official exhibits filed...mar 18, 2010 · petition: johns s. browner, cynthia s. hughes, nichole...
TRANSCRIPT
OFFICIAL EXHIBITS
STATE OF INDIANA
FILED
INDIANA UTILITY REGULATORY COMMISSION
April 17, 2018
INDIANA UTILITY
PETITION OF SYCAMORE GAS COMP ANY FOR APPROVAL TO INCREASE ITS RATES AND CHARGES FOR GAS SERVICE AND FOR AUTHORIZATION TO TRACK ADDITIONS OF CUSTOMER SERVICE LINES
) ) ) ) )
REGULATORY COMMISSION
CAUSE NO. 45072
Sycamore Gas Company, Inc. ("Sycamore Gas"), by counsel, hereby submits the
attached direct testimony and replacement exhibits of its five witnesses in support of this rate
petition: Johns S. Browner, Cynthia S. Hughes, Nichole M. Clement, John T. Stenger and
Michael J. Martin. The same testimony was also filed in this cause on April 12, 2018. And
with a single exception, the attached exhibits are also identical to what Sycamore Gas filed
on April 12, 2018. The sole exception is Exhibit MJM-1. As originally filed, that exhibit
contained two pages. The Exhibit MJM-1 included with today's filing is a single page and
contains data which on the public version has been redacted.
Clayton C. Miller, Att'y No. 17466-49 STOLL KEENON OGDEN PLLC 201 N Illinois Street, Suite 1225 Indianapolis, IN 46204-4219 Telephone: (317) 464-1591 Facsimile: (317) 464-1592 Clayton.Miller@skofirm com
Respectfully submitted,
SYCAMORE GAS COMPANY, INC.
STAIB OF INDIANA
INDIANA UTILITY REGULATORY COMMISSION
PETITION OF SYCAMORE GAS COMPANY FOR APPROVAL TO INCREASE ITS RATES AND CHARGES FOR GAS SERVICE AND FOR AUTHORIZATION TO TRACK ADDITIONS OF CUSTOMER SERVICE LINES
) ) ) ) )
CAUSE NO. 45072
SUBMISSION OF REPLACEMENT CASE-IN-CHIEF
Sycamore Gas Company, Inc. ("Sycamore Gas"), by counsel, hereby submits the
attached direct testimony and replacement exhibits of its five witnesses in support of this rate
petition: Johns S. Browner, Cynthia S. Hughes, Nichole M. Clement, John T. Stenger and
Michael J. Martin. The same testimony was also filed in this cause on April 12, 2018. And
with a single exception, the attached exhibits are also identical to what Sycamore Gas filed
on April 12, 2018. The sole exception is Exhibit MJM-1. As originally filed, that exhibit
contained two pages. The Exhibit MJM-1 included with today's filing is a single page and
contains data which on the public version has been redacted.
Clayton C. Miller, Att'y No. 17466-49 STOLL KEENON OGDEN PLLC 201 N Illinois Street, Suite 1225 Indianapolis, IN 46204-4219 Telephone: (317) 464-1591 Facsimile: (317) 464-1592 Clayton.Miller@skofirm com
Respectfully submitted,
SYCAMORE GAS COMPANY, INC.
CERTIFICATE OF SERVICE
The undersigned certifies that he has served a copy of the attached testimony and
replacement exhibits upon the Office of the Utility Consumer Counselor by electronic mail at:
Dated this 17th day of April 2018.
514652.160046/7684496.1
DIRECT TESTIMONY OF JOHN S. BROWNER
ON BEHALF OF SYCAMORE GAS COMP ANY
IURC CAUSE NO. 45072
1 Ql. Please state your name.
2 Al. John S. Browner
3 Q2. Please state your business address and occupation.
IURC Cause No. 45072 Exhibit JSB Page 1 of7
4 A2. My business address is 370 Industrial Drive, Suite 200, Lawrenceburg, Indiana, 47025. I
5 am the President of the petitioner Sycamore Gas Company ("Sycamore" or "Petitioner").
6 Q3. Please describe your education and work experience.
7 A3. I received a Bachelor of Arts degree in English Literature from Denison University in
8 1992 and a Master of Business Administration degree from Indiana University Kelley School of
9 Business in 2000. I have been the president of Sycamore since August 2004 when, then known
10 as Lawrenceburg Gas Company, it was acquired by INOH Gas Corporation from Cinergy
11 Corporation ("Cinergy"). INOH, of which I am a part owner, subsequently changed its name to
12 Sycamore Gas, Inc. d/b/a Sycamore Energy. From June, 1999 until August, 2002, I worked for
13 Cinergy in various management capacities, most recently as manager in Cinergy's Commercial
14 Business Unit. Prior to my employment with Cinergy I worked for General Electric Capital
15 Service and the Bemis Corporation.
16 Q4. Have you previously testified before the Indiana Utility Regulatory Commission
17 ("IURC")?
IURC Cause No. 45072 Exhibit JSB Page 2 of7
1 A4. My experience testifying before the IURC has been limited to a case in which Sycamore
2 sought to expand its service territory, Cause No. 42819.
3 QS. What is the purpose of your testimony in this rate case?
4 A5. I describe Sycamore's business and explain, together with other witnesses, the need for
5 rate relief. I also describe Sycamore's settlement with the Indiana Office of Utility Consumer
6 Counselor ("OUCC") as to a reasonable rate of return to be incorporated into Sycamore's new
7 rates, and explain various administrative details relating to Sycamore's petition.
8 Q6. What is Sycamore and where is it located?
9 A6. Sycamore is a local gas distribution company organized in the State of Indiana and
10 authorized by the IURC to render such service to the public. Its principal place of business is the
11 same as my business address listed above: 370 Industrial Drive, Suite 200, Lawrenceburg,
12 Indiana, 47025. 2018 marks the 150th anniversary of Sycamore's founding as the Lawrenceburg
13 Gas Company in 1868. Our service territory includes parts of Dearborn, Franklin and Ohio
14 Counties in southeastern Indiana and includes the towns of Brookville, Greendale,
15 Lawrenceburg, Rising Sun and West Harrison.
16 Q7. How many customers does Sycamore serve?
17 A7. Sycamore provides gas service to 5,502 residential customers as well as 868 commercial
18 and 25 industrial customers. Sycamore also provides transportation-only service to 3
19 commercial and 5 industrial customers. Finally, Sycamore provides wholesale gas service to the
20 City of Aurora, Indiana and that municipal utility has approximately 2,500 customers.
21
IURC Cause No. 45072 Exhibit JSB Page 3 of7
1 Q8. Are Sycamore's current rates sufficient for it to recover its costs to provide safe,
2 reliable gas distribution service to its customers and earn a reasonable return on its
3 investment in the plant and equipment used to provide such service?
4 A8. No. Sycamore's current rates were established by the IURC in 2007, some eleven years
5 ago in Cause No. 43090. Over the course of the ensuing years, our costs have increased but our
6 customer base has not grown sufficiently as to provide additional revenue to meet our increased
7 costs. In addition to facing higher employee wage and benefit costs and higher field construction
8 and maintenance costs, Sycamore has also continued to invest in its system at an average rate
9 which exceeds the amount of annual depreciation of that system. I am attaching as Exhibit JSB-
10 I the petition filed to initiate this cause which also generally describes these conditions.
11 Q9. Who are the other witnesses joining you in supporting Sycamore's petition to
12 increase its rates?
13 A9. Sycamore's principle accounting witness is our Chief Financial Officer, Cynthia S.
14 Hughes, who explains in her testimony the current state of Sycamore's finances and why a rate
15 increase is warranted at this time. She includes exhibits covering some of the categories of
16 expenses during the test year for this rate case, the twelve months ending September 30, 2017, as
17 well as necessary adjustments to those figures. She also describes Sycamore's capital structure,
18 rate base valuation and depreciation, as well as tax issues.
19 Sycamore has retained the services of certified public accountant Nichole Clement from the firm
20 Gilmore Jasion Mahler Ltd. to address tax deferral issues in light of the recently-lowered federal
21 income tax rates and also calculate a gross revenue conversion factor to be applied when
22 establishing Sycamore's new rates.
IURC Cause No. 45072 ExhibitJSB Page 4 of7
1 Sycamore's consultant John Stenger from Superior Utility Operations testifies about the extent
2 and condition of Sycamore's utility infrastructure, maintenance and other operational issues, the
3 need for recent as well as proposed infrastructure replacement and expansion projects, ongoing
4 regulatory compliance efforts and how Sycamore's previously-approved weather normalization
5 adjustment operates, among other subjects.
6 Sycamore has also retained the services of Michael J. Martin to explain adjustments to
7 Sycamore's test year income and expenses, how Sycamore's costs are allocated and translate the
8 details of Sycamore's current operations into a new revenue requirement and ultimately, new
9 rates.
10 QlO. Is Sycamore sponsoring testimony from a cost-of-capital expert?
11 Al 0. No. Prior to filing its petition, Sycamore reached an agreement with the OUCC to settle
12 the issue of what rate of return is reasonable for purposes of calculating the cost of capital
13 component of Sycamore's base rates. Exhibit JSB-2 to my testimony is a signed agreement
14 reflecting the parties' compromise proposal to accept 10.05% as the rate of return on Sycamore's
15 common equity capital. Not only does this settlement remove from this cause at the outset any
16 dispute over this often-contested aspect of rate case litigation, but doing so is also expected to
17 lower Sycamore's rate case expense as compared to if it had pursued a contested course of action
18 as to this issue. The decision to settle on 10.05% was informed by the parties' understanding of
19 recent IURC orders in other small gas utilities' rate cases setting the rate ofreturn on common
20 equity at either 10.1 % or 10.0%. While each utility has its own unique characteristics and
21 circumstances, and Sycamore feels it would be justified in seeking a higher rate ofreturn, the
22 parties agreed to compromise and, at least for purposes of settlement, that Sycamore shares
IURC Cause No. 45072 Exhibit JSB Page 5 of7
1 sufficiently common size and risk attributes with Midwest Natural Gas (10.1 % ) and Ohio Valley
2 Gas (settled for 10.0%) as to justify a finding of I 0.05% for Sycamore in this case.
3 Qll. From where does Sycamore get the gas that it sells to its customers?
4 A 11. Sycamore has gas supply contracts with producers providing gas via one of the two
5 interstate gas pipelines to which Sycamore is connected, Texas Gas Transmission and Texas
6 Eastern Transmission.
7 Q12. Do Sycamore's current or proposed base rates include recovery of any portion of
8 the cost of the gas it sells to its customers?
9 Al2. No. Sycamore utilizes the quarterly gas cost adjustment (GCA) mechanism to determine
10 an appropriate rate factor designed for it to recover 100% of the cost of the gas commodity.
11 Q13. What do Sycamore's quarterly GCA filings suggest about its need for rate relief?
12 Al3. The evidence in each quarterly GCA filing includes an exhibit showing quarterly totals
13 for a statutorily-prescribed earnings bank. While these filings take a much less comprehensive
14 view of the utility's financial position than a general rate case, they nevertheless provide a
15 barometer as to whether it appears to be over-earning or under-earning based on the amount of
16 earnings approved by the IURC in the utility's most recent general rate case. As shown in
17 Sycamore's most recent GCA filing, IURC Cause No. 37368 GCA-138, in only two of the last
18 34 quarters has Sycamore shown positive earnings. Over the more than a decade since its last
19 rate order, Sycamore's accumulated under-earnings exceed $7 million, which is a significant sum
20 for a utility of Sycamore's relatively small size. Exhibit JSB-3 is an excerpt from Schedule 18
21 (page 2of2) filed in the above-referenced GCA proceeding.
IURC Cause No. 45072 Exhibit JSB Page 6 of7
1 Q14. Does Sycamore provide gas to any customers pursuant to a special, off-tariff
2 contract?
3 Al4. Yes. In Cause No. 44193 the IURC approved Sycamore's only active special contract
4 pursuant to which it supplies gas to MGPI of Indiana, LLC at its manufacturing facility in
5 Lawrenceburg, IN. That contract was executed in March of2012 and has a term of 10 years.
6 Ql5. Does Sycamore own and maintain the portion of the customer service line between
7 the property line and Sycamore's meter?
8 Al 5. Historically, Sycamore's customers have owned, and been responsible for maintaining or
9 replacing, the gas service line on their property from the curb valve, or at the curb or apparent
10 curb when the shut off valve is not located near the curb, to Sycamore's meter. Over the past
11 several years, however, as issues have arisen requiring the repair or replacement of the customer-
12 owned portion of the service line, Sycamore's contractor, after coordinating with the customer,
13 has performed the necessary work. Most if not all of Sycamore's gas meters are located at the
14 structure receiving the gas service. As explained more fully in Mr. Stenger's testimony,
15 Sycamore is seeking in this rate case approval for a process to track the costs associated with
16 both the work required to address issues with the service line, but also for Sycamore to acquire
17 and accept responsibility for the customer-owned portion of the service line.
18 Ql6. What was Sycamore's rationale for moving its headquarters to a new location in
19 2017?
20 Al 6. Sycamore outgrew its previous facilities. Our new location provides adequate, secure
21 yard and covered storage for our equipment and material. Sycamore's move to the new location
IURC Cause No. 45072 Exhibit JSB Page 7 of7
1 has allowed it to better organize its field operations, to better maintain its materials inventory,
2 and to improve its recordkeeping operations. The new office is better designed than Sycamore's
3 former location to support communications between customer service staff and field operations.
