Order 15755 - Narr. Elec. Co.: Standard Offer Adjustment Provision

 

STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS

PUBLIC UTILITIES COMMISSION

REPORT AND ORDER

On December 1, 1998, the Narragansett Electric Company (the "Company" or "Narragansett") made a reconciliation and adjustment filing that proposed changes under the Standard Offer Adjustment Provision ("SOAP") charge and the Transmission Service Cost Adjustment Provision. The Company also filed for a rate change to recover the net amount attributable to (i) the 1998 street light revenues associated with the rate increase approved in Docket No. 2290, (ii) refunds issued in 1998 under the Purchased Power and Fuel Adjustment Clauses, and (iii) lost revenues associated with the Cooperative Interruptible Service ("CIS") Credit. All rate changes were filed with the Public Utilities Commission ("Commission") to become effective on January 1, 1999 pursuant to R.I.G.L. section 39-3-10. The proposed rate changes are intended to become effective contemporaneously with the adoption of the lower Transition Charge and the transition to Standard Offer Uniform Rates approved by the Commission in Docket 2773. The intent is to minimize the number of rate changes during the year. [1 See Order No. 15375, dated December 31, 1998.]

A public hearing was held on December 17, 1998. The following appearances were entered in this proceeding:

FOR THE COMPANY                       Ronald T. Gerwatowski

Thomas Robinson

FOR THE DIVISION                          Paul J. Roberti

Chief, Public Utilities Regulatory Unit

Special Assistant Attorney General

FOR THE COMMISSION                 Lindsay Johnson

Special Counsel

I. ADJUSTMENT FACTOR

The Company presented the testimony of Mr. James M. Molloy, Senior Rate Analyst, New England Power Service Company ("NEPSCO"), in support of the proposed change in the SOAP charge and the adjustment factor. Mr. Molloy testified that the total charge of $.00028 per kWh will recover the net cost of a number of items of income and expense. Specifically, the change is intended to (i) recover an under-collection of the cost of Standard Offer service purchased from wholesale suppliers, (ii) recover the cost of Cooperative Interruptible Service credits as allowed in Docket No. 2631, [2 See Order No. 15489, dated July 10, 1998, at p. 16.]  (iii) implement a rate credit to account for a rate increase to Streetlighting customers, and (iv) recover the amount of an over-refund issued to customers in January 1998. The proposed charge is computed as follows:

 [3 This amount represents the estimated balance as of December 31, 1998.]

[4 Ex. NEC-A, Ex. JMM-1, p. 18.]

Under the Company's proposal, all customers would be subject to a charge of $.00028 per kWh on all usage on and after January 1, 1999.

A. UNDER-COLLECTION OF STANDARD OFFER POWER COSTS

On January 1, 1998, Narragansett began purchasing power from New England Power Company ("NEP") under the terms of a settlement agreement dated May 30, 1997 amongst the Company, NEP, the Division of Public Utilities and Carriers ("Division") and the Commission ("Settlement Agreement"). Under the Settlement Agreement rates, Narragansett has been billed for Standard Offer service at the flat rate of 3.2 cents.  [5 See Order No. 15489, dated July 10, 1998, at p. 6.]  While Narragansett could have revised its rates to charge its customers the same flat rate of 3.2 cents, it chose not to do so because this change would have resulted in substantial increases in some customers' bills. [6 Ibid. at pp. 6-7.]  Alternatively, the Company proposed rates that did not recover the cost of Standard Offer service from each customer and were less likely to track and recover the total cost of Standard Offer service.  [7 This problem will not recur because the Commission has approved a Standard Offer Uniform Rate equal to the wholesale Standard Offer rate. See Order No. 15375, dated December 31, 1998.]  Largely due to this fact, the Company has estimated that it has under-recovered the total cost of Standard Offer service by $1,403,041 for the calendar year 1998. [8 Ex. NEC-A, pp. 8, 18.]

