October 13,2017

VU HAND DELIVERY Ms. Ingrid Ferrell Executive Secretary Public Service Commission of West 201 Brooks Street Charleston, WV 25301

MOUNTAINEER GAS COMPANY Infrastructure Replacement and Expansion Program filing for 20 18.

Dear Ms. Ferrell:

Please find enclosed for filing on behalf of the Energy Users Group an original and twelve (1 2) copies of the "Direct Testimony and Exhibits of Richard A. Baudino" being filed in the above-referenced case.

Please contact me if you have any questions concerning this filing.

Sincerely,

Lara R. Brandfass (W State Bar #12962) Susan J. Riggs (WV State Bar #5246 lbrandfass@,spilmanlaw.com sr&gs@,spiImanlaw.com

Barry A. Naum (WV State Bar #12791) Derrick Price Williamson bnaurn@,spilmanlaw.com dwilliarnson@,spilmanlaw.com

LRB:sds: 10245701 Enclosures C: Certificate of Service

Spilman Thomas & Battle. PLLC

300 Kariawha Boulevard, East 1 PO Box 273 ~ Charleston. WV 25321 -0273 1 West Virginia 1 North Carolina j Pennsylvania 1 Virginia 1 spilmanlaw.com CERTIFICATE OF SERVICE

I, Susan J. Riggs, counsel to the West Virginia Energy Users Group, do hereby certify that on this 13'h day of October, 2017, a copy of the foregoing "Direct Testimony and Exhibits of

Richard A. Baudino I' was served upon the parties and/or counsel of record in this proceeding as follows:

VIA HAND DELIVERY

Linda Bouvette, Esquire Staff Attorney Public Service Commission of West Virginia 201 Brooks Street Charleston, WV 25301 Counsel for Commission Staff

VIA U.S. MAIL

Christopher L. Callas, Esquire Stephen N. Chambers, Esquire Nicklaus A. Presley, Esquire Jackson Kelly PLLC P.O. Box 553 Charleston, WV 25322-0553 Counsel for Mountaineer Gas Company

Tom White, Esquire Consumer Advocate Division 700 Union Building 723 Kanawha Boulevard, East Charleston, WV 2530 1 Counsel for Consumer Advocate Division

PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON

CASE NO. 17-1066-G-390P MOUNTAINEER GAS COMPANY Infrastructure Replacement and Expansion Program Filing for 2018.

DIRECT TESTIMONY OF RICHARD A. BAUDINO

1 Q. Please state your name and business address.

2 A. My name is Richard A. Baudino. My business address is J. Kennedy and Associates, Inc.

3 ("Kennedy and Associates"), 570 Park Drive, Suite 305, Roswell, Georgia

4 3 0075.

5

6 Q. What is your occupation and by whom are you employed?

7 A. I am a consultant to J. Kennedy and Associates.

8

9 Q. Please describe your education and professional experience.

10 A. I received my Master of Arts degree with a major in Economics and a minor in Statistics

11 from New Mexico State University in 1982. I also received my Bachelor of Arts Degree

12 with majors in Economics and English from New Mexico State in 1979. I began my

13 professional career with the New Mexico Public Service Commission Staff in October

14 1982 and was employed there as a Utility Economist. During my employment with the

15 Staff, my responsibilities included the analysis of a broad range of issues in the

16 ratemaking field. Areas in which I testified included cost of service, rate of return, rate

J. Kennedy and Associates, Inc. Richard A. Baudino Page 2 1 design, revenue requirements, analysis of sale/leasebacks of generating plants, utility

2 finance issues, and generating plant phase-ins.

3

4 In October 1989, I joined the utility consulting firm of Kennedy and Associates as a

5 Senior Consultant where my duties and responsibilities covered substantially the same

6 areas as those during my tenure with the New Mexico Public Service Commission Staff.

7 I became Manager in July 1992 and was named Director of Consulting in January 1995.

8 Currently, I am a consultant with Kennedy and Associates.

9

10 Exhibit-(RAB- 1) summarizes my expert testimony experience.

11

12 Q. On whose behalf are you testifying?

13 A. I am testifying on behalf of the West Virginia Energy Users Group ("WVEUG").

14

15 Q. What is the purpose of your Direct Testimony?

16 A. The purpose of my Direct Testimony is to recommend that the Public Service

17 Commission of West Virginia (''PSC'' or "Commission") adopt certain consumer

18 protections as part of its decision regarding approval of Mountaineer Gas Company's

19 ("Mountaineer" or "Company") proposed Infrastructure Replacement and Expansion

20 Program (lIIREP").

J. Kennedy and Associates, Inc. Richard A. Baudino Page 3 I Q. What are the consumer protections that you recommend be adopted by the

2 Commission in this proceeding?

3 A. I recommend that the following protections be adopted by the Commission for

4 implementation in the Company's IREP:

1. The yearly cap on IREP-related rate increases from current authorized tariff rates

should be limited to 3.75% of the Company's total revenues authorized in the last

8 base rate case.