4 It also provides for a more efficient experience for our walk-in- customers. Finally, the former
5 facility had no garage. The new location has garage space, allowing Sycamore to store
6 equipment inside during extreme weather, thereby enhancing its readiness for emergency
7 response.
8 Ql 7. Has Sycamore's Board of Directors authorized you to pursue this petition for rate
9 relief?
10 Al 7. Yes. Attached as Exhibit JSB-4 to my testimony is a copy of the resolution authorizing
11 this petition that was adopted by Sycamore's Board of Directors on March 20, 2018.
12 Q18. Has Sycamore notified its customers that it has filed this petition for rate relief?
13 A18. Notice to Sycamore's residential customers of its petition to increase its base rates has not
14 been sent by the time this testimony was prefiled, but Sycamore intends to comply with this
15 Commission's customer notice requirements set forth in 170 Ind. Admin. Code 5-1-18. I expect
16 to include a copy of that notice, in the form of a bill insert, as Exhibit JSB-5 to my testimony
17 when it is offered into the record at the evidentiary hearing in this cause, and I intend to pre-file
18 that Exhibit within a week of its mailing to customers.
19 Q19. Does this conclude your direct testimony?
20 Al9. Yes.
Exhibit JSB-1
FILED STATE OF INDIANA MAR 2 9 znw
INDIANA UTILITY REGULATORY COMMISSION !Mi"'iANA UflUfY f-{~GULATORV COMMISSION
PETITION OF SYCAMORE GAS COMPANY ) FOR APPROVAL TO INCREASE ITS RATES ) AND CHARGES FOR GAS SERVICE AND FOR ) AUTHORIZATION TO TRACK ADDITIONS OF) CUSTOMER SERVICE LINES )
PETITION
CAUSE NO. Lf5Q]:_L_
Sycamore Gas Company, Inc. ("Sycamore Gas" or "Company"), hereby applies to the
Indiana Utility Regulatory Commission for authority to a) increase its rates and charges, and b)
track and recover its costs to replace as needed and then maintain the portion of its customers'
service lines between the curb and the Company's gas meter. In support of its application,
Sycamore Gas states that:
1. The Company is an Indiana public utility corporation having its principal office at
3 70 Industrial Drive, Suite 200, Lawrenceburg, Indiana, 47025. It is a "public utility" as well as a
"gas utility" as those terms are defined in the Public Service Commission Act, Ind. Code 8-1-2.
The Company is a wholly-owned subsidiary of Sycamore Gas, Inc. d/b/a Sycamore Energy.
2. Sycamore Gas provides gas utility service pursuant to Necessity Certificates to
parts of Dearborn, Franklin and Ohio Counties in southeastern Indiana. In addition to serving
rural areas in these counties, the Company provides gas utility service within the towns of
Brookville, Greendale, Lawrenceburg, Rising Sun and West Harrison. The Company also
provides gas on a wholesale basis to the Town of Aurora.
3. The Company's current base rates and charges were determined by order of this
Commission in Cause No. 43090 on June 20, 2007. These rates and charges no longer produce
revenue sufficient to meet the Company's ongoing financial obligations associated with its
continued provision of safe, reliable gas service to its customers. The Company believes that
Indiana Code §8-1-2-61 is applicable to this matter.
4. The Company requests that the twelve-month period ending September 30, 2017,
be used as the test year in this cause, with adjustments permitted for changes that are known,
fixed and measurable and in effect within 12 months after the end of the test year. The Company
is in the process of determining its revenue requirement and the amount by which its rates need
to be increased in order to enable it to achieve that requirement. The Company is also studying
the appropriate allocation of revenue to be obtained from among its different classes of
customers.
5. Sycamore Gas also seeks authorization to implement a tracking mechanism, and
approval of an associated tariff, to recover the additional expenses associated with its
replacement and maintenance of the curb-to-meter portion of customers' service lines.
6. The name and address of the Company's attorney in this matter is Clayton C.
Miller, of Stoll Keenan Ogden PLLC, 201 N. Illinois Street, Suite 1225, Indianapolis, Indiana
46204-4219. Mr. Miller is duly authorized to accept service of papers in this cause on behalf of
Sycamore Gas.
7. The Company requests that copies of all correspondence and filings in this cause
also be sent to:
John S. Browner Sycamore Gas Company, Inc. 370 Industrial Drive, Suite 200 Lawrenceburg, Indiana 47025
WHEREFORE, Sycamore Gas respectfully requests that the Commission hold a hearing
and enter an Order approving an increase is the Company's rates and charges and authorizing a
mechanism for the Company to track and recover on an annual basis its additional costs
2
associated with its anticipated acquisition and maintenance or replacement of that portion of its
customers' service lines between Sycamore Gas' main and the gas meter.
Clayton C. Miller, Att'y No. 17466-49 STOLL KEENON OGDEN PLLC 201 N. Illinois Street, Suite 1225 Indianapolis, IN 46204-4219 Telephone: (317) 464-15 91 Facsimile: (317)464-1592 Clayton. Miller@sko firm. com
Respectfully submitted,
SYCAMORE GAS COMPANY, lNC.
By:
CERTIFICATE OF SERVICE
The undersigned certifies that he has served a copy of the foregoing Petition upon the
following entity by hand delivery this 29th day of March 2018.
Office of the Utility Consumer Counselor Indiana Govermnent Center North 100 North Senate Avenue, Room N501 Indianapolis, Indiana 46204-2215
514652.45644617663482.1
3
STA TE OF INDIANA
INDIANA UTILITY REGULATORY COMMISSION
PETITION OF SYCAMORE GAS COMPANY FOR APPROVAL TO INCREASE ITS RA TES ) AND CHARGES FOR GAS SERVICE AND FOR) AUTHORIZATION TO TRACK ADDITIONS OF) CUSTOMER SERVICE LINES )
CAUSE NO. 45072
STIPULATION AND SETTLEMENT AS TO PETITIONER'S COST OF EQUITY CAPITAL
Exhibit JSB-2
This stipulation and settlement agreement ("Settlement Agreement") is entered into by
the Indiana Office of Utility Consumer Counselor ("OUCC") and the petitioner in this cause,
Sycamore Gas Company, Inc. ("Sycamore"). Each is considered to be a "Party" to this cause
and Sycamore and the OUCC are collectively referred to herein as the "Parties."
To promote efficiency and economy, the Parties stipulate and agree 10.05% will be
Sycamore's cost of shareholders' equity capital rate. This figure will be used in this cause to
determine the overall rate of return to which Sycamore is entitled and on which its new base
rates will be based. The Parties agree 10.05% cost of equity rate is consistent with orders from
the Indiana Utility Regulatory Commission ("Commission" or "IURC") in other relatively small
gas utilities' rate cases during the last half of 2017. See, for example, this Commission's rate
orders for Midwest Natural Gas (IURC Cause No. 44880, order of August 16, 2017 setting rate
at 10.10%) and Ohio Valley Gas (IURC Cause No. 44891, order of October 17, 2017 accepting
settled rate of 10.00%).
The Parties anticipate engaging in further settlement negotiations concerning the many
other issues in this case. They have entered into this Settlement Agreement in order to obviate
any need for Sycamore to retain the services of a cost-of-equity expert witness to develop and
present testimony in this cause. Given that rate case expenses are recoverable from a utility's
customers, by reaching agreement on this issue at the outset of Sycamore's rate case the Parties
are saving customers' money with respect to this cost.
This Settlement Agreement reflects each Party's compromise as its preferred resolution;
Sycamore wanted a higher cost-of-equity and the OUCC wanted a lower number than 10.05%.
But each agrees that in the specific circumstances of this case, and solely for purposes of
settlement, 10.05% is not only within the range ofreasonable outcomes available to this
Commission, but is the appropriate rate to be incorporated into the calculation of Sycamore's
new base rates in this case. The Parties anticipate that their respective cases-in-chief will further
support their settlement of this term. The Parties agree this Settlement Agreement is conditioned
upon and subject to the Commission's acceptance and approval of the 10.05% cost of equity
capital rate as specified herein without condition that is unacceptable to either Party. This
stipulation is reached for purposes of the immediate proceeding only, and neither Party will
recommend this Settlement Agreement as precedent by the Commission in any other proceeding.
The undersigned represent and agree that each is fully authorized to execute this
Settlement Agreement on behalf of the designated Party, which will be bound thereby.
ACCEPTED AND AGREED this 6th day of April, 2018.
SYCAMORE GAS COMPANY, INC.
2
INDIANA OFFICE OF UTILITY
CONSUMER COUNSELOR
Exhibit JSB-3
Schedule 18 Page 2 of2
SYCAMORE GAS C01'rf PANY
Operating Income Earnings Test For Period Ended December 31, 2017
Line GCA Determined Authorized No. GCA Period Ended No. Return Return Differential
(A) (B) (C) (D) (E)
December, 2017 138 1,010,929 1,345.858 (334,929)
2 September, 2017 137 970,923 1.345,858 (374.935)
3 June, 2017 136 965,870 1,345,858 (379,988) 4 March, 2017 135 L032,655 1,345,858 (313,203)
5 December, 2016 134 989,539 1,345,858 (356,319)
6 September, 2016 133 1,072,238 1,345,858 (273,620)
7 June,2016 132 1,030,966 1,345,858 (314,892)
8 March,2016 131 785.316 1,345,858 (560,542)
9 December. 2015 130 842, 119 1,345,858 (503,739)
10 September, 2015 129 1,003,590 1,345,858 (342,268)
11 June, 2015 128 968,336 1,345.858 (377,522)
12 March,2015 127 1.026,412 1,345,858 (319,446)
13 December, 2014 126 1,225.065 1.345.858 (120,793)
14 September, 2014 125 1,144.010 1,345,858 (201,848)
15 June, 2014 124 1,267,581 1,345,858 (78.277)
16 March,2014 123 1,306,770 1,345,858 (39,088)
17 December, 2013 122 1.147,677 J .345.858 (198,181)
18 September. 2013 121 1.110.668 1.345,858 (235, 190)
19 June, 2013 120 978,744 1,345,858 (367,114)
20 March, 2013 119 1,262,912 L345,858 (82,946)
21 December, 2012 118 1,288,935 1,345,858 (56,923)
22 September, 2012 117 1.219.467 1,345,858 (126,391)
23 June, 2012 116 1,294,299 1,345,858 (51,559)
24 March, 2012 115 1,360,560 l,345.858 14,702
25 December. 2011 114 1,237.427 1.345,858 (I 08.431)
26 September, 20 I l 113 1,285,342 1.345.858 (60,516)
27 June, 2011 112 IJ20,337 1,345.858 (25,521)
28 iv!arch, 2011 111 1,130,519 l,345,858 (215,339)
29 December, 2010 110 1,381,593 1,345,858 35,735
30 September, 2010 109 1,270,130 1,345,858 (75,728)
31 June, 2010 108 1,010,566 1.345.858 (335,292)
32 March, 2010 107 902,568 1,345,858 (443,290)
33 December, 2009 106 748,826 l.345,858 (597,032)
34 September, 2009 105 924,747 1,345,858 (421,111)
35 June, 2009 104 1,355.413 l,345.858 9,555
36 March, 2009 103 1,769.531 1,345,858 423,673
37 December, 2008 102 1,746,543 1,345,858 400,685
38 September, 2008 101 1,769.080 1.345,858 423,222
39 June, 2008 100 1,878,074 1,345,858 532,216
40 March, 2008 99 1,435.855 1,345,858 89,997
41 December, 2007 98 1.023,562 1,345,858 (322,296)
42 September, 2007 97 936,127 l,345.858 (409,73 l)
Total _flj)94.2 l 5)
DIRECT TESTIMONY OF CYNTHIA S. HUGHES
IURC Cause No. 45072
Exhibit CSH Page 1of4
ON BEHALF OF SYCAMORE GAS COMPANY, INC.
IURC CAUSE NO. 45072
1 Ql. Please state your name.
2 Al. Cynthia S. Hughes
3 Q2. Please state your business address and occupation.
4 A2. My business address is 370 Industrial Rd., Suite 200, Lawrenceburg, Indiana 47025. I
5 am the Chief Financial Officer (CFO) for Sycamore Gas Company, Inc. ("Sycamore" or
6 "Petitioner").
7 Q3. Please describe your education and work experience.
8 A3. I received a Bachelor of Science degree in industrial management from Purdue
9 University 1975 and a Master of Business Administration degree from the University of Chicago
10 in 1983. I am a certified public accountant in the State of Illinois. I have been Sycamore's CFO
11 since May, 2015. Prior to that I was a CFO for private and public companies in the
12 manufacturing and distribution industries.
13 Q4. Have you previously testified before the Indiana Utility Regulatory Commission
14 ("IURC")?
15 A4. Yes, I regularly file testimony in support of Sycamore's quarterly gas cost adjustment
16 petitions in the GCA subdockets ofIURC Cause No. 37368.
1 QS. What is the purpose of your testimony in this rate case?
IURC Cause No. 45072
Exhibit CSH Page 2 of 4
2 A5. As Sycamore's CFO, I am familiar with the company's financial records. I am
3 sponsoring financial exhibits, including the Petitioner's income statement and balance sheet as
4 well as schedules showing its rate base, amortization and cost of capital calculations. I also
5 support various adjustments made to the Petitioner's test year operating expenses to derive pro
6 forma operating expenses and, ultimately, the revenue required for Sycamore to be able to
7 continue providing safe and reliable utility service and earn a fair return on its investments which
8 enable it to provide such service.
9 Q6. Please describe Exhibit CSH-1.
10 A6. Exhibit CSH-1 is the Petitioner's Balance Sheet. Sycamore is proposing a cut-off date of
11 March 31, 2018 for determining the fair value of its rate base, which I determined based on the
12 depreciated original cost of those assets.
