from
the February quarterly filing. The Company is
proposing this change to adjust for changes in gas
costs in a more timely fashion and therefore passing
back or collecting costs more closely to the period in
which they occur. This will also mitigate the
over/undercollections of gas cost for the next twelve
month period. The Company will use the remaining
projected volumes from the February filing in the May
filing to mitigate volitity of the rate. Refer to PGC
Exhibit No. 34 for an example of the calculation. The
example provided reflects changes to the Commodity
component, the change would apply to the Demand-NGS and
Demand-De components as well.
-19-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
Please explain PGC Exhibit No. 29.
PGC Exhibit No. 29 provides the calculation of the
weighted average demand cost of upstream capacity and
the demand transfer rate ("DTR") associated with the
SATS rate schedule.
The weighted average demand cost of upstream
capacity provides an alternative to SATS suppliers for
capacity release that would consolidate upstream
transmission capacity that would be priced at the same
effective cost as if the Supplier was allocated a pro
rata share of every segment of transmission capacity
held by the Company.
Please explain the DTR.
The DTR is utilized to recover from NGSs the costs of
capacity incurred by sales customers prior to the
conversion of the sales customer to transportation
service. Under the SATS rate schedule, NGSs receive a
transfer of gas in storage for all customers that
convert to transportation service after the month of
April. The DTR is designed to remove any incentive for
the NGS to convert sales customers after the summer
period to avoid the assignment of upstream capacity
during the summer period when sales volumes are low.
Absent the DTR, NGSs could avoid capacity costs during
the summer period when sales volumes and associated
-20-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
DIRECT TESTIMONY OF SHEILA SUAREZ
revenues are low and only incur such capacity costs by
converting customers after the summer period where
sales volumes and associated revenues are high. The
DTR eliminates any such incentive and protects the
remaining sales customers from paying costs that are
incurred for the benefit of transportation customers.
Please explain PGC Exhibit No. 35.
The Company is proposing a change in the methodology
for calculating its Priority Standby ("PSB") Service
rates and Standby ("SB") Service rates. PGC Exhibit
No. 35 calculates these rates using the new methodology
and proposes to gradually increase the rate by 50% of
the change created by this new calculation.
The new methodology is calculated directly on the
amount of capacity held in reserve in order to meet the
obligations of PSB and SB customers. Since this change
in method will result in a significant increase in the
rates to PSB customers, the Company proposing a more
gradual increase equal to 50% of the difference between
current rates and rates that would be calculated under
the proposed method without mitigation.
The Company has seen a large uptick in the growth
in the number of PSB customers over the last 13 years.
Page 2 of PGC Exhibit No. 35 provides a graph of the
number of PSB customers since February, 1999. The
-21-
1
2
3
4
5 Q.
6 A.
DIRECT TESTIMONY OF SHEILA SUAREZ
Company is concerned that the current PSB rate is
priced below its cost and therefore is not providing
the proper price signal regarding the cost to serve PSB
customers.
Does this complete your testimony?
Yes, at this time.
-22-