9

I0 2. The cumulative cap on customer IREP-related rate increases over currently

11 authorized tariff rates should be limited to 7.5% of the Company's total revenues

12 authorized in the last base rate case.

13

14 3. The Company should not be permitted to implement an IREP Rate Component

15 after an IREP investment base reset following a base rate case order or, if an

16 annual IREP Rate Component is already in place, to increase the existing IREP

17 Rate Component with a subsequent calendar year's incremental projected

18 investment in IREP Facilities, if the Company's achieved return on average equity

19 investment, as reflected in its audited financial statements for the preceding

20 calendar year prepared using generally accepted accounting principles and

21 measured on a calendar year basis, exceeds the authorized return on common

22 equity set in the Company's most recent base rate case. If one of these situations

23 occurs, then the Company could still make its IREP filing for purposes of

J. Kennedy and Associates, Inc. Richard A. Baudino Page 4 1 maintaining the existing IREP Rate Component (if any) and addressing any

2 needed reconciliations of costs and revenues from previous years.

3

4 Q* Did the Commission adopt these consumer protections in another proceeding?

5 A. Yes. In its Order in Case No. 16-0550-W-DSIC involving West-Virginia American

6 Water Company ("WVA WC"), the Cornmission approved a Joint Stipulation and

7 Agreement for Settlement ("Settlement") that enabled WVAWC to implement a

8 Distribution System Improvement Charge (''DSIC'') as an infrastructure replacement cost

9 recovery mechanism similar to those authorized for natural gas utilities under Senate Bill

10 390 ("S.B. 390"). 'WV'EUG participated in that proceeding and joined the settlement and

11 believes that those customer protections are important components and principles of not

12 only the DSIC but of any of infrastructure replacement charges. The Settlement in the

13 WVAWC case is attached to my Direct Testimony as Exhibit-(RAB-2). The

14 consumer protections that were approved by the Commission begin in paragraph 9(g) on

15 page 6 and continue through page 8.

16

17 Q. Please provide the basis for your recommendation of yearly and cumulative rate

18 caps associated with the IREP.

19 A. In order to mitigate future rate impacts on West Virginia ratepayers from Mountaineer's

20 IREP, I recommend that the yearly increase to the Company's tariff rates be limited to

21 3.75% of the Company's authorized revenues and that the total cumulative increase be

22 limited to 7.5% of those authorized revenues. Given the expedited cost recovery

23 treatment afforded investments that flow through Mountaineer's IREP, it is a just and

J. Kennedy and Associates, Inc. Richard A. Baudino Page 5 1 reasonable quid pro quo that customers receive some form of protection from excessive

2 future rate increases that may flow through Mountaineer's REP.

3

4 Furthermore, I am concerned that without such caps, the Company could continue to

5 increase IREP investments to the degree that a base rate case filing becomes unnecessary

6 from the Company's perspective, or at least would be delayed indefinitely. I believe that

7 traditional base rate cases are important components of the regulatory process by

8 reconciling all of a utility's costs and revenues, moving surcharge investments into rate

9 base, and also providing additional assurances of both reasonable returns on equity

10 ("ROE") and just and reasonable allocation of costs among customers. For that reason, i

11 believe that caps on IREP charges may provide an additional incentive for the Company

12 to continue to seek base rate adjustments when necessary without placing any undue

13 burdens on the Company in the meantime.

14

15 Q. Why should an earnings test be approved by the Commission?

16 A. One of the purposes of infrastructure recovery plans is to help prevent significant

17 earnings erosion to the utility company from ongoing investments in non-revenue

18 producing infrastructure replacement between rate cases. If Mountaineer's actual earned

19 ROE is equal to or greater than its last authorized return on equity before the

20 implementation of an IREP-related revenue increase, then there is no good reason for the

21 Company to increase its charges to West Virginia ratepayers in order to shore up its

22 earnings due to infrastructure replacement investments. Such rate increases would

23 actually cause Mountaineer to earn an excessive ROE.

