Public Comment Sessions

UNS Gas, Inc. Application for Approval of a Purchased Gas Adjustor Surcharge

Friday, September 23, 2005 - Flagstaff – 10 AM

Coconino County Administration Building

219 East Cherry

Flagstaff, AZ

Friday, September 23, 2005 – Prescott – 3 PM

Prescott City Hall – Council Chambers

201 S. Cortez

Prescott, AZ

Friday, September 30, 2005 – Lake Havasu City – 10:30 AM

Mohave County Library

Community Room

1770 N. McCulloch

Lake Havasu City, AZ

Friday, September 30, 2005 – Kingman – 3 PM

Mohave County Board of Supervisors Mtg. Room

809 E. Beale St.

Kingman, AZ

PHOENIX – In an effort to increase dialogue with the public on a request from UNS Gas, Inc (“UNS”) to increase a surcharge used to cover higher natural gas costs, the Arizona Corporation Commission will be holding public comment sessions in key parts of the UNS service territory. 

The public comment sessions will be held in Flagstaff, Prescott, Lake Havasu City and Kingman.  The sessions will include presentations by Commission Staff on natural gas prices and recommendations regarding UNS’ surcharge request, followed by Commissioner comment and an open forum for comment from customers and the general public on these matters.    

A Commission vote on UNS’ application has not yet been scheduled but could occur as early as the October 18-19, 2005 Commission Open Meeting.  When voting at the Open Meeting, the Commissioners have considerable latitude to decide how they wish to address the application and are not bound by UNS’ request or the recommendations offered by Commission Staff.  The Commissioners will not take any substantive vote during the public comment sessions scheduled for September 23^rd and 30^th. 

While the sessions are directly linked to the pending UNS application, they are also part of a broader effort by the Commissioners to ensure the public is aware of natural gas price issues and is prepared for the impact of winter heating bills.  Just as electricity use peaks in the summer because of air conditioning, natural gas use increases in the winter due to heating—Arizona’s residential consumers use about seven times as much natural gas in January as they do in August. 

The UNS Application

On August 17, 2005, UNS filed for Commission approval of a purchased gas adjustor (PGA) surcharge of $0.27 per therm.  Previously in Commission Decision No. 67730 (March 31, 2005) the Commissioners approved a $0.03 per therm PGA surcharge, until the PGA bank balance reaches zero or the Commission alters the order.  (Note: This $0.03 surcharge is still active, so the new UNS request for $0.27 is actually a $0.24 increase over the existing surcharge.) 

UNS’ application cites the ongoing high cost of natural gas and the upcoming increased cost for service on the El Paso Natural Gas (EPNG) Company’s interstate pipeline system as factors leading to the UNS application.  Further, UNS has stated that its unrecovered natural gas purchase costs have continued to rise even with the existing $0.03 surcharge.  UNS has indicated that the total proposed surcharge is comprised of approximately $0.19 per therm for natural gas costs and $0.08 per therm for increased cost of gas transport service on the EPNG pipeline.

The Commission Staff Report

The Commission Staff Report (September 12, 2005) regarding the UNS application is, in effect, the Staff’s recommendation to the Commissioners.  Staff recommends, for a twelve-month period beginning November 1, 2005, implementation of the $0.19 per therm portion of the UNS request related to higher natural gas costs.  Beginning in January 2006, the Commission Staff recommends an additional $0.06 per therm PGA surcharge to reflect higher EPNG costs anticipated by UNS. This would bring the PGA surcharge total to $0.25 per therm through the end of October 2006, when the $0.25 per therm surcharge would end.  The Staff, however, recommends a new $0.05 per therm surcharge begin on November 1, 2006 and remain in effect until the PGA bank balance reaches zero or the Commission alters its order. 

(Note: the UNS application addresses only the surcharge required to address undercollection, not the monthly PGA rate which will also be impacted by higher natural gas costs.  If no surcharge change were implemented, customers would still see higher bills because of the monthly PGA rate changes.  In addition, the balance representing the amount owed to UNS due to PGA undercollections would continue to grow.)

To address the needs of lower-income Arizonans in UNS service territory, the Commission Staff recommends that UNS customers being served under the Customer Assistance Residential Energy Support (“CARES”) tariff be exempt from paying any per therm surcharge amounts. 

Analysis

Table 1 below shows what an average residential customer, using 105 therms, paid in January 2005.  The table also projects bills for the same customer in January 2006 under (1) UNS’ application; (2) Commission Staff recommendations; and (3) No Surcharge Change.

Table 1.  Comparison of Three Options

Table 2 below shows a timeline of the PGA surcharge amounts requested by UNS relative to the amounts recommended by the Commission Staff.

Table 2.  Comparison of Surcharge Timeline Options

Glossary

Purchased Gas Adjustor Mechanism (PGA) – a Commission-approved mechanism through which the utility is allowed to recover the cost of the natural gas commodity and the cost of interstate pipeline transportation to deliver natural gas to the utility’s distribution system.

PGA Bank Balance – The difference between the amount of money the utility has paid for natural gas costs and the amount of money the utility has collected from its customers to pay for on-going natural gas costs.  When the utility has spent more money than it has collected from customers, the PGA bank balance is termed to be undercollected and when the utility has spent less money than has been collected from customers, the PGA bank balance is considered to be overcollected.

Monthly PGA Rate – An additional per therm rate that is recalculated monthly to reflect the changing cost for UNS to purchase natural gas over the most recent 12 month period.  The monthly PGA rate is limited to a change of no greater than $0.10 per therm over a twelve month period.

PGA Surcharge – A temporary additional per therm charge approved by the Commission for the general purpose of addressing when the utility’s PGA bank balance becomes undercollected by a large amount.

Therm – The unit of measure for billing customers for natural gas usage.  One therm equals 100,000 British thermal units (Btu’s).  One Btu is the amount of heat required to increase the temperature of one pound of water from 60° to 61°F at a constant pressure of one atmosphere.