BEFORE THE PUBLIC SERVICE COMMISSION
STATE OF MISSOURI

In the Matter of the tariff filing of		)	
Aquila, Inc. d/b/a Aquila			)	Case No. GT-2003-0038
Networks - L&P				)	Tariff No. 200300096
						)
In the matter of the tariff filing of		)	Case No. GT-2003-0039
Aquila, Inc. d/b/a Aquila			)	Tariff No. 200300095
Networks - MPS				)

						Consolidated 

STAFF’S SUGGESTIONS IN SUPPORT OF THE UNANIMOUS STIPULATION AND AGREEMENT

	COMES NOW the Staff of the Missouri Public Service Commission (Staff) and respectfully submits Staff’s Suggestions in Support of the Unanimous Stipulation and Agreement (Stipulation and Agreement) for approval by the Commission. 
BACKGROUND
	On August 2, 2002, Aquila, Inc. d/b/a Aquila Networks-L&P and Aquila, Inc. d/b/a Aquila Networks-MPS (Aquila) submitted proposed tariff sheets dealing with natural gas aggregation for schools pursuant to § 393.310 RSMo Supp. 2002.  The sheets bore a proposed effective date of October 1, 2002.  Subsequently, following discussions among the parties, a Joint Motion to Reconsider a Commission Order, the Commission issued and Order on September 10, 2002, directing Aquila to file new tariffs bearing an effective date of November 1, 2002.  
	On August 13, 2002, a procedural conference was held, and the date of August 26, 2002, was set for the submission of a proposed procedural schedule.  On August 22, 2002, the Commission granted the Association intervention.  On August 23, 2002, a technical conference involving all of the parties was held.  On August 26, the Staff in this case filed a proposed procedural schedule.
	The parties held several discussions concerning the content of the proposed tariff, the intentions of the General Assembly in passing the new legislation, and the most practical means to accomplish the intention of the legislation.  As a result of those discussions, the parties have agreed a Stipulation and Agreement, which resolves all issues in this proceeding.
RESOLUTION OF ISSUES
	Tariff Sheets.   
	Aquila filed tariff sheets on August 2, 2002.  While it is true that Aquila missed the exact deadline required by Section 393.310.3 RSMo 2002, Staff believes that Aquila has substantially complied with the statute.  The proposed attached tariff sheets bear an effective date of October 29, 2002.  These dates are within the mandates of Section 393.310.5 RSMo 2002.  The specific tariff sheets filed as Appendix A and Appendix B to the Unanimous Stipulation and Agreement bear an effective date of October 29, 2002, to take effect to correspond to the start of billing cycles of Aquila.  This should reduce the costs to Aquila implement the program.  
	Aquila’s proposed experimental tariff filing states a termination date of June 30, 2005 (Aquila Proposed Tariff Sheet No. 32.9 in Appendix A and Proposed Sheet No. 32.9 in Appendix B).  This complies with Section 393.310 RSMo Supp. 2002.  The Aquila proposed experimental tariff permits aggregation for the Missouri school entities and Staff believes that this complies with Section 393.310 RSMo Supp. 2002.  The proposed experimental tariff provides for the eligible school entities at multiple meter locations as required by the statute.   
	Aquila’s proposed experimental tariffs comply with the statute by exempting schools with usage of less than one hundred thousand (100,000) therms annually from mandatory telemetry.  
Revenue Impact.  Staff is not aware of any detriment to Aquila caused by its proposed aggregation tariffs.  Staff concurs with the other parties in the belief that the agreed-upon changes to Aquila’s transportation procedures reflected in the proposed tariff sheets will not result in a material change to its revenue requirement.  
As noted by the parties in the Stipulation and Agreement, the Commission should be aware that the revenue generated by the $.004 per therm cap in Section 393.310 RSMo Supp. 2002 for aggregation and balancing services in the first year may be insufficient to cover all of Aquila’s incremental costs.  If necessary, Aquila may be allowed to charge more to cover its actual incremental costs in the second and third year of the program.  
Based upon information recorded by Aquila, Staff will track incremental costs.  Staff defines incremental costs as only those costs that occur because of this experimental program.  This is the specific purpose of the reporting requirement found in the Stipulation and Agreement in Paragraph 6.  Aquila is obligated, by Paragraph 6 of the Unanimous Stipulation and Agreement to report on or before June 1 of each year of the program, to provide records of the revenues generated and expenses incurred as a result of this experimental program.  These records are to be provided to the Staff and OPC and categorized in sufficient detail to permit the Staff and OPC to determine what under- or over-recovery of expenses may be taking place at that time and to determine what changes in aggregation and/or balancing fees may be appropriate at that time to prevent any harm to the groups identified in section 393.310 RSMo Supp. 2002.  
Staff believes that the statute can reasonably be construed to mean that that the Commission may, no later than November 1st of each year of the experimental program, implement any adjustments in aggregation or balancing fees deemed appropriate to comply with section 393.310 RSMo Supp. 2002.
	Legislative Requirements.   
	The legislation provides that the Commission “shall approve such tariffs upon finding that implementation of the aggregation program set forth in such tariffs will not have any negative financial impact on the gas corporation, its other customers or local taxing authorities, and that the aggregation charge is sufficient to generate revenue at least equal to all incremental costs caused by the experimental aggregation program.” § 393.310.5 RSMo Supp. 2002.