J. Kennedy and Associates, Inc. Richard A. Baudino Page 6

1 Q. The consumer protections you recommend were approved for a water utility

2 (WVAWC). Are these protections appropriate for a gas distribution utility like

3 Mountaineer?

4 A. Yes, most definitely. The fundamental reasons for programs like Mountaineer's IREP

5 and WVAWC's DSIC are basically the same. For gas distributors, the IREP was created

6 by the passage of S.B. 390, which enabled West Virginia gas companies to receive

7 expedited cost recovery of infrastructure replacement, upgrade, and expansion project

8 deemed just and reasonable by the PSC. Therefore, customer protections for West

9 Virginia water customers subject to a DSIC should also be afforded to gas customers

1C subject to an REP. Given that West Virginia now has two separate mechanisms for

11 infrastructure investments and surcharges (Le., the S.B. 390 mechanisms for the gas

12 utilities and a DSIC mechanism for WVAWC), I believe that these additional customer

13 protections advance an important policy goal of uniformity among these state-wide

14 infrastructure programs .

15

16 Q. Is there an alternative that the Commission could pursue to achieve the objectives

17 that you have outlined?

18 A. Yes. The Commission could also institute a rulemaking proceeding. While I understand

19 from counsel that the Commission has previously denied a petition for a rulemaking

20 proceeding, the current status of varying infrastructure programs and charges may make a

21 rulemaking proceeding more relevant and desirable from the Commission's perspective.

22 Additionally, a rulemaking proceeding could give the Commission and parties the

23 opportunity to fully resolve other questions that have been contested in these

J. Kennedy and Associates, Inc. Richard A. Baudino Page 7

1 proceedings, such as the classification of costs and expenses that can be included in the

2 programs, base rate treatment of completed and ongoing infrastructure investments,

3 depreciation offsets, etc.

4

5 Q. Does this conclude your Direct Testimony?

6 A. Yes.

J. Kennedy and Associates, Inc.

Exhibit No. -(RAB-l) Page 1 of 16

RESUME OF RICHARD A. BAUDINO

EDUCATION

New Mexico State University, M.A. Major in Economics Minor in Statistics

New Mexico State University, B.A. Economics English

Thirty-two years of experience in utility ratemaking and the application of principles of economics to the regulation of electric, gas, and water utilities. Broad based experience in revenue requirement analysis, cost of capital, rate of return, cost and revenue allocation, and rate design.

REGULATORY TESTIMONY

Preparation and presentation of expert testimony in the areas of:

Cost of Capital for Electric, Gas and Water Companies Electric, Gas, and Water Utility Cost Allocation and Rate Design Revenue Requirements Gas and Electric industry restructuring and competition Fuel cost auditing Ratemaking Treatment of Generating Plant Sale/Leasebacks Exhibit No. -(RAB-l) Page 2 of 16

RESUME OF RICHARD A. BAUDINO

EXPERIENCE

1989 to Present: Kennedy and Associates: Director of Consulting, Consultant - Responsible for consulting assignments in revenue requirements, rate design, cost of capital, economic analysis of generation alternatives, electric and gas industry restructuring/competition and water utility issues.

1982 to 1989: New Mexico Public Service Commission Staff: Utility Economist - Responsible for preparation of analysis and expert testimony in the areas of rate of return, cost allocation, rate design, finance, phase-in of electric generating plants, and sale/leaseback transactions.

CLIENTS SERVED

Louisiana Public Service Commission Georgia Public Service Commission New Mexico Public Service Commission

Other Clients and Client Groups

Ad Hoc Committee for a Competitive PSI Industrial Group Electric Supply System Large Power Intervenors (Minnesota) Air Products and Chemicals, Inc. Tyson Foods Arkansas Electric Energy Consumers West Virginia Energy Users Group Arkansas Gas Consumers The Commercial Group AK Steel Wisconsin Industrial Energy Group Armco Steel Company, L.P. South Hospital and Health Care Assn. Assn. of Business Advocating PP&L Industrial Customer Alliance Tariff Equity Philadelphia Area Industrial Energy Users Gp. Atmos Cities Steering Committee West Penn Power Intervenors Canadian Federation of Independent Businesses Duquesne Industrial Intervenors CF&I Steel, L.P. Met-Ed Industrial Users Gp. Cities of Midland, McAllen, and Colorado City Penelec Industrial Customer Alliance Climax Molybdenum Company Penn Power Users Group Cripple Creek & Victor Gold Mining Co. Columbia Industrial Intervenors General Electric Company U.S. Steel & Univ. of Pittsburg Medical Ctr. Holcirn (U.S.) Inc. Multiple Intervenors IBM Corporation Maine Office of Public Advocate Industrial Energy Consumers Missouri Office of Public Counsel Industrial Utility Consumers University of Massachusetts - Amherst Kentucky Office of the Attorney General WCF Hospital Utility Alliance Lexington-Fayette Urban County Government West Travis County Public Utility Agency Large Electric Consumers Organization Steering Committee of Cities Served by Oncor Newport Steel Utah Office of Consumer Services Northwest Arkansas Gas Consumers Healthcare Council of the National Capital Area Maryland Energy Group Vermont Department of Public Service Occidental Chemical Exhibit No. -(RAB-1) Page 3 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Partv Utilitv Subject

10183 1803, NM New Mexico Public Southwestem Electric Rate design. 1817 Service Commission coop.