13 Q7. Please describe Exhibits CSH-2 and CH-3.
14 A7. Exhibit CSH-2 is the Petitioner's Income Statement as of the end of the test year utilized
15 in this case, the twelve months ending September 30, 2017. I then incorporated the adjustments
16 developed by Sycamore witness Michael Martin shown in his Exhibit MJM-2 to develop my
17 Exhibit CSH-3, Sycamore's Adjusted Income Statement reflecting adjustments for fixed, known
18 and measurable changes during the twelve-month period October 1, 2017 through September 30,
19 2018. The unadjusted Income Statement includes a more detailed version on pages 2 and 3 of
20 Exhibit CSH-2 organized by FERC account, and it is the Adjusted Income Statement which
21 shows the revenue requirement Sycamore is requesting in this case.
1 Q8. Please describe Exhibit CSH-4.
IURC Cause No. 45072 , Exhibit CSH Page 3 of 4
2 A8. Exhibit CSH-4 I show amounts added to Sycamore's test year depreciation expense. I
3 made two adjustments to the test year figure. The first adjustment is to reflect the difference
4 between the depreciation expense included in the test year on plant that had been added during
5 the test year, and the annual depreciation on such plant. The second adjustment adds the
6 annualized depreciation on plant added between the end of the test year and the cutoff date for
7 Sycamore's rate base.
8 Q9. Please describe Exhibit CSH-5.
9 A9. My Exhibits CSH-5 and CSH-6 show the basis for Sycamore's adjustment to its test year
10 income tax expenses for Indiana. Taxable income is computed by adding the utily receipts tax
11 and deducting interest expense from Total Operating Revenue less Operating Expenses before
12 Income Tax. I used an income tax rate of 5.75% to determine the state income tax, which is
13 subtracted from the tax expense per the books for the proforma adjustment.
14 QlO. Please describe Exhibit CSH-6.
15 Al 0. Exhibit CSH-6 calculates the federal income tax on the adjustments. Taxable income is
16 calculated by subtracting Operating Expenses before Income Tax, Indiana income tax and
17 interest expense from Total Operating Revenue. Income tax expense is reduced by $297,538.
18 Qll. What is Sycamore's cost of capital?
19 Al 1. Exhibit CSH-7 presents Sycamore's Cost of Capital as of the date of the rate base cutoff
20 in this case, March 31, 2018. As described in Sycamore witness John Browner's direct
21 testimony, Sycamore has reached an agreement with the Indiana Office of Utility Consumer
IURC Cause No. 45072
Exhibit CSH Page 4 of 4
1 Counselor (OUCC) that, for purposes of this rate case, Sycamore's cost of equity capital is
2 10.05%. Neither Sycamore nor its parent company, Sycamore Gas Corporation d/b/a Sycamore
3 Energy, has any long-term debt as of March 31, 2018. The other two components of Sycamore's
4 capital structure are customer deposits, with a cost of 6% based on the Commission's rule for
5 such deposits, 170 IAC 5-1-15(±)(1), and the balance of deferred income taxes. For Sycamore's
6 deferred income taxes, the balance shown on Exhibit CSH-7 reflects the reduction resulting from
7 lower federal income tax rates that went into effect on January 1, 2018, as calculated by
8 Sycamore witness Nichole Clement.
9 Q12. Have you calculated how much additional revenue Sycamore requires?
10 A12. Yes. Sycamore's rate base is $16,115,658. When multiplied by the 8.91 % proposed~rate
11 of return, that yields $1,962,411 after grossing up for taxes. This will require an additional
12 $773,651 above operating revenue at current rates. Exhibit CSH-8 shows that this additional
13 non-gas revenue required represents an increase of 65% over the adjusted operating revenue at
14 current rates.
15 Q13. Have you prepared a proposed statement of income?
16 A13. Yes. Exhibit CSH-9 calculates the adjustments for the needed additional revenue using
17 the effective rates from Nichole Clement's Exhibit NMC-2 Gross Revenue Conversion Factor.
18 The additional revenue and operating expenses are combined with the Adjusted Income
19 Statement, Exhibit CSH-3, for the Proposed Statement oflncome, Exhibit CSH-10.
20 Q14. Does this conclude your direct testimony?
21 A14. Yes.
SYCAMORE GAS COMPANY INC.
Balance Sheet for the Twelve Months Ended March 31, 2018
ASSETS
UTILITY PLANT Utility Plant in Service $ 31,105,858 Less Accumulated Depreciation $ (15,598,077l Net Utility Plant in Service 15,507,781
Construction Work in Progress 365 Total Utility Plant 15,508,146
OTHER INVESTMENTS lntercompany Receivable 13,817,087
CURRENT ASSETS Accounts Receivable (3,393,425) Materials and Supplies 278,304 Prepaid Expenses 322,508 Recoverable Gas Costs 227,740 Deferred Income Tax 20,250 Total Current Assets (2,544,623)1
TOTAL ASSETS $ 26,780,609
SH ARE H 0 L DER S' EQUITY AND LI ABILITIES
SHAREHOLDERS' EQUITY Retained Earnings Total Shareholders' Equity
CURRENT LIABILITIES Accounts Payable Bank Overdraft Other Accrued Liabilities and Expenses Customer Deposits Income Taxes Payable Current Portion of Long Term Debt Total Current Liabilities
LONG TERM LIABILITIES Long Term Debt Regulatory Liability Deferred Income Tax Total Long Term Liabilities Less: current portion of long term debt Net long term liabilities
TOTAL LIABILITIES
$ 24,563,469 24,563,469
(3,175,554) 141,660 808,921 217,690
(351,963)
(2,359,247)
1,512,701 3,063,687 4,576,387
4,576,387
2,217,141
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES $ 26,780,609 ======
IURC Cause No. 45072 Exhibit CSH-1
SYCAMORE GAS COMPANY INC. Income Statement
for the Twelve Months Ended September 30, 2017
OPERATING REVENUE Gas Sales Service Revenue $ 7,553,912 Transportation Revenue 813,749 Other Operating Revenue 97,564 Total Operating Revenue 8,465,225
OPERATING EXPENSES Natural Gas Purchases 3,560,327 Operations and Maintenance 985,623 Administration 1,207,755 Bad Debt Expense (176) Depreciation 901,745 Taxes - Other Than Income Taxes 240,052 Federal Income Taxes 497,590 Indiana Income Taxes 101,386 Total Operating Expenses 7,494,302
OPERATING INCOME 970,923
NON-OPERATING EXPENSE Interest Expense 11,959 Total Non Operating Expense 11,959
NET INCOME $ 958,964
IURC Cause No. 45072 Exhibit CSH-2
1 of 3
SYCAMORE GAS COMP ANY INC. Income Statement
for the Twelve Months Ended September 30, 2017
OPERATING REVENUE Gas Residential Sales NTARevenue Commercial Gas Sales Sales for Resale Industrial Gas Sales IT Sales Revenue Total Gas Revenue
Transportation Revenue Residendial Penalty Revenue Miscellaneous Revenue Total Miscellaneout Revenue
Total Operating Revenue
PURCHASED GAS 804 Purchased Gas 805 Amortization of Variances
Total Purchased Gas
DISTRIBUTION 872 Compressor Station Labor 874 Main and Services Expenses 875 Measuring and Regulating Equipment 87 6 Measuring and Regulating - Station City Gate 877 Measuring and Regulating - Industrial 880 Other Expense
Total Distribution Operating Expense
887 Maintenance of Mains 889 Maintenance Measuring and Regulating Equipment 890 Maintenance Measuring and Regulating Equipment-Industrial 892 Maintenance Services 893 Maintenance Meters and Regulators 894 Maintenance Other Equipment
Total Distribution Maintenance Expense
Total Distribution Expense
$ 3,720,342 307,438
1,937,631 1,018,969
511,138 324,318
7,819,838
547,823 48,123 49,441
645,387
8,465,225
3,441,312 119,015
3,560,327
60 456,758
73,011 17,674 2,098
99,264 648,865
7,078 19,988 22,469
102,158 11,627 12,046
175,367
824,231
IURC Cause No. 45072 Exhibit CSH-2
2 of3
SYCAMORE GAS COMP ANY INC. Income Statement
for the Twelve Months Ended September 30, 2017
CUSTOMER ACCOUNTING 902 Meter Reading Expense 903 Billing and Collection Expense 904 Uncollectible Accounts 905 NIA Rebates 908 Customer Assistance Expense 909 Informational Advertising Expense
Total Customer Accounting Expense
ADMINISTRATIVE AND GENERAL 920 Administrative and General Salaries 921 Office Expenses 923 Outside Services 924 Property Insurance Expense 926 Employee Benefits 928 Regulatory Commission Expense 930 Miscellaneous General Expense 931 Rents 932 Travel and Entertainment 935 Maintenance General Plant
Total Administrative and General
Total Operation and Maintenance Expense
403 DEPRECIATION EXPENSE
408 TAXES - GENERAL 408. l Taxes Other Thank Income Taxes 408.2 Real Estate Tax 408.3 Utility Receipts Tax
Total Taxes - General
409 TAXES -INCOME 409.1 Federal Income Taxes, Utility Operations 409 .1 Indiana Income Taxes, Utility Operations
Total Taxes - Income
INTEREST EXPENSE 424.0 Interest Expense - Customer Deposits 424.1 Interest Expense - Other
Total Interest Expense
NET INCOME
128,831 44,221
(176) 19,650 14,717 6,251
213,494
464,846 184,880 125,064 215,145
51,466 8,941
13,469 57,339
1,766 32,561
1,155,476
5,753,528
901,745
68,245 105,440 66,367
240,052
497,590 101,386 598,976
8,515 3,444
11,959
$ 958,964
IURC Cause No. 45072 Exhibit CSH-2
3 of3
SYCAMORE GAS COMPANY INC. Adjusted Income Statement
for the Twelve Months Ended March 31, 2018
Per Books OPERATING REVENUE 09/30/17 Adjustments
Gas Sales Service Revenue $ 7,553,912 $ (3,634, 156) Transportation Revenue 813,749 (901) Other Operating Revenue 97,564 Total Operating Revenue 8,465,225 (3,635,057)
OPERA TING EXPENSES Natural Gas Purchases 3,560,327 (3,546,386) Operations and Maintenance 985,623 221,642 Administration 1,207,755 233,310 Bad Debt Expense (176) 7,213 Depreciation 901,745 39,019 Taxes - Other Than Income Taxes 240,052 (46,715) Amortization of Regulatory Liability (105,537) Federal Income Taxes 497,590 (297,538) Indiana Income Taxes 101,386 {39,2132 Total Operating Expenses 7,494,302 (3,534,206)
OPERATING INCOME 970,923 (100,851)
NON-OPERATING EXPENSE Interest Expense 11,959 Total Non Operating Expense 11,959
NET INCOME $ 958,964 $ {100,8512
$
$
Adjusted at 03/31/18
3,919,756 812,848 97,564
4,830,168
13,941 1,207,265 1,441,065
7,037 940,764 193,337
(105,537) 200,052
62,173 3,960,096
870,072
11,959 11,959
858,113
Cause No. 45072 Exhibit CSH-3
SYCAMORE GAS COMP ANY INC. Depreciation Adjustments
for the Twelve Months Ended March 31, 2018
Additional depreciation to annualize depreciation for
assets placed in service in the test year.
Annualized depreciation for assets placed in
service October 1, 2017 to March 31, 2018.
Total Depreciation Adjustments
$ 29,544
9,475
$ 39,019
Cause No. 45072 Exhibit CSH-4
SYCAMORE GAS COMP ANY INC.
Adjustment to Indiana Income Tax Expense
OPERATING REVENUE
Gas Sales Service Revenue Transportation Revenue Other Operating Revenue Total Operating Revenue
OPERATING EXPENSES Natural Gas Purchases Operations and Maintenance Administration Bad Debt Expense Depreciation Taxes - Other Than Income Taxes Operating Expenses before Income Tax
Add Utility Receipts Tax
Less Interest Expense
Taxable Income Tax Rate Indiana Income Tax
Per Books 09/30/17
$ 7,553,912 813,749
97,564 8,465,225
3,560,327 985,623
1,207,755 (176)
901,745 240,052
6,895,326
Less tax expense per books for year ended 9/30/17 Proforma adjustment to Indiana Income Tax
Adjustments
$ (3,634, 156) (901)
(3,635,057)
(3,546,386) 221,642 233,310
7,213 39,019
(46,715) (3,091,917)
IURC Cause No. 45072 Exhibit CSH-5
Adjusted at 09/30/17
$ 3,919,756 812,848 97,564
4,830,168
13,941 1,207,265 1,441,065
7,037 940,764 193,337
3,803,409
66,461
11,959
1,081,261 5.75%
62,173 101,386
$ (39,213)
SYCAMORE GAS COMPANY INC.