	Staff has reviewed and considered this legislation.  This includes consideration of latent internal inconsistencies in the legislation, including, but not limited to, the conflict between the “hold harmless” provisions in subsection 5 and the first year price cap provision for an “aggregation and balancing fee” in subdivision (2) of subsection 4.  Staff and the other parties discussed practical alternatives consistent with the overall intention of the legislation to launch an experimental program to afford a means of natural gas aggregation and transportation to school districts and individual schools in the state.  Staff and the other parties also considered the specific findings that the Commission is required by § 393.310.5 RSMo Supp. 2002 to make in order to approve the proposed tariffs.
	Staff believes that the illustrative tariff sheets in Appendix A and Appendix B attached to the Unanimous Stipulation and Agreement have been designed to preclude material financial impacts on local taxing authorities by requiring eligible school entities to agree to pay to local taxing authorities amounts similar to local taxes or similar fees levied on Aquila’s revenues from sales customers.  This means that actual gas costs incurred by the school districts will be the basis for determining the amount of taxes due.  Tariff Sheet 56 contains provisions regarding the payment of gross receipts taxes.  
	In order for Staff to monitor the remittance of the payments, Staff recommends that the Commission order the Missouri School Boards’ Association to file a report documenting the aggregator’s payments by June 1 of each year of the program.  This report should be categorized in sufficient detail to permit the Staff and OPC to determine what changes may have taken place in amounts of taxes paid.  
Staff asserts that the illustrative tariff sheets in Appendix A and Appendix B have been designed to preclude negative, material financial impacts on Aquila by including new aggregation and balancing fees.  Aquila’s proposed new aggregation and balancing fees are set at the $.004 per therm limit allowed by the statute for the first year.  
	Staff asserts that the illustrative tariff sheets in Appendix A and Appendix B have been designed to preclude negative, material financial impacts on the other customers of Aquila.  Staff believes that there are no material changes to the tariffs of other Aquila customers occurring at this time.  While it is true that Aquila is filing new tariffs applicable to the small volume class, it is Staff’s opinion that there is no material change in the small volume class tariffs and such tariffs should be approved.  Staff Witness Imhoff noted in his testimony that Staff recommended approval of Aquila’s small volume aggregation/transportation tariffs.  There are no requested rate changes and changes being made provide more clarity in the tariffs (Imhoff Testimony at p. lines 13-18).  Staff also believes that capacity is being released to participating customers, and that it is appropriate to credit any capacity release revenues received from this program back to the current PGA customers.  PGA credits are also contemplated for balancing fees collected under the program.  
The illustrative tariff sheets in Appendix A and Appendix B have been designed with an aggregation charge.  Neither Staff nor any of the other parties can, at this time, attest without limitation that the specific charge is “sufficient to generate revenue at least equal to all incremental costs caused by the experimental aggregation program.”  Given that this is a new provision, and there are no facts or experience as to what the costs will be, how many customers may be served by the provision, or what volumes will be transported, there is simply no way at this time to make an unqualified representation on this particular point.  As stated in the Stipulation, the parties do assert that given the overall structure of the new tariff provisions, they have attempted to minimize the costs covered by the charge.  Staff believes that this is adequate support for a Commission finding that the aggregation charge is sufficient to generate revenue at least equal to all incremental costs caused by the experimental aggregation program under Section 393.310.5 RSMo Supp. 2002.   
This is merely an acknowledgement that Aquila’s actual experience under this experimental program may be considerably different from the estimates that were, of necessity, used in the development of the provisions.  Staff and the other parties will be watching for any unforeseen complications or circumstances that no one has yet discovered or fully appreciated.  
Section 393.310.5 also requires the Commission to find that implementation of the aggregation program set forth in such tariffs will not have any negative financial impact on the gas corporation, its other customers or local taxing authorities.  While the parties believe that the program is designed to meet these purposes, it is also necessary to acknowledge that this is an experimental program and that data will only be derived from actual implementation of the program.  If necessary, Staff will work with Aquila to alleviate any unforeseen negative financial impact from this program by suggesting changes and reviewing any changes proposed by Aquila.  
		WHEREFORE, Staff respectfully requests that the Commission issue its Order:
	a)	Approving all of the specific terms and conditions of this Stipulation and Agreement; 
b)	Admitting the pre-filed testimony into the record; 
c)	Adopting Staff’s suggested reporting by Aquila;
	d)	Adopting Staff’s suggested reporting by the Missouri School Boards’ Association as set forth herein; and,
e)	Granting such further relief as the Commission should find reasonable and just.

						Respectfully submitted,

										
						DANA K. JOYCE
						General Counsel

						/s/ Robert V. Franson
					__________________________________________
						Robert V. Franson 	MBE # 34643
						Associate General Counsel
						Missouri Public Service Commission
						P.O. Box 360
						Jefferson City, MO 65102
						Tel:   (573) 751-6651
						Fax:   (573) 751-9285
						Email: 
						Attorney for the Staff of the Public Service 								Commission

Certificate of Service

I hereby certify that copies of the foregoing have been mailed, hand-delivered, transmitted by facsimile or e-mailed to all counsel of record this Tuesday, September 24, 2002.

							/s/ Robert V. Franson
____________________________________