11/84 1833 NM New Mexico Public El Paso Electnc Co. Service contract approval, Service Commission rate design, performance standards for Palo Verde nuclear generating system

1983 1835 NM New Mexico Public Public Service Co. of NM Rate design. Service Commission

1984 1848 NM New Mexico Public Sangre de Cristo Rate design Service Commission Water Co.

02/85 1906 NM New Mexico Public Southwestern Rate of return. Seriice Commission Public Service Co.

09/85 1907 NM New Mexico Public Jornada Water Co. Rate of return Service Commission

11/85 1957 NM New Mexico Public Southwestern Rate of return. Service Commission Public Service Co.

04/86 2009 NM New Mexico Public El Paso Electric Co Phase-in plan, treatment of Service Commission saldleaseback expense.

06/86 2032 NM New Mexico Public El Paso Electric Co. Saleileaseback approval. Service Commission

09/86 2033 NM New Mexico Public El Paso Electric Co Order to show cause, PVNGS Service Commission audit.

02/87 2074 NM New Mexico Public El Paso Electric Co. Diversification. Service Commission

05/87 2089 NM New Mexico Public El Paso Electric Co Fuel factor adjustment. Service Commission

08/87 2092 NM New Mexico Public El Paso Electric Co. Rate design. Service Commission

10/87 2146 NM New Mexico Public Public Service Co. Financial effects of Service Commission of New Mexico restructuring, reorganization

07/88 2162 NM New Mexico Public El Paso Electric Co. Revenue requirements, rate Service Commission design, rate of return.

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-l) Page 4 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

01/89 2194 NM New Mexico Public Plains Electric G&T Economic development. Service Commission Cooperative

1/89 2253 NM New Mexico Public Plains Electric G&T Financing Service Commission Cooperative

08/89 2259 NM New Mexico Public Homestead Water Co. Rate of return, rate Service Commission design.

10189 2262 NM New Mexico Public Public Service Co. Rate of return Service Commission of New Mexico

09/89 2269 NM New Mexico Public Ruidoso Natural Rate of return, expense Service Commission Gas Co. from affiliated interest.

12/89 89-208-TF AR Arkansas Electric Arkansas Power Rider M-33 Energy Consumers & Light Co.

01/90 U-17282 LA Louisiana Public Gulf States Cost of equity. Seivice Commission Utilities

09/90 90-158 KY Kentucky Industrial Louisville Gas Cost of equity, Utility Consumers & Electric Co.

09/90 90-004-U AR Northwest Arkansas Arkansas Western Cost of equity, Gas Consumers Gas Co. transportation rate.

12/90 U-17282 LA Louisiana Public Gulf States Cost of equity. Phase IV Service Commission Utilities

04/91 91-0374 AR Northwest Arkansas Arkansas Western Transportationrates. Gas Consumers Gas Co.

12/91 91-410- OH Air Products & Gas & Cost of equity. EL-AIR Chemicals, Inc., Electric Co. Armco Steel Co., General Electric Co., Industrial Energy Consumers

05/92 910890-El FL Occidental Chemical Florida Power Corp Cost of equity, rate of cop. return.

09/92 92-0324 AR Arkansas Gas Arkansas Louisiana Cost of equity, rate of Consumers Gas Co. return. cost-of-service.

09/92 39314 ID Industrial Consumers Michigan Cost of equity, rate of for Fair Utility Rates Power Co. return.

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-l) Page 5 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Partv Utility Subject

09/92 92-0094 AR Tyson Foods General Waterworks Cost allocation, rate design.

01/93 92-346 KY Newport Steel Co Union Light, Heat Cost allocation. a Power Co.

01/93 39498 IN PSI Industrial PSI Energy Refund allocation. Group

01/93 U-10105 MI Association of Michigan Return on equity. Businesses Consolidated Advocating Tariff Gas Co. Equality (ABATE)

04/93 92-1464- OH Air Products and Cincinnati Gas Return on equity EL-AIR Chemicals, Inc., & Electric Co. Armco Steel Co., Industrial Energy Consumers

09/93 93-1894 AR Arkansas Gas Arkansas Louisiana Transportation service Consumers Gas Co. terms and conditions.