Adjustment to Federal Income Tax Expense
Per Books OPERATING REVENUE 09/30/I 7
Gas Sales Service Revenue Transportation Revenue Other Operating Revenue Total Operating Revenue
$7,553,912
OPERA TING EXPENSES Natural Gas Purchases Operations and Maintenance Administration Bad Debt Expense Depreciation Taxes - Other Than Income Taxes Operating Expenses before Income Tax
Less Indiana Income Tax
Less Interest Expense
Taxable Income Tax Rate Federal Income Tax Less FIT per books for year ended 9/30/17 Proforma adjustment to Federal Income Tax
813,749 97,564
8,465,225
3,560,327 985,623
1,207,755 (176)
901,745 240,052
6,895,326
Adjustments
$(3,634,156) (901)
(3,635,057)
(3 ,546,3 86) 221,642 233,310
7,213 39,019
(46,715) (3,091,917)
Adjusted at 09/30/17
$ 3,919,756 812,848 97,564
4,830,168
13,941 1,207,265 1,441,065
7,037 940,764 193,337
3,803,409
62,173
11,959
952,627 21%
200,052 497,590
(297,538)
IURC Cause No. 45072 Exhibit CSH-6
Component
Common Equity
Customer Deposits
Long Term Debt
Deferred Income Tax
Total
SYCAMORE GAS COMP ANY INC.
Amount
$ 24,563,469
217,690
3,063,686
$ 27,844,844
Cost of Capital at March 31, 2018
Percent of Total - %
88.22%
0.78%
0.00%
11.00%
100.00%
Cost-%
10.05%
6.00%
0.00%
0.00%
IURC Cause No. 45072 Exhibit CSH-7
Weighted Cost-%
8.87%
0.05%
0.00%
0.00%
8.91%
IURC Cause No. 45072 Exhibit CSH-8
SYCAMORE GAS COMP ANY INC.
Total Rate Base
Proposed Rate of Return Proposed Operating Income
Revenue Requirement at March 31, 2018
Proposed Utility Operating Income
Adjusted Utility Operating Income Additional Utility Operating Income Required Revenue Conversion Factor Additional Revenue Required
Operating Income adjusted for Revenue Conversion Factor: Proposed Utility Operating Revenue Adjusted Utility Operating Revenue at Current Rates Additional Utility Operating Revenue Required
Non Gas Revenue Increase: Percent increase of additional revenue over current rate revenue
$ 16,115,658
8.91% $ 1,436,319
$ 1,436,319
870,072 566,247
1.366279 $ 773,651
$ 1,962,411 1,188,760
$ 773,651
65%
'
IURC Cause No. 45072 Exhibit CSH-9
SYCAMORE GAS COMP ANY INC. Calculation of Adjustments Due to Proposed Additional Revenue
Uncollectible Accounts Expense: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Uncollectible Expense
Public Utility Fee: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Public Utility Fee
Utility Receipts Tax: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Utility Receipts Tax
Indiana Income Tax: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Indiana Income Tax
Federal Income Tax: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Federal Income Tax
773,651 0.083128%
643
773,651 0.132976%
1,029
773,651 1.398836%
10,822
773,651 5.737574%
44,389
773,651 19.455972%
150,521
IURC Cause No. 45072 Exhibit CSH-10
SYCAMORE GAS COMP ANY INC. Proposed Statement of Income
for the Twelve Months Ended March 31, 2018
Adjusted Proposed Proposed OPERATING REVENUE 09/30/17 Rate Effect 09/30/17
Gas Sales Service Revenue $ 3,919,756 $ 773,651 $ 4,693,407 Transportation Revenue 812,848 812,848 Other Operating Revenue 97,564 97,564 Total Operating Revenue 4,830,168 773,651 5,603,819
OPERATING EXPENSES Natural Gas Purchases 13,941 13,941 Operations and Maintenance 1,207,265 1,207,265 Administration 1,441,065 1,441,065 Bad Debt Expense 7,037 643 7,680 Depreciation 940,764 940,764 Taxes - Other Than Income Taxes 193,337 11,851 205, 188 Amortization of Regulatory Liability (105,537) (105,537) Federal Income Taxes 200,052 150,521 350,573 Indiana Income Taxes 62,173 44,389 106,561 Total Operating Expenses 3,960,096 207,404 4,167,500
OPERATING INCOME 870,072 566,247 1,436,319
NON-OPERATING EXPENSE Interest Expense 11,959 11,959 Total Non Operating Expense 11,959 11,959
NET INCOME $ 858,113 $ 566,247 $ 1,424,360
IURC Cause No. 45072 ExhibitNMC
Page I of 4
DIRECT TESTIMONY OF NICHOLE M. CLEMENT
IURC Cause No. 45072
1 Ql. Please state your name, address and occupation.
2 Al. My name is Nichole M. Clement. I am a partner with the public accounting firm Gilmore
3 JasionMahler, LTD. My business address is 551 Lake Cascades Pkwy., Findlay, OH
4 45839-1106.
5
6 Q2. Please state your educational background and professional qualifications and
7 memberships.
8 A2. I received my bachelor of science degree in Business Administration with a specialization
9 in accounting from Bowling Green State University in 1994. I am a certified public
10 accountant and a member of the Ohio Society of Certified Public Accountants, the
11 American Institute of Certified Public Accountants, the Ohio Gas Association, the Ohio
12 Telecom Association and the Ohio Rural Broadband Association.
13
14 Q3. Have you previously testified before the Indiana Utility Regulatory Commission
15 (IURC)?
16 A3. No.
17
18 Q4. What is the purpose of your testimony in this proceeding?
19 A4. I was retained by the petitioner, Sycamore Gas Company, Inc. ("Sycamore") to assist
20 with determining the impact ofrecently lowered federal income tax rates on Sycamore's
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22 A6.
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IURC Cause No. 45072 ExhibitNMC
Page 2 of 4
deferred taxes. In December 2017, the U.S. Congress passed the Tax Cut and Jobs Act
(TCJA) which lowered the federal corporate income tax rate from 34% to 21 % beginning
January 1, 2018. Sycamore has deferred tax liability that is the result of tax depreciation
being greater than book depreciation during the early years of the life of most of its
assets. I calculated Sycamore's deferred tax liability as of September 30, 2017, which
was the end of the twelve-month test year it is utilizing in this rate case, using the
subsequently enacted rate of 21 %. I then calculated the remaining useful book life of the
assets creating the deferred tax liability and developed an adjustment to Sycamore's test-
year tax expense to reflect the lower tax rate which took effect on January 1, 2018. I also
provided the gross revenue conversion factor applied to its revenue requirement so that
the new rates to be established by the IURC in this case take into account Sycamore's
revised tax expense.
What is the origin of Sycamore's accumulated deferred taxes?
The deferred tax liability was generated from tax depreciation exceeding the amount of
book depreciation that was able to be deducted on a yearly basis. The current tax laws
allow Sycamore to accelerate its depreciation on property by allowing it to utilize shorter
lives for tax purposes and expense some of their assets in the year purchased under the
provisions of Sections 179 and 168(k) of the federal tax code.
What are some examples of the assets associated with Sycamore's deferred taxes?
Some examples of the assets associated with Sycamore's deferred taxes are mains,
service lines and meters.
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IURC Cause No. 45072 ExhibitNMC
Page 3 of4
How did lower federal income tax rates impact Sycamore's deferred tax account?
As a result of the TCJA, the deferred tax amount was calculated utilizing the lower rate of
21 % and the deferred tax liability was reduced accordingly to reflect the future tax
liability at known enacted rates. As shown on the attached Exhibit NMC-1, Sycamore
has $12,447,983 less in tax net book value than book net book value. When the federal
income tax rate was 34%, the amount of deferred tax was $4,232,314.22. After the
federal income tax rate was lowered to 21 %, the amount of deferred tax on the same asset
base is $2,614,076.43. Pursuant to Generally Accepted Accounting Principles applicable
to utility ratemaking, the difference of $1,618,237.79 is to be amortized over the
weighted average of the remaining book life of the underlying assets as a reduction in
Sycamore's annual tax expense. I determined the weighted average remaining book life
of Sycamore's underlying assets to be 15 1/3 years. This results in an annual reduction to
Sycamore's tax expense of $105,537.25.
Please describe the gross revenue conversion factor.
A utility's regulated rates are determined according to its proven costs to provide service.
One of these costs is the taxes it has to pay on the income that the rates produce.
Roughly speaking, the gross revenue conversion factor recognizes that the rates need to
be "grossed-up" so that they recover not just the tax on the amount of revenue necessary
to recover non-tax expenses, but also the cost of the tax on the amount ofrevenue
necessary to recover the tax expense. In this case, I determined that the gross revenue
conversion factor applicable to Sycamore's revenue requirement should be 1.366279.
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3 A9.
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How did you determine the correct amount for this factor?
IURC Cause No. 45072 ExhibitNMC
Page 4 of 4
As shown on the spreadsheet attached as Exhibit NMC-2 to my testimony, I start with
100% of Sycamore's revenue. I then reduced that by the percentage of Sycamore's
revenue that is uncollectible, and also remove the percentage Sycamore has to pay for
Indiana's Public Utility Fee. This gives me Sycamore's percentage of net revenue before
income taxes. Further reductions are taken for the utility receipts tax, Indiana income tax
and federal income tax. After accounting for all these reductions in Sycamore's revenue,
I calculate the gross revenue conversion factor by dividing 100% by the percentage of
income after income taxes. Here, Sycamore's projected income after income taxes is
73.191513% of 100%, and dividing that percentage into 100 equals 1.366279. That is the
number by which Sycamore's target net income is multiplied to determine its annual
revenue requirement.
Does this conclude your direct testimony in this case?
16 AlO. Yes.
4
Sycamore Gas Company
Regulatory Liability Calculation
As of Date Certain September 30, 2017
Balance Sheet Book Tax
Federal Deferred Tax
Property, Plant and Equipment Cost $ 31,078,554.00 $ 30,310,190.00 Accumulated Depreciation $ (15,562,962.00) $ (27,242,581.00) Net Book Value $ 15,515,592.00 $ 3,067,609.00
Federal Total $ 15,515,592.00 $ 3,067,609.00
Federal Statutory Tax Rate Prior to January 1, 2018
Federal Deferred Tax Asset (Liability) at 34% Statutory Rate
Federal Statutory Tax Rate on January 1, 2018
Federal Deferred Tax Asset (Liability) at 21% Statutory Rate
Regulatory Liability (Decrease in Deferred Tax due to Rate Change)
Amortization of Regulatory Liability over weighted average life of the plant balances
Months 184.00 Years 15.33
Amortization
10/1/2017-4/30/2018 $ 35,179.08 5/1/2018-4/30/2019 $ 105,537.25 5/1/2019-4/30/2020 $ 105,537.25 5/1/2020-4/30/2021 $ 105,537.25 5/1/2021-4/30/2022 $ 105,537.25 5/1/2022-4/30/2023 $ 105,537.25 5/1/2023-4/30/2024 $ 105,537.25 5/1/2024-4/30/2025 $ 105,537.25 5/1/2025-4/30/2026 $ 105,537.25 5/1/2026-4/30/2027 $ 105,537.25 5/1/2027-4/30/2028 $ 105,537.25 5/1/2028-4/30/2029 $ 105,537.25 5/1/2029-4/30/2030 $ 105,537.25 5/1/2030-4/30/2031 $ 105,537.25 5/1/2031-4/30/2032 $ 105,537.25 5/1/2032-4/30/2033 $ 105,537.25
Total $ 1,618,237.79
Exhibit NMC-1
Type Noncurrent Noncurrent
Asset Liability
$ $ (12,447,983.00)
$ $ (12,447,983.00)
34.00% 34.00%
$ $ (4,232,314.22)
21.00% 21.00%
$ $ (2,614,076.43)
$ $ (1,618,237 .79)
Line No
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7
8
9
10
11
Sycamore Gas Company Gross Revenue Conversion Factor
Rate
Revenue
Less: Uncollectible expense 0.083128%
Net Collected Revenues
Less: Public Utility Fee 0.133087%
Net Revenue before Income Taxes
Utility Receipts Tax (Line 3 x rate) 1.400000%
Indiana Income Tax (Line 5 x rate) 5.750000%
Income Before Federal Income Tax
Federal Income Tax (Line 8 x rate) 21.000000%
Income after Income Taxes (Line 8 - Line 9)
Gross Revenue Conversion Factor (1.00/Line 10)
Exhibit NMC-2
Total
100.000000%
0.083128%
99.916872%
0.132976%
99.783896%
1.398836%
5.737574%
92.647485%
19.455972%
73.191513%
1.366279
1 Ql.
2 Al.
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IURC Cause No. 45072 ExhibitJTS
Page 1of10
DIRECT TESTIMONY OF JOHN T. STENGER
IURC Cause No. 45072
Please state your name, address and occupation.
My name is John T. Stenger. My business address is 370 Industrial Drive, Suite
200, Lawrenceburg, Indiana, 47025. I am the Consultant to Sycamore Gas
Company, the petitioner in this proceeding ("Petitioner" or "Sycamore").
Please state your educational background.
I received Bachelor of Science Degrees in Civil Engineering and Land Surveying
from Purdue University in 1984. In 2000, I received a Master of Business
Administration degree from Xavier University. I have attended numerous
industry programs and courses, including on Natural Gas Distribution
Engineering; Corrosion and Rectifier courses, and Regulator and Station Design
courses. I am a Professional Engineer registered in both Indiana and Ohio.
Please summarize your business experience.
15 A3. I have worked in the natural gas utility industry since 1988. From 1988 to 2001, I
16 was employed by Cinergy and the Cincinnati Gas & Electric Company, holding
1 7 engineering and managerial positions in its Gas Operations department. I left
18 Cinergy in September, 2001 to become part-owner and President of the Oxford
19 Natural Gas Company in Oxford, Ohio, where my responsibilities included
20 overall system management, gas procurement and calculation of the Gas Cost
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IURC Cause No. 45072 ExhibitJTS Page 2 oflO
Recovery mechanisms for Oxford Natural Gas and Verona Natural Gas. I served
as the Vice President, Operations for Sycamore from the time it was purchased by
INOH Gas from Cinergy on August 30, 2004 until October 1, 2007. I am an
owner of Premier Energy Services ("Premier"), a natural gas construction and
maintenance contractor. I am also the owner of Superior Utility Operations, Inc.
