BEFORE THE PUBLIC SERVICE COMMISSION
STATE OF MISSOURI

In the Matter of the Tariff Filing of Missouri 	)	
Gas Energy, a division of Southern Union		) 	Case No. GT-2003-0033
Company. 						)	Tariff No. JG-2003-0049

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 1, 2002, MGE 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 September 24, 2002.  By letter dated August 14, 2002, MGE extended the proposed effective date to October 28, 2002. 
	On August 13, 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 to the following Stipulation and Agreement, which resolves all issues in this proceeding.

RESOLUTION OF ISSUES
	Tariff Sheets.   
	MGE timely filed tariff sheets by August 1, 2002 as required by Section 393.310.3 RSMo 2002.  MGE put an initial effective date of August 24, 2002 on the tariff sheets, and voluntarily extended it to November 1, 2002.  These dates are within the mandates of Section 393.310.5 RSMo 2002.  The specific tariff sheets filed as Appendix A to the Unanimous Stipulation and Agreement bear an effective date of October 28, 2002, to take effect to correspond to the start of billing cycles of MGE.  This should reduce the costs to MGE to implement the program.  
	MGE’s proposed experimental tariff filing states a termination date of June 30, 2005 (MGE Proposed Tariff Sheet No. 54).  This complies with Section 393.310 RSMo Supp. 2002.  The MGE 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.   
	MGE’s proposed experimental tariffs comply with the statute by exempting school 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 MGE caused by its proposed aggregation tariffs.  Staff concurs with the other parties in the belief that the agreed-upon changes to MGE’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 Section 393.310 RSMo Supp. 2002 for aggregation and balancing services in the first year may be insufficient to cover all of MGE’s incremental costs.  If necessary, MGE 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 MGE, 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.  MGE is obligated, by Paragraph 6 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 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 MGE’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.  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 have been designed to preclude negative, material financial impacts on MGE by including new aggregation and balancing fees.  MGE’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 have been designed to preclude negative, material financial impacts on the other customers of MGE, since no changes to the tariffs of other MGE customer classes are being proposed at this time.  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 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 MGE’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 MGE to alleviate any unforeseen negative financial impact from this program by suggesting changes and reviewing any changes proposed by MGE.  
	Tariff Sheet 56 has a provision on capacity release.  The Tariff Sheet enumerates specific provisions regarding capacity release.  This includes a provision that the Company will make available up to 4,500 MMBtu/day of pipeline capacity on the Williams Gas Pipeline Central System.  Any additional capacity that is needed will be made available on the Kansas Pipeline Operation Company System.  Staff supports this provision because it addresses the operational and fiscal needs of the eligible school entities and of the Company.  Staff supports the balance of the provisions regarding capacity release. 	
	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 the Missouri School Board’s Association as set forth herein; and,
d)	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 17, 2002.

							/s/ Robert V. Franson
							____________________________________