B. CIS UNDER-COLLECTION

Until recently,  [9 The credits were discontinued on September 1, 1998.] the Company's rates included a CIS credit that reduced the bills of customers who were willing to have their service interrupted during peak load periods. Because NEP was the beneficiary of the load reductions, it reimbursed Narragansett for any credits issued to retail customers. Under the terms of the Settlement Agreement, NEP ceased reimbursing Narragansett for the credits on January 1, 1998. Narragansett, however, continued the credits in its rates in order to minimize the impact of the Standard Offer rates that went into effect on January 1, 1998. The result is that Narragansett has not recovered the cost of issuing the credits from either NEP or its ratepayers. [10 See Order No. 15489, dated July 10, 1998, at p. 16.]   The proposed adjustment would allow Narragansett to recover $790,964.  [11 This amount includes interest at the rate of 5.21% on the unrecovered balance during the month of February 1998, and 5.14% on the unrecovered balance during the subsequent months of 1998.]

C. STREETLIGHTING RATE INCREASE

In Docket No. 2290, the Company was allowed to phase in an annual increase in the Streetlighting rates to bring the rates more in line with cost. Because Narragansett did not establish a need for additional total revenues, the Commission required these revenues to be credited against the rates of all other customers through a credit to the Purchased Power Cost Adjustment ("PPCA") clause. The amount of 1998 Streetlighting revenues to be credited is $827,494.11. [12 See Ex. NEC-A, p. 30.]

D. EXCESS REFUND

In December 1997, the Commission approved a refund to ratepayers of $.0261 per kWh of usage billed during the month of January 1998. [13 See Order No. 15519, dated February 10, 1998.]  The excess refund resulted from a Commission-ordered refund flowing back to ratepayers overcollections in the Company's fuel and purchase power clauses and in FAS 106 expenses (recovery of post retirement benefit costs as authorized in Docket No. 2045). Mr. Molloy presented detailed calculations establishing that customers received refunds that exceeded the amount owed to customers by $18,183. [14 Ex. NEC-A, p. 38]. The Company is requesting that this excess refund be recovered though the proposed adjustment charge.

E. FINDINGS OF PROPOSED SOAP CHARGE

The Commission has reviewed each of the items included in the proposed SOAP and finds the proposed charge to be fair and reasonable. Accordingly, the Commission approves a SOAP charge of $.00028 to become effective on January 1, 1999 for usage on and after January 1, 1999.

II. TRANSMISSION SERVICE COST ADJUSTMENT FACTOR

The Company presented the testimony of Ms. Pamela A. Viapiano, a NEPSCO Principal Rate Analyst, in support of the proposed Transmission Service Cost Adjustment factor of $.00068 per kWh.

Ms. Viapiano testified that Narragansett takes transmission services primarily from two entities, NEPOOL under Tariff No. 1, and NEP under Tariff No. 9. She testified that while the NEPOOL and NEP rates have increased,  [15 The FERC has permitted the rates under these tariffs to become effective, subject to refund. Ex. NEC-A, p. 112.] primarily because of additions to transmission plant, [16 Ibid. at p. 119.]  Narragansett's transmission rates have not been increased for more than three years. [17 Id.]  The proposed factor has been calculated to recoup the estimated transmission expenses to be incurred for the calendar year 1999 and would increase revenues by approximately $3,400,000 to recover 1999 estimated transmission billings of approximately $23,000,000. [18 Ex. NEC-A, p. 27.]

After reviewing Ms. Viapiano's testimony, the Commission finds the proposed Transmission Adjustment Factor of $.00068 per kWh to be a reasonable estimate and approves it for application to usage on and after January 1, 1999. In approving the rate, however, the Commission notes that the FERC transmission rates are subject to refund and the Commission makes no findings on the amount of transmission costs that ultimately may be found to be reasonable and chargeable to the Company's ratepayers. This determination will be made when the Company files a reconciliation of the actual transmission costs for approval.

(15755) ORDERED

1. That the proposed adjustment factor of $.00028 per kWh is approved to be applied to usage on and after January 1, 1999.

2. That the proposed Transmission Adjustment Factor of $.00068 is approved to be applied to usage on and after January 1, 1999.

3. That the Company shall act in accordance with all other findings and instructions contained in this Report and Order.

EFFECTIVE AT PROVIDENCE, RHODE ISLAND PURSUANT TO AN OPEN MEETING DECISION ON DECEMBER 18, 1998. WRITTEN ORDER ISSUED DECEMBER 31, 1998.

PUBLIC UTILITIES COMMISSION