("Superior"). Effective October 1, 2007, Superior serves as a Consultant to
Sycamore and I provide operational and managerial services to Sycamore
pursuant to its contract with Superior. Also, I represent Sycamore as a member of
the Board of Directors of the Indiana Energy Association (IEA), where I serve as
the Chairman of the IEA Gas Executive Committee and also serve on that
association's Pipeline Safety and Gas Rates I Regulatory Committees.
Please describe the operational and managerial services you provide to
Sycamore.
My company, Superior, provides field construction, maintenance and pipeline
safety compliance services to Sycamore. Superior charges a monthly fee based
upon Superior's employees actual wage rates and normal expenses, such as
general !ability insurance and worker's compensation costs, etc., plus a negotiated
adder. Overtime charges are billed on a monthly basis for work performed, at the
rates Superior pays its employees, plus the negotiated adder. Services for
specialty work, such as welding and tapping, are provided as needed and are
based on local market rates. These services are typically provided by Premier,
which has welders on staff. Premier also provides additional construction
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IURC Cause No. 45072 Exhibit JTS
Page 3of10
resources when Sycamore's work load dictates. This allows Sycamore to better
control the cost for using those types of services, and allows Sycamore to
minimize the staff regularly assigned to its field work. My personal services
include supplying various engineering, pipeline safety compliance, gas supply and
managerial functions. These services are compensated on an annual fee basis.
All charges are negotiated, reviewed and approved by Sycamore's President, John
Browner and CFO, Cindy Hughes.
What is the purpose of your testimony in this proceeding?
I am testifying in support of Sycamore's request for rate relief. I summarize
Sycamore's operating characteristics and describe on-going efforts to provide
reliable service to gas distribution customers in an efficient manner.
Are you familiar with Sycamore's property that is used and useful in
rendering gas utility service to the public?
Yes. Among my functions is to keep abreast of federal and state pipeline safety
regulations and maintain Sycamore's system in compliance with those
regulations. It is my responsibility to handle communications and interactions
with the Indiana Utility Regulatory Commission's Pipeline Safety Division. I am
also responsible for engineering and design services for all of Sycamore's capital
projects and I oversee Sycamore's response to customer service issues, repairs to
mains and service lines, and planning and implementation of main replacements
and extensions. My responsibilities also include arranging for Sycamore to
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IURC Cause No. 45072 ExhibitJTS
Page 4of10
purchase gas through both forward and spot contracts in order to reliably meet our
customers' demands for this commodity. Finally, I manage Sycamore's gas
transportation supply program, including balancing and billing of its
transportation customers' accounts.
Please describe Sycamore's utility system and customer base.
Sycamore owns, maintains and operates 176 miles of gas mains which it utilizes
to distribute gas to 5,502 residential customers, 868 commercial customers, 25
industrial customers and one wholesale customer. Sycamore also serves 3
commercial transportation customers and 5 industrial transportation customers.
All of the gas Sycamore sells to its system customers is purchased by Sycamore
for resale from the two interstate gas pipelines to which Sycamore's mains are
connected: Texas Gas Transmission and Texas Eastern Transmission. Sycamore
also contracts with Texas Gas Transmission for NNS pipeline storage service,
which is used both as a hedge and as a balancing tool.
Have Sycamore's customer counts or gas main miles changed since its last
rate case?
Yes, for both. Sycamore has seen its overall customer count decrease by one
customer. It has added seven miles to its gas mains since the test year upon which
its current base rates are based. Service has been extended to the Reservoir Road
area in Brookville; to the Ridgewood Health Campus in Lawrenceburg; and to
Woodridge Estates Subdivision in Bright. As discussed further below, MGPI of
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IURC Cause No. 45072 Exhibit JTS
Page 5of10
Indiana was added as a customer in the former Seagrams Distillery facility, as was
Proximo Distillers. Sycamore worked with both customers to eliminate those
facilities' past reliance on generation of steam from coal. Several bare steel
replacement projects have been completed since Sycamore's last rate case, further
improving system safety and its percentage of unaccounted-for gas. Sycamore
also completed significant water bath heater projects at three of its Texas Gas
Transmission city gate stations. Finally, Sycamore installed a new odorizer
facility and regulator station at its other Texas Gas city gate station.
Has Sycamore completed any post-test-year capital projects?
Yes. As shown on my attached Exhibit JTS-1, Sycamore completed 13 projects
and purchases between October 1, 2017 and March 31, 2018 which added a total
of $570,431.36 to the value of Sycamore's used and useful plant in service.
Are there any gaps in Sycamore's service territory?
Sycamore operates in two nearby but neither contiguous nor interconnected
divisions. Most customers are located in Sycamore's Lawrenceburg Division
centered in and around the communities of Lawrenceburg and Greendale, Indiana.
Sycamore's Brookville Division serves 979 residential and commercial customers
1 industrial customer and 1 industrial transportation customer in the communities
of Brookville and Cedar Grove located approximately 25 miles north of
Greendale.
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1 Qll.
2 All.
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5 A12.
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12 A13.
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21 A14.
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Please identify Sycamore's sole wholesale customer.
IURC Cause No. 45072 Exhibit JTS
Page 6of10
Sycamore distributes gas on a wholesale basis to the Town of Aurora, Indiana.
Who manages Sycamore's relationship with the Town of Aurora?
I do. The Town serves approximately 2,500 residential customers of its municipal
gas utility, and I regularly communicate with officials or representatives of that
utility, including at least quarterly about Sycamore's GCA applications. I also
balance and prepare the monthly invoice for its sole transportation customer,
Aurora Casket.
Does Sycamore serve any customers pursuant to a special contract?
Yes. As noted in the testimony of Sycamore's President, John Browner,
Sycamore has a Commission-approved special contract with MGPI oflndiana,
LLC. MGPI owns and operates a large distillery in the city of Lawrenceburg,
Indiana. The Commission approved Sycamore's special contract to provide off-
tariff gas service to MGPI by order dated August 22, 2012 in IURC Cause No.
44193. Unless it is renewed and re-approved by the Commission, that special
contract is set to expire in March of 2022.
Does Sycamore utilize the services of a gas marketer?
Yes. Sycamore contracts with CenterPoint Energy Services for firm gas supply
throughout the calendar year. Through CenterPoint, Sycamore is able to deliver
to its customers firm gas supply at competitive commodity rates. CenterPoint' s
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IURC Cause No. 45072 ExhibitJTS
Page 7of10
services have enable Sycamore to minimize its transmission system demand
charges and to properly execute daily nominations and balancing for Sycamore's
supply needs. Sycamore is also able to hedge gas volumes at less than full
contract volumes, improving its ability to complete fixed-price purchases.
Normal Temperature Adjustment
How has Sycamore implemented the normal temperature adjustment
mechanism approved by this Commission on December 6, 2006 in IURC
Cause No. 43141 ("NTA Order")?
Once a year an average of each GCA customer's gas usage in July and August is
used to determine a baseload usage amount for that customer. Then pursuant to
the NTA order, during the months October through April Sycamore determines a
monthly adjustment to those customers' bills based on heating degree days.
Warmer than expected weather results in the customer paying a slightly higher
volumetric rate for their gas utility service, while cooler than expected weather
results in the customer paying a slightly lower volumetric rate. The NTA is not
structured to provide Sycamore any direct net benefit other than from a more
stable revenue stream as its customers are protected from the widest swings in the
cost of their service.
Proposed Change to Service Line Responsibility
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IURC Cause No. 45072 ExhibitJTS
Page 8 of IO
Are Sycamore's customers responsible for repairing and replacing their
service lines located between their property line and Sycamore's gas meter
on the customer's premises?
Typically yes. In most cases the full run of the service line located on the
customer's property, both before and after Sycamore's gas meter, has been owned
by the customer, who is also responsible for its maintenance and repair as well as
its replacement. Sycamore's Tariff Sheet 21, "Section II- Supplying and Taking
of Service" describes at paragraph #5 on page 2 of 2 the customer's responsibility
in this regard.
Does Sycamore handle new service extensions in this same fashion?
No. This assignment to the customer of ownership and responsibility for nearly
all of the service line is a vestige of Sycamore's century-old business. But this
practice has become increasingly impractical in 2018. Newer federal regulations
on the qualification of gas line operators, including the increasingly limited pool
of contractors licensed to perform such work for customers, have made it
increasingly impractical for someone other than an employee or contractor of
Sycamore to do the work. For example, whereas a decade ago a homeowner
might be able to call their plumber to work on their gas service line, few plumbers
meet today's more stringent standards to work on a gas line. Accordingly, for
extensions of service to new customers, Sycamore proposes to move the
demarcation point for ownership of and responsibility for the customer service
line from the property line to the point at which the service line exits Sycamore's
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IURC Cause No. 45072 Exhibit JTS
Page 9of10
gas meter. The cost to extend service to a new customer from Sycamore's main
to the outlet of Sycamore's meter would then be added to Sycamore's rate base.
How does Sycamore handle repairs to customers' service lines that Sycamore
does not currently own?
Sycamore performs such work, more often than not involving the replacement of
pipe, at the customer's request and charges the customer for the work.
Are you proposing in this case to change the way service line replacements
are handled?
Yes. With this Commission's approval, whenever the portion of the service line
between the curb and the meter has to be replaced, Sycamore would perform the
work at no charge to the customer and the cost of that small project would be
added to Sycamore's rate base. Sycamore would also assume responsibility as the
owner for maintenance and repair of the replaced portion of the service line, again
at no separate charge to the customer other than through future inclusion of the
cost as a utility operating expense built into the base rates collected from all
customers for their utility service.
Are you aware of this type of change with respect to ownership and
responsibility for gas customer service lines having been approved in other
jurisdictions?
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IURC Cause No. 45072 ExhibitJTS
Page 10 of IO
1 A20. Yes. In 0 hio that state's Public Utility Commission has approved requests from
2 both Duke Energy and Columbia Gas to gradually transfer to the utility ownership
3 and responsibility for the customer service line all the way to the gas meter, and
4 ''similar arrangements have been approved for Duke Kentucky by the Kentucky
5 Public Service Commission in that commonwealth. See, for example, Kentucky
6 PSC Case No. 2015-00210. Attached as Exhibit JTS-2 is a copy of an excerpt
7 from Duke Kentucky's tariff reflecting the transfer to Duke of responsibility for
8 customer service lines.
9
10 Q21. Does this conclude your testimony?
11 A21. Yes.
- 10 -
Exhibit JTS-1
Sycamore Gas - Post-Test-Year Capital Projects
!!. Project Description Cost
1 Brookville Library Addition * $ 39,192.76
2 MGPI - New Warehouse - Gas Facilities Relocation * $ 219,742.56
3 Tom's Sales & Service - Gas Facilities Relocation * $ 19,817.81
4 Carroll Avenue Main Extension $ 3,265.60
5 Ritzmann Drive Project $ 898.90
6 Pribble Road Gas Main Replacement $ 19,980.65
7 Lawrenceburg #1 Station Odorizer Replacement $ 143,604.50
8 Miscellaneous Gas Main Projects $ 8,036.87
9 Miscellaneous Gas Service Installations (31) $ 74,641.20
10 Gas Meter Replacements and Installations $ 23,426.04
11 Gas House Regulator Replacements and Installations $ 4,008.53
12 New Equipment Purchased $ 11,849.94
- Desktop computer for SCADA system
- Large Format Scanner/Copier
- Fusion Equipment
- Hammer Head Mole
13 Structures and Improvements $ 1,966.00
- Concrete for Sand and Gravel Pits in Yard
Total Capital Expenditures $ 570,431.36
* Reimbursement projects - completed at customer request
IURC Cause No. 45072
Exhibit JTS-2
Excerpt from Duke Kentucky Tariff
Duke Energy Kentucky, Inc. 4580 Olympic Blvd. Erlanger, Kentucky 41018
KY. P.S.C. Gas No. 2 Fifth Revised Sheet No. 23 Cancelling and Superseding Fourth Revised Sheet No. 23 Page 1of2
SECTION IV - COMPANY'S INSTALLATION
1. Installation and Maintenance.
Except as otherwise provided in these Service Regulations, in Service Agreements or Rate Schedules, Company will install and maintain its lines and equipment on its side of the point of delivery, but shall not be required to install or maintain any lines or equipment, except meters and service regulators on Customer's side of the point of delivery without cost to Customer. Only Company's agents are authorized to connect Company's service to Customer's service piping.
2. Gas Service Piping.
The gas service pipe shall be installed by the Company from the Company's main in the street to the curb line at its own expense and from the curb line to the meter, including curb box and valve, at the Company's expense, subject to the Company's rules, regulations and existing prices, upon execution of an application and provided that an adequate distribution main exists in front of the Customer's building. The service piping from the curb to the meter, including street box and valve, installed at the expense of the Customer, shall be maintained at the expense of the Company. No connections or work of any kind shall be done on a gas main or service piping up to the outlet of the meter by anyone who is not a qualified agent or employee of the Company. The Company will assume ownership of customer service lines (curb to meter) following replacement, as well as in instances of new installations.
Only one gas service will be installed in any individual dwelling or building, except in cases where the building's units are sectionalized by acceptable fire separations such as firewalls, regardless of the number of customers to be served within.
The service pipe will be laid from the point of the gas supply connection location to the meter location approved by the Company. Should the distance between the curb and the Customer's building be in excess of 150 feet or involve other special conditions, a suitable meter location, approved by the Company, will be selected.
Service pipe can be installed in the same ditch as the electric, telephone, and cable television cable, providing the electric cable is in a conduit and the gas service pipe has six inches of separation from the cables. Any other utilities will not occupy the ditch with the service pipe, and a minimum of three feet will be maintained between gas service pipe and other utilities.
Service piping will end at the inlet connection of the meter which will be set at the point and entry of the service. If it is necessary to extend the service pipe beyond the point of entry, such exposed service piping in the building under flooring, through walls, coal bins, etc., shall be properly protected and the expense thereof borne by the customer.
In case of more than one building on a lot, a separate service will be run direct from the main to each building except in cases where the building nearest the Company' such cases the meter will be placed on the service in the nearest own extension to the' other building.
Issued: March 15, 2017 Effective: April 15, 2017 Issued by /s/ James P. Henning, President
s U L . . II .LLL ' t Jildingpcuacn~-§~f~1t~Wim~~l8ii
Talina R. Mathews EXECUTIVE DIRECTOR
J~R.L1.~ EFFECTIVE
4/15/2017 PURSUANT TO 807 KAR 5:011 SECTION 9 (1)
Duke Energy Kentucky, Inc. 4580 Olympic Blvd. Erlanger, Kentucky 41018
KY. P.S.C. Gas No. 2 Fifth Revised Sheet No. 23 Cancelling and Superseding Fourth Revised Sheet No. 23 Page 2 of2
T.he Company shall install excess flow valves (EFV) for all new and renewed service· piping (N) installations for single family homes or other Customer service classifications as part its standard installation and at the Company's expense where such EFV installation is required in accordance with regulations of the Federal Pipeline Hazardous Materials Safety Administration (PHMSA). For all other service piping installations that are not covered by PHMSA installation requirements, the Customer may request the installation of an EFV at the Customer's sole expense. The Company and Customer shall mutually agree upon the timing of such installation with regard to any necessary permitting that may be required. The Customer requesting the installation of an excess flow valve shall be responsible for the actual total cost of such installation and the Company shall provide Customer with a written estimated cost of such installation prior to performing the installation. A deposit of fifty-percent of the estimated cost of installation shall be required prior to the commencement of the installation. The balance of the actual cost of installation shall be due upon completion.
The Company shall not be required to install an EFV if one or more of the following conditions is present:
a. The service line does not operate at a pressure of 10 psig or greater throughout the year; b. Company has prior experience with contaminants in the gas stream that could interfere
with the excess flow valve's operation or cause loss of service to a customer; c. The excess flow valve could interfere with necessary maintenance and operation
activities; or, d. An excess flow valve meeting applicable performance standards is not commercially
available.
3. Company's Property and Protection Thereof.
All meters and equipment furnished by and at the expense of Company, which may at any time be in said premises, shall, unless otherwise expressly provided herein, be and remain the property of Company, and Customer shall protect such property from loss or damage, and no one who is not an agent of Company shall be permitted to remove or handle same.
Issued: March 15, 2017 Effective: April 15, 2017 Issued by /s/ James P. Henning, President
KENTUCKY PUBLIC SERVICE COMMISSION
Talina R. Mathews EXECUTIVE DIRECTOR
J~f?_~
EFFECTIVE
4/15/2017 PURSUANT TO 807 KAR 5:011 SECTION 9 (1)
Duke Energy Kentucky, Inc. 4580 Olympic Blvd. Erlanger, Kentucky 4101 S
RIDERASRP
Ky. P.S.C. Gas No. 2 Second Revised Sheet No. 63 Cancelling and Superseding First Sheet No. 63 Page 1of1
ACCELERATED SERVICE REPLACEMENT PROGRAM RIDER
APPLICABILITY Applicable to all customers receiving service under the Company's sales and transportation rate schedules.
CALCULATION OF ACCELERATED SERVICE REPLACEMENT RIDER REVENUE REQUIREMENT The ASRP Rider revenue requirement includes the following:
a. ASRP-related Plant In-Service not Included in base gas rates minus the associated ASRP~ related accumulated depreciation and accumulated deferred income taxes;
b. Retirement and removal of plant related to ASRP construction; c. The rate of return on the net rate base is the overall rate of return on capital, using the
capital structure and debt rates from the most recent base gas rate case and using a 9. 7% ROE, grossed up for federal and state Income taxes;
d. Depreciation expense on the ASRP-related Plant In-Service less retirements and removals; e. Property taxes related to ASRP and; f. Operation and Maintenance Costs for reconnaissance and relocation of meters.
ACCELERATED SERVICE REPLACEMENT PROGRAM FACTORS All customers receiving service under Rate RS and Rate GS shall be assessed a separate monthly charge that will enable the Company to complete the service replacement program. This monthly charge is in addition to the Customer Charge component of their appllcable rate schedule, as well as any other applicable monthly charges. Customers receiving service under Rate OGS, Rate FT-L, Rate IT and Rate SSIT wilt be assessed a separate throughput charge in addition to their commodity delivery charge, for that purpose.
Rider ASRP will be updated annually, to reflect the anticipated impact on the Company's revenue requirements of net plant additions and projected operations and maintenance expense during the upcoming calendar year. Such adjustments to the Rider will become effective with the first billing cycfe of January, and will reflect the allocation of the required revenue increase based on the revenue distribution approved by the Commission. After each year, the Company will submit a balancing adjustment to true-up the actual costs with the projected program costs for the preceding year. . Any balancing adjustment wlll become effective with the first billing cycle on or. after the effective date of the change.
The charges for the respective gas service schedules for the revenue month beginning January 2018 (T)
are:
Rate RS, Residential Service Rate GS, General Service Rate DGS, Distributed Generation Service Rate FT-L, Firm Transportation service - large Rate IT, Interruptible Transportation Service Rate SSIT, Spark Spread Interruptible Transportation Rate
Issued by authority of an Order of the Kentucky Public Service . Co 'ss· n te Au ust 31 2017 in Cas N 0 ~o 24 lssued: November 21, 2017 Effective: January 2, 2018 lssued by James P. Hennlng, President Isl James P. Henning
$1.80/month $1.78/month $0.00045/CCF $0.00045/CCF $0.00039/CCF
PUBLIC SERVICE COMMISSION
Gwen R. Pinson Executive Director
~'f<~'1~· EFFECTIVE
1/2/2018 PURSUANT TO 807 KAR 5:011 SECTION 9 (1}
{I) (r) (!) (!) (i)
IURC Cause No. 45072 ExhibitMJM Page 1 of 12
DIRECT TESTIMONY OF MICHAEL J. MARTIN
ON BEHALF OF SYCAMORE GAS COMPANY
IURC CAUSE NO. 45072
1 Ql. Please state your name.
2 Al. Michael J. Martin
3 Q2. Please state your business address and occupation.
4 A2. My business address is 8835 Worthington Circle, Indianapolis, IN, 46278. I am the
5 President of Martin Energy Consulting and I have been retained by Sycamore Gas Company,
6 Inc. ("Sycamore" or "Petitioner") to provide regulatory advice and to support proforma rate
7 making adjustments at both present and proposed rates for the test year.
8 Q3. Please describe your education and work experience.
9 A3. I received a Bachelor of Science degree in Accounting from Trine University (formerly
10 known as Tri-State University) in Angola Indiana in 1973 and a Master of Business
11 Administration degree from Valparaiso University, Valparaiso, IN with Honors in 2008.
12 Following retirement from Northern Indiana Public Service Company ("NIPSCO") as their
13 Director Regulatory and Governmental Affairs in 2013, I became Campus Director for Trine
14 University's Indianapolis Regional Campus in Avon, IN until October 2014. In October, 2014, I
15 opened an energy consulting practice and began teaching undergraduate and graduate classes in
16 economics, finance and accounting as an adjunct instructor for various colleges and universities
17 which included Butler and Trine University. Starting in the summer of2015 and ongoing, I have
11 Pafle 0 -
IURC Cause No. 45072 ExhibitMJM Page 2of12
1 been lecturing for Trine University at one of its Southeast Asia partner schools located in
2 Melaka Malaysia teaching many of the same disciplines aforementioned.
3 Q4. Please describe your previous assignments as President of Martin Energy
4 Consulting and work experience and responsibilities while employed by NIPSCO and
5 others prior.
6 A4. I provided a small manufacturing business advice on options to improve energy
7 efficiency in a new plant site under consideration and incentives available from both their natural
8 gas and electricity provider. I also provided regulatory advice for an independent pipeline
9 company regarding state and federal pipeline safety rules. Prior to being retained by Sycamore to
10 prepare proforma adjustment in this rate case, I provided Sycamore strategic options to address
11 TDSIC and federal mandate requirements in Indiana.
12 While employed by NIPSCO I testified on several rates, regulatory, and tariff matters on the
13 natural gas segment of that company. Prior to joining NIPSCO by way of a merger between its
14 parent company, NiSource and The Columbia Energy Group, I represented two of Columbia's
15 natural gas distribution companies in similar capacities. While employed by Columbia, I
16 participated in several rate cases and provided testimony on most issues that are addressed in
17 determining a utility's need for rate relief.
18 Q4. Have you previously testified before the Indiana Utility Regulatory Commission
19 ("IURC")?
20 A4. Yes, on several occasions. In addition, I have testified before the Pennsylvania Public
21 Utility Commission, Maryland Public Service Commission and New York Public Service
21Page
IURC Cause No. 45072 ExhibitMJM Page 3of12
1 Commission. I have also been also actively involved in the American Gas Association,
2 Pennsylvania Energy Association, and Indiana Energy Association and served as the Chair of
3 their Regulatory Committees.
4 QS. What is the purpose of your testimony in this rate case?
5 AS. I have been retained by Sycamore to prepare and support proforma adjustments on a
6 present and proposed rate basis to financial information for the test year twelve months ended
7 September 30, 2017. The books and records which are the starting point for the proforma
8 adjustments are supported by Cindy Hughes, Sycamore's Chief Financial Officer. The primary
9 purpose of Sycamore's proforma adjustments, as described in more detail later in this testimony,
10 is to restate its revenues, expenses and plant expenditure to annualize, normalize, amortize and
11 eliminate non- reoccurring costs during the test year. I will also testify to tariff rule changes and
12 the rates on the rate schedules filed in this case. Lastly, I will also support the calculations in the
13 company's allocated cost of service study that will be filed after the filing of the company's case-
14 in-chief.
15 Q6. Please explain the proforma adjustments to Sycamore's Operating Revenue.
16 A6. Sycamore's Gas Operating Sales Revenues on a per book basis is an aggregate of
17 revenues collected from customers based on purchased gas cost recovered through the applicable
18 GCA rates, distribution volumetric and customer charges in its various rate schedules, the
19 application of the NTA and taxes. The first step is to remove all revenue related to the GCA
20 mechanism. Second, Sycamore must price-out all retail and wholesale customer sales and
21 transportation customer deliveries based on bill :frequency date for the test year. Lastly,
3jPage
IURC Cause No. 45072 ExhibitMJM Page 4of12
1 Sycamore is adjusting upward its test year revenue to increase the test year sales to reflect
2 warmer than normal weather occurring in the test year. I used the data that supports Sycamore's
3 monthly NTA adjustment to make this test period weather normalization adjustment.
4 Q7. Please explain the bill frequency adjustment.
5 A 7. Sycamore assigns each customer a billing code number based upon their classification
6 (residential, commercial, industrial or transportation) and their applicable rate schedule for
7 service. The bill frequency aggregates the customer actual usage by billing code for the test
8 period and further records how much actual usage has occurred in each rate step of the applicable
9 rate schedule. For example, Sycamore's General Service Rate Schedule has different charges for
10 volumetric usage in the first 30 therms, next 70 therms, next 900 therms, next 4,000 therms and
11 all over 5,000 therms. The bill frequency data provides usage in each usage category for each
12 billing code. Exhibit MJM-1 takes the usage data from the bill frequency report by billing code
13 and prices the volumetric usage by the effective distribution charges at present rates.
14 The bill frequency report also indicates the number of customers in the test period that fall within
15 the Group 1, Group 2 and Group 3 customer charge categories. Customers are placed in a
16 category based upon the meter size used to measure the amount of gas they consume on a cubic
17 feet basis per hour. At present rates those charges are $12.00 per meter per month for a group 1
18 customer, $24.00 per meter per month for a group 2 customer and $75.00 per meter per month
19 for a group 3 customer. Only customers receiving service under General Service, School
20 Transportation Service and Firm Transportation Service have specific customer charges based on
21 usage. Customers taking service on all other Sycamore Rate Schedules are subject to only one
41Page
IURC Cause No. 45072 ExhibitMJM Page 5of12
1 customer charge. The amount of test year revenue from customer charges at present rates, by
2 rate schedule, is also shown on Exhibit MJM-1.
3 Q8. Please explain the aforementioned weather normalization adjustment.
4 A8. The test year usage was adjusted to reflect normal usage. During the test year, actual
5 heating degree days as reported by the National Weather Service in Cincinnati, Ohio were
6 warmer than normal for six of the seven months of October through April. As a result
7 Sycamore's weather normalization adjustment resulted in adding usage to its test year for pricing
8 revenue at present rates.
9 In this case the weather normalization adjustment was determined based on application of the
10 Normal Temperature Adjustment (NTA) mechanism for the test year. This mechanism applies
11 to customer taking service under Rate GS - General Service and Rate WS- Wholesale Service.
12 Customers receiving service under either Rate GS or Rate WS are weather sensitive therefore the
13 volume billed under the NTA is a reasonable approach to determine the weather normalization
14 adjustment in this case. Further, the NTA rate schedule requires that all usage billed under the
15 NTA is priced at the third step for General Service customers and the applicable volumetric rate
16 for Rate WS. The volumes billed under the NTA mechanism are shown on customers bills. The
17 applicable volumes have been priced at the third step and volumetric rate under Rate GS and
18 Rate WS respectively on Exhibit MJM - 1. That exhibit reflects an adjustment to test year
19 revenues from Sycamore's Rate GS customers. Sycamore's revenue from its sole Rate WS
20 customer, the City of Aurora, has not been similarly adjusted because the City's weather
21 normalized usage has already been factored into Sycamore's bills during the test year.
SI Page
1 Q9. Please explain adjustments to operating expense.
IURC Cause No. 45072 ExhibitMJM Page 6of12
2 A9. Adjustments to operation and maintenance, depreciation, and taxes other than income tax
3 expense are shown in Exhibit MJM - 2 and explanations and calculations are found on pages I
4 through 8.
5 As shown on pages I through 6 of Exhibit MJM-2, Sycamore is making 13 adjustments to
6 Operation and Maintenance Expenses at present rates.
7 Adjustment no. 2 on page 1 of Exhibit MJM- 2 eliminates all purchased gas expense from the
8 test year operating expenses, FERC Account #804, as such costs, other than unaccounted for gas,
9 are recovered in Sycamore's GCA filings. Sycamore has calculated the cost of unaccounted for
10 gas in the test period by multiplying the company's overall unaccounted-for rate of 0.4%, as
11 reported to the Department of Transportation (DOT) in March 2018 for calendar year 2017, by
12 the gas purchased volumes in the test year GCAs, plus the weather normalization used in the
13 proforma revenue calculations all listed in therms.
14 Adjustment No. 3 on page 2 of Exhibit MJM -2 adjusts Sycamore's operating expenses for
15 additional payroll related expenses not included in the test year. First, Sycamore has included a
16 cost of $38, 793, in FERC Account #870, to increase the test year for operational management
17 services provided by Superior Utility Operations, Inc. during the test year but not billed
18 Sycamore until after the close of the test year. Secondly, Sycamore is adding $21,800 to reflect
19 payroll of Superior Utility Operations, Inc. ("Superior") operations employees who performed
20 overtime work on behalf of Sycamore in October, November and December 2016 but not
21 recorded as an expense by Sycamore until after the test year. Sycamore renegotiated an
6IPage
IURC Cause No. 45072 ExhibitMJM Page 7of12
1 agreement with Superior, effective October 1, 2016, that calls for all overtime worked by
2 Superior employees over and above regular time to be billed directly to Sycamore. Third, all
3 direct employees of Sycamore received an increase in pay effective January 1, 2018.
4 Annualizing these increased salaries requires a positive adjustment of $13, 000 to the test year
5 payroll expense. Fourth, during the test year, Sycamore updated the scope of duties for its
6 employee responsible for Sycamore's system-wide mapping of underground piping and other gas
7 system infrastructure. Having completed the work to create the maps, the cost of which project
8 was treated as a capital expense, going forward this same employee will keep all maps of
9 Sycamore's infrastructure up-to-date, among other functions, the cost of which is an operating
10 expense. Annualizing this cost requires a positive adjustment of $53,699 to Sycamore's test year
11 annual operating expenses in FERC Account #880. Fifth, in May 2018 Sycamore will begin
12 receiving services of a Utility Technician who will be employed by Superior but dedicated full-
13 time to Sycamore projects. The $92,350 addition to Sycamore's test year expenses includes his
14 annual salary, benefits and overhead and is divided equally among FERC Account## 887, 892
15 and 902. Addition of this employee is to needed to allow better management of Sycamore's
16 daily operations as required to comply with increased pipeline safety compliance
17 regulations. This employee will be assigned to various operation and maintenance activities,
18 including meter reading.
19 Adjustment No. 4 on Exhibit MJM- 2, page 3 to Operations and Maintenance Expenses reflects
20 an annual amortization of expenses incurred to process this rate case for Sycamore. The
21 estimated total expense of $226,000 includes the estimated cost oflegal and regulatory
22 professionals as well as sending billing notices to customers regarding this rate case. Sycamore is
7JPage
IURC Cause No. 45072 ExhibitMJM Page 8of12
1 amortizing these costs over 3 years as this represents the expected time frame between rate cases
2 going forward.
3 Adjustment No. 5 on Exhibit MJM-2, page 3 adjusts the expense of the fee annually submitted to
4 the IURC to take into consideration the gas purchased volumes and amounts to reflect
5 normalized weather in therms priced at the most recent gas cost of $0.397/therm. The
6 distribution margins priced at present rates in the test year was added to this total. The sum of the
7 two was multiplied by the current IURC fee billed to their jurisdictional utilities.
8 Adjustment No. 6 on Exhibit MJM -2, page 4 adjusts FERC Account #923 outside services for
9 the cost ofretaining students part-time from DePaul Cristo Rey High School for clerical work in
10 Sycamore's business offices. These services were initiated in August 2017 therefore the test
11 period results were adjusted for the eleven months not reflected in test year expenses.
12 Adjustment No. 7 on Exhibit MJM - 2, page 4 adjusts FERC Account #923 for the other 50% of
13 Superior Utility Operations, Inc. management services provided Sycamore during the test year
14 and going forward but not reflected in test year expenses.
15 Adjustment No. 8 on Exhibit MJM-2, page 4 adjusts Sycamore's per book test year amounts of
i6 uncollectible expense in FERC Account #904 to reflect a three-year average of net bad debt
17 expense, gross write-offs less recoveries, of the twelve-month periods ended September 2015,
18 September 2016, and September 2017. Three years is deemed as a reasonable period to
19 normalize any abnormally large or small bad debt write-off activity.
20 Adjustment No. 9 on Exhibit MJM-2, page 5 is to increase Sycamore's test year expenses by
21 $15,000 to reflect the cost of developing and maintaining welding procedures and training
SI Page
IURC Cause No. 45072 ExhibitMJM Page 9of12
1 programs so Sycamore can better improve its pipeline safety efforts in compliance with the
2 Federal requirement set forth at 49 CFR 192 and under API 1104.
3 Adjustment No. 10 on Exhibit MJM-2, page 5 increases Sycamore's test year expenses for the
4 cost of higher insurance premiums now being paid the Company's insurance company for
5 increased property casualty, liability, workers compensation, and directors and officers
6 insurance. The new policy went into effect in August 30, 2017.
7 Adjustment No. 11 on Exhibit MJM-2, page 5 increases costs under AC 926 - Employee
8 benefits for providing medical insurance and a 401 K savings program to Sycamore's direct
9 employees. Effective January 1, 2018 Sycamore is experiencing an increase in medical insurance
10 premiums of $1, 710 per month. These costs over an annual period are being added to
11 Sycamore's test year expenses. Sycamore will also incur $400 in additional annual cost for
12 contributing funds to direct employees' 401 K saving plan.
13 Adjustment No-. 12 to Exhibit MJM-2, page 6 includes the increase in rental expense incurred by
14 Sycamore for their new operations center, customer service center and company administrative
15 offices. Sycamore transferred its operation to the new facilities in June 2017.
16 Adjustment No. 13 to Exhibit MJM-2, page 6 of Sycamore's test year eliminates the cost of all
17 charitable giving and goodwill advertising.
18 Sycamore is presenting its proforma adjustments under Nos. 14 and 15 to Taxes Other than
19 Income Taxes on page 7 of Exhibit MJM-2.
9IPage
IURC Cause No. 45072 ExhibitMJM Page 10of12
1 Adjustment No. 14 on Exhibit MJM-2, page 7 is additional employer payroll taxes to be incurred
2 on the direct employee payroll increased discussed earlier in the operation and maintenance
3 expense adjustment.
4 Adjustment No. 15 on Exhibit MJM-2, page 7 is to adjust Sycamore's test year to remove the
5 cost of Utility Receipts Tax being recovered through Sycamore's GCA mechanism and only
6 include the cost of Utility Receipts Tax of proforma revenues at present rates for the test year.
7 Sycamore has utilized its proforma revenue for the test year at present rates and reduced such
8 amount by bad debt cost and revenues received from its Wholesale Service rate schedule. Bad
9 debt cost represents revenues not being collected by Sycamore. Revenue from wholesale gas
10 service is from a municipality that is exempt from utility receipts tax.
11 QlO. Please explain the calculation of Sycamore's rate base in this case.
12 AlO. Sycamore's Rate Base as of March 31, 2018 is shown on Exhibit MJM-3. Gas utility
13 plant included CWIP on Sycamore's books and records as of September 30, 2017. As of March
14 31, 2018, however, all of that CWIP had been placed into service. Sycamore has also included
15 additional gas plant in rate base that was put in service within six months of the close of its test
16 period. From these amounts rate base has been credited for Accumulated Depreciation Reserve
17 as of September 30, 2017. An additional credit has been included for the annualized effect of
18 depreciation expense added to the test period on plant placed in service during the test period but
19 receiving less than one year's value of depreciation expense. Also Accumulated Depreciation
20 has been adjusted for depreciation expense occurring on gas plant added post test year.
lOIPage
IURC Cause No. 45072 ExhibitMJM Page 11of12
1 Added to Net Utility Gas Plant on Exhibit MJM- 3 is a 13-month average of the balance of
2 materials and supplies for the 13 months ended September 30, 2017.
3 Finally rate base has been adjusted for the inclusion of cash working capital. Sycamore has
4 utilized the long-established method of determining it requirement for cash working capital in
5 rate base by including one-eighth (1/8) of proforma operation and maintenance expenses
6 excluding purchased gas cost. The total amount of the rate base on Exhibit MJM -3 will be used
7 to determine the revenue deficiency required by Sycamore to earn the overall rate of return
8 supported by witness Cynthia Hughes.
9 Qll. Please explain the tariff changes proposed by Sycamore in this case.
10 Al 1. Attached as Exhibit MJM-4 are draft tariffs containing all of the proposed rates, charges,
11 and changes in rules and regulations being proposed by Sycamore in this rate case. Sycamore is
12 not proposing to add or eliminate any customer rate schedules in this case. Furthermore,
13 Sycamore is not changing the rate structure reflected in its current tariff rate schedules.
14 Sycamore is using the results of its cost of service study, however, to increase the fixed charges
15 in all of its rate schedules to continue through gradualism to move the customer charges to a
16 level that fully recovers the fixed costs per rate schedule incurred by Sycamore when providing
17 gas service. All remaining revenue necessary to earn its proposed rate of return on rate base will
18 be recovered from customers and their appropriate rate schedule based on the cost allocations
19 shown in the cost of service study.
20 In addition, Sycamore is proposing a new tariff sheet, Extension of Company facilities. In the
21 past, Sycamore used contractual agreements to calculate the cost of adding new customers and
lllPage
IURC Cause No. 45072 ExhibitMJM Page 12of12
1 whether a contribution was needed from them. The new tariff defines a standard installation and
2 commits Sycamore to providing free piping, to be installed by Sycamore, from the distribution
3 main to the meter installation. This is a simple procedure and will accommodate many of
4 Sycamore's extensions of its distribution system going forward.
5 In addition, to be consistent with Indiana Senate Bill 560 and with Section 8-1-39-11 of the
6 Indiana Code, Sycamore has added a provision in this new tariff to make rural extensions on its
7 system based on a 20-year discounted cash flow formula.
8 Because Industrial Service extensions are unique, Sycamore will continue to determine the cost
9 of installing the necessary infrastructure for customers in that class to receive gas service on a
10 case-by-case basis.
11 Q13. Does this conclude your direct testimony?
12 A13. Yes.
12 I Page
DESCRIPTION
Rate GS- General Service Customer Charge Per Month:
Group 1 Meters
Group 2 Meters
Group 3 Meters
Total Bills and Customer Charge Revenue
Distribution Charges:
First 30 therms
Next 70 therms
Next 900 therms
Next 4,000 therms
Over 5,000 therms
Total Therms and Distribution Revenue
Total General Service Revenue
Rate WS - Service to Aurora for Resale Customer Charge Per Month
Distribution Charge -All gas delivered
Total Wholesale Service Revenue
Total Sales Service Revenue
Rate ITS -Interruptible Transportation Service Customer Charge Per Month
Distribution Charge
Total Interruptible Transport Service Revenue
Rate ES- Employment Stabilization Service Customer Charge Per Month
Distribution Charge
Total Employment Stabilization Service Revenue
Rate FT - Firm Transportation Service Customer Charge Per Month
Group 1 Meter
Group 2 Meter
Group 3 Meter
Total Bills and Total Customer Charge Revenue
Distribution Charges:
First 30 therms
Next 70 therms
Next 900 therms
Next 4,000 therms
Over 5,000 therms
Total Therms and Distribution Revenue
Total Firm Transportation Revenue
Special Contract Service Customer Charge Per Month
Distribution Charge
First 45,000 therms
Next 45,000 therms
Over 90,000 therms
Total Therms and Distribution Revenue
Total Special Contract Revenue
Total Transportation Service Revenue
Total Distribution Service Revenue
Sycamore Gas Company Calculation of Proforma Revenue at Present and Proposed Rates
For The Twelve Month Period Ended September 30, 2017 PUBLIC VERSION
Number
of Bills
74,284
1,773
240
76,297
12
Bill Ing
Quantities
(therms)
1,488,847
1,650,951
1,607,628
634,665
787.055
6,169,146
2,334,915
8,504,061
21,321,524
Proforma at Present Rates
Ajustment for Billing Quantity Adjusted
Normal Weather
(therms)
960,350
960,350
960,350
For Normal Weather
(therms)
1,488,847
1,650,951
2,567,978
634,665
787.055
7,129,496
2,334,915
9,464,411
Present
Rates
($/therm)
12
24
75
0.5472
0.4405
0.3218
0.2609
0.2145
900
0.1089
Total Revenue
At Present Rates
$
891,408
42,552
18 000
951,960
814,697
727,244
826,375
165,584
168 823
2 702 724
3,654,684
10,800
254 272
265,072
3,919,756
812,848
4,732,603
IURC Cause No. 45072
Exhibit MJM-1
Adjustment No. 2: Natural Gas Purchased Expense
Sycamore Gas company
Detail of Adjustments
To adjust "Natural Gas Purchase Expense" to eliminated cost of
natural gas recovered through the GCA from base rates
Test Year Purchases - Therms (from GCA's 131-135)
Additional Purchases for normal weather (NTA reports)
Sub-Total
Unaccounted - For Percentage - Sycamore UAFG Report to DOT March 2018
Estimated Unaccounted For Gas
Anticipated Cost of Gas - Per Therm
Source: GCA 137, Feb. - April, 2018, Schedule 3
Total Proforma Natural Gas Purchase Expense
Less: Natural Gas Purchase Expense in Test Year
Decrease in Natural Gas Purchase Expense - AC 804
IURC Cause No. 45072
Exhibit MJM-2
1of7
Details Adjustment
7,818,760
960,350
8, 779,110
0.004
35,116
0.397
13,941
(3,560,327)
(3,546,386)
Sycamore Gas company
Detail of Adjustments
Adjustment No. 3: Operation and Maintenance Expense Adjustments
To adjust payroll expenses for those not fully reflected in the test year
A/C 870 has been adjusted to include the cost of providing operational
Management services from Superior Utility Operations, Inc not
reflected in the test period
AC 874 has been adjusted to reflect a change in billing from its
contract construction company,Superior Utility Operations, Inc.
for customary services not billed in the test period prior to the January, 2017
change in contract
In January 2018, Sycamore awarded its full time employees an annual
payroll increase. The adjustment has been recorded to AC 920
Sycamore adjusted AC 880 for additional expense
to annualize mapping costs.
In May, 2018 Superior Utility Operations, Inc will be adding a Utility Technician
- perform construction and maintenance activities as assigned.
This person would enable the Company to re-assign an existing contractor employee
to a new role, to comply with expanding pipeline safety compliance
and management of work activities. The fully loaded cost will be billed to
AC 887, AC 892 and AC 902 on the basis 1/3 to each
Total increase in payroll expenses
Detail
38,793
21,800
13,000
53,699
'Adjustment
197,843
IURC Cause No. 45072
Exhibit MJM-2
2 of7
Sycamore Gas company
Detail of Adjustments
Adjustment No. 4 - Operation and Maintenance Expenses
To adjust test period AC 928 - Rate case Amortization Expenses to
reflect the annual cost of preparing the current case amortized
over a 3 year period.
Sycamore's estimated incremental cost of preparing, filing and
possibly litigating a base rate filing before the IURC
Amortization Period - Years
Annual expense
Adjustment No. 5 - Operation and Maintenance Expenses
To adjust test year AC 928 - Regulatory Commission Expenses
to reflect the current IURC fee applied to proforma operating
revenue at present rates.
Natural Purchased Gas Costs for the test year
Additional Purchases on normalized weather
Cost of Gas from GCA 137, Schedule 3
Additional Gas Cost
Proforma distribution revenue at present rates
Total Operating Revenue
IURC Assessed Fee for 2017
Total Annualized Cost
Amount in the test year
Annual adjustment
960,350
$0.397
IURC Cause No. 45072
Exhibit MJM-2
3 of7
Detail
226,000
3
3,560,327
381,259
4,732,604
8,674,190
0.0013308680
11,544
8,940
Adjustment
75,333
2,604
Sycamore Gas company
Detail of Adjustments
Adjustment No. 6 - Operation and Maintenance Expense
In August 2017 Sycamore entered into a work study contract with
DePaul Cristo Rey High School for students to provide clerical
services during the work week.
The annual level of the work study contract
Amount recorded during the test year to AC 923
Adjustment
Adjustment No 7 - Operation and Maintenance Expense
To adjust AC 923 outside services for Management Service provided
by Superior Utility Operations, Inc not reflected
within the test year
Adjustment No. 8 - Operation and Maintenance Expense
To adjust AC 904 Uncollectible Accounts Expense to reflect a
three year average of Net bad debt write -offs (actual amounts written
off less recoveries) for the period October 2014 through September 2017
Three years of net bad debt written off
3 year
Three year average
Amount recorded in AC 904 during test period
Adjustment
Detail
30,000
2,900
21,110
3 7,037
(176)
IURC Cause No. 45072
Exhibit MJM-2
4of 7
Adjustment
27,100
38,793
7,213
Sycamore Gas company
Detail of Adjustments
Adjustment No. 9 - Operation and Maintenance Expense
Sycamore Gas Company is improving its pipeline safety procedures and
is implementing an ongoing training procedure for welding in accordance with
Federal requirement 49 CFR 192 under API 1104
Adjustment to AC 874 - Training Expenses
Adjustment No. 10 - Operation and Maintenance Expense
Effective August 30 Sycamore property Casualty insurance was increased
its Property casualty insurance provider that its policy would increase
Policy for 2017and 2018 period
Policy for 2016 and 2017 period
Adjustment to AC 924
Adjustment No. 11 - Operation and Maintenance Expense
Sycamore is experiencing a monthly increase in medical insurance
premiums effective January 1, 2018
Monthly premiums effective 2018
Monthly premiums during 2017
Monthly increase
Number of months not in test year
Adjustment to AC 926 - Employee Benefits
Sycamore has contributed additional amounts into employee
401 K accounts related to the payroll increase not reflected in the test year
Detail Adjustment
256,314
213,736
6,320
4,610
1,710
12
15,000
42,578
20,520
400
IURC Cause No. 45072
Exhibit MJM-2
5 of7
Sycamore Gas company
Detail of Adjustments
Adjustment No. 12 - Operation and Maintenance Expense
In May, 2017 Sycamore moved into a new operation center to
better meet the needs of its customers. The new facility
is under a lease arrangement. Sycamore will adjust its test period
for the higher cost of the lease
Monthly cost of new building lease
Number of months
Annual cost of new building lease
Amount of building rents in test year
Adjustment to AC 931- Rents
Adjustment No. 13 - Operation and Maintenance Expense
Sycamore is eliminating all charitable giving and
institutional advertising in AC 930 occurring in the test year
Details Adjustment
6100 12
73200
56971
16,229
(3,247)
IURC Cause No. 45072
Exhibit MJM-2
6 of7
Sycamore Gas Compa_ny
Detail of Adjustments
Adjustment No. 15 -Taxes other than Income Taxes
Sycamore Gas Company will incur an additional amount of
Payroll Taxes (FICA) on the annually increase of $13,000
awarded full time employees
Adjustment to Taxes other than Income taxes
Adjustment No. 16 - Taxes other than Income Taxes
Sycamore Gas Company will adjust its utility gross receipts tax expense
to reflect the amount based on the test year distribution margin
recovered in this case at present rates
Gas Service Distribution Revenue Proforma at Present Rates
Less Wholesale customer receipts
Less Bad Debt expense
Receipts subject to Utility Receipts Tax
Utility Receipts Tax Rate
Proforma at Present Rates
Gross Receipts in the test year
Adjustment to Taxes other than Income Taxes
Detail
4,732,605
265,072
7.037.00
4,460,496
1.40%
62,446.94
110,162
Adjustment
IURC Cause No. 45072
Exhibit MJM-2
7 of7
1,000
1,000
(47,715)
(46,715)
Sycamore Gas Company
Calculation of Original Cost Rate Base Net of Accumulated Depreciation
At March 31, 2018
Utility Plant in Service as of September 30, 2017
Utility Plant in Service - Six Months Subsequent to Test Year (March 31, 2018)
CWIP as of March 31, 2018
Total Utility Plant in Service as of March 31, 2018
Accumulated Depreciation as of September 30, 2017
Additional Annualized Depreciation Expense to test year
Depreciation Expense on utility plan added through March 31, 2018
Total Accumulated Depreciation Reserve at March 31, 2018
Total Utility Plant in Service Net of Accumulated Depreciation
Material and Supplies - 13 month Average
Cash Working Capital
Operation and Maintenance Expense as Adjusted
Allowance for 45 days
Total Cash Working Capital
Total Original Cost Rate Base net of Accumulated Depreciation
Detail
30,814,180
291,678
365
15,559,057
29,544
9,475
2,655,366
0.125
IURC Cause No. 45072
Exhibit MJM-3
Adjusted
31,106,223
15,598,076
15,508,147
275,591
331,921
16,115,659
IURC Cause No. 45072
Exhibit MJM-4
Proposed Sycamore Gas Tariff
Sycamore Gas Company Tariff for Gas Service 1.U.R.C. No. G-2
Extension of Company Facilities
Obligation to Serve
Original Sheet No. Page No. 1 of 3
The utility will maintain an obligation to extend its gas facilities to customers subject to
restrictions involved in adding new customers and adding facilities for existing customers also
subject to curtailment provisions found elsewhere in the company's tariff and economic tests
described further below.
Standard Installation
The Company shall provide to any Residential Customer, without charge, a Standard Installation. A Standard Installation shall consist of up to 150 feet of underground service pipe to be supplied by a distribution main operating at 60 psig or less along with a meter and other equipment necessary to provide the service. All costs in excess of such Standard Installation shall be included, along with the cost of distribution mains in the economic tests described below.
The Company will supply a non-Residential Customer served by a distribution main operating at 60 psig or less without charge for a service up to 150 feet of 2-inch Iron Pipe Size or smaller diameter from the main to the service connection at the meter set with a delivery pressure of 10 psig or less. A charge will be applied by the Company for a service in excess of 150 feet.
Upon request for Gas Service by a prospective Customer or a group of prospective Customers (subdivision) located in the same area, the Company will extend without charge its facilities including distribution mains, underground service pipes, meters and other equipment necessary to provide the service, in the following circumstances:
1) That Company's estimate of the present value of its Non-Gas Cost Revenue, calculated at the applicable monthly customer charge and distribution charges under Rate GS provided to the prospective Customer(s) for a period of five and one-half (5.5) years, is equivalent to or in excess of Company's estimate of the following:
a. the cost of installing distribution main(s) and other facilities, and b. the cost in excess of a Standard Installation defined above, and;
2) The prospective Customer must be considered permanent, and the connected load provides an expected usage level to warrant the capital expenditure involved.
Rural Area Extension
Upon request for Gas Service by a prospective Customer in a Rural Area (defined below), or a group of prospective Customers located in the same Rural Area, that is (or are) eligible to receive service under Rate GS - General Service, Company will extend without charge its
Effective: ------Issued by John Browner, President
Sycamore Gas Company
Tariff for Gas Service l.U.R.C. No. G-2
Rural Area Extension (Continued)
Original Sheet No.
Page No. 2 of 3
facilities including regulator stations, distribution mains, underground service pipes, meters and other equipment necessary to provide the service provided:
1) That Company's estimate of the present value of its Non-Gas Cost Revenue, calculated at the applicable monthly customer charge and distribution charges under Rate GS, provided to the prospective Customer(s) for a period of twenty (20) years is equivalent to or in excess of Company's estimate of the following:
a. the cost of such distribution main(s) and other facilities, and b. the cost in excess of a Standard Installation as defined above and;
2) The prospective Customer must be considered permanent, and the connected load provides an expected usage level to warrant the capital expenditure involved and;
3) Company's capital investment in extension of facilities to such Rural Areas pursuant to this section on and after (when TOSIC plan is approved to a period seven (7) years thereafter has not exceeded an amount to be provided in the TOSIC filing)
4) "Rural Area" is defined, for purposes of this section, as any area within Company's service territory that is unincorporated, or other areas as approved by the Commission.
Deposits
If the cost of the facilities necessary to provide the Gas Service requested exceeds the applicable allowance described above; Company may require either a deposit or adequate provision of the payment of a deposit equal to the cost of the facilities extension in excess of the allowance limit.
Any refundable extension deposit accepted by Company shall be subject to refund until the expiration of the six-year contract period. For each Customer connected to the extension, Company shall refund an amount by which five and one-half (5.5) times the estimated annual Non-Gas Cost Revenue described above for gas appliances actually installed exceeds the estimated cost of connecting such Customer. At no time shall the aggregate refund made to any depositor exceed the amount of extension deposit received from such depositor. Any deposit to be refunded will be made on annual installments.
Upon request for Gas Service by a prospective Customer where, in Company's opinion, the facilities extension is of such length and the prospective Non-Gas Cost Revenue which may be developed by it is so meager as to make it doubtful whether the Non-Gas Cost Revenue from the extension would pay a fair return on the investment involved; or, in the case of a real estate development with slight or no immediate demand for service; or in the case of Industrial installations requiring slight or irregular service and requiring extensive equipment.
Effective: _____ _
Issued by John Browner, President
Sycamore Gas Company Tariff for Gas Service 1.U.R.C. No. G-2
Targeted Economic Development Projects
Original Sheet No. Page No. 3 of 3
Targeted Economic Development Projects pursuant to Ind. Code Ch. 8-1-39 are excluded from the provisions above and economics will be determined on a case by case basis
Effective: _____ _
Issued by John Browner, President