09/93 93-081-U AR Arkansas Gas Arkansas Louisiana Cost-of-service,transportation Consumers Gas Co. rates, rate supplements; return on equity; revenue requirements.

12/93 U-17735 LA Louisiana Public Cajun Electric Historical reviews; evaluation Service Commission Power Cooperative of economic studies. Staff

03/94 10320 KY Kentucky Industrial Louisville Gas 8. Trimble County CWlP revenue Utility Customers Electric Co. refund.

4/94 E-0151 MN Large Power Intervenors Minnesota Power Evaluation of the cost of equity, GR-94-001 co. capital structure, and rate of return.

5/94 R-00942993 PA PG&W Industrial Pennsylvania Gas Analysis of recovery of transition Intervenors &Water Co. costs.

5/94 R-00943001 PA Columbia Industrial Columbia Gas of Evaluation of cost allocation, Intervenors Pennsylvania rate design, rate plan, and carrying charge proposals.

7/94 R-00942986 PA Armco, Inc., West Penn Power Return on equity and rate of West Penn Power co. return. Industrial Intervenors

7/94 94-0035- WV West Virginia Monongahela Power Return on equity and rate of E-42T Energy Users’ Group co. return.

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-I) Page 6 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

6/94 8652 MD Westvaco Corp Potomac Edison Return on equity and rate of co. return.

9/94 9303574 AR West Central Arkansas Arkansas Oklahoma Evaluation of transportation Gas Consumers Gas Corp. service.

9/94 U-19904 LA Louisiana Public Gulf States Return on equity. Service Commission Utilities

9/94 8629 MD Maryland Industrial Baltimore Gas Transition costs. Group & Electric Co.

11/94 94-1754 AR Arkansas Gas Arkla, Inc. Cost-of-service, rate design, Consumers rate of return.

3/95 RP94-343- FERC Arkansas Gas NorAm Gas Rate of return 000 Consumers Transmission

4/95 R-00943271 PA PP&L Industrial Pennsylvania Power Return on equity. Customer Alliance & Light Co.

6/95 U-10755 MI Association of Consumers Power Co. Revenue requirements. Businesses Advocating Tariff Equity

7/95 6697 MD Maryland Industrial Baltimore Gas Cost allocation and rate design. Group & Electric Co.

8/95 95-254-TF AR Tyson Foods, Inc. Southwest Arkansas Refund allocation. U-2811 Electric Cooperative

10/95 ER95-1042 FERC Louisiana Public Systems Energy Return on Equity. -000 Service Commission Resources, Inc.

11/95 1-940032 PA Industrial Energy State-wide - Investigation into Consumers of all utilities Electric Power Competition Pennsylvania

5/96 96-030-U AR NorthwestArkansas Arkansas Western Revenue requirements, rate of Gas Consumers Gas Co. return and cost of service.

7/96 8725 MD Maryland Industrial Baltimore Gas Return on Equity Group & Electric Co.,Potomac Electric Power Co. and Constellation Energy Corp.

7/96 U-21496 LA Louisiana Public Central Louisiana Return on equity, rate of return. Service Commission Electric Co.

9/96 U-22092 LA Louisiana Public Entergy Gulf Return on equity. Service Commission States, Inc.

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-l) Page 7 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

1/97 RP96-199- FERC The Industrial Gas Mississippi River Revenue requirements, rate of 000 Users Conference Transmission Corp. return and cost of service.

3/97 96-4204 AR West Central Arkansas Oklahoma Revenue requirements, rate of Arkansas Gas Corp. Gas Corp. return, cost of service and rate design

7/97 u-11220 MI Association of Michigan Gas Co. TransportationBalancing Provisions. Business Advocating and Southeastern Tariff Equity Michigan Gas Co.

7/97 R-00973944 PA Pennsylvania Pennsylvania- Rate of return, cost of American Water American Water Co. service, revenue requirements. Large Users Group

3/98 83904 GA Georgia Natural Atlanta Gas Light Rate of return, restructuring Gas Group and the issues, unbundling,rate Georgia Textile design issues. ManufacturersAssoc.

7/98 R-00984280 PA PG Energy, Inc. PGE Industrial Cost allocation Intervenors

8198 U-17735 LA Louisiana Public Cajun Electric Revenue requirements. Service Commission Power Cooperative

10198 97-596 ME Maine Office of the Bangor Hydro- Return on equity, rate of return. Public Advocate Electric Co.

10198 U-23327 LA Louisiana Public SWEPCO, CSW and Analysis of proposed merger. Service Commission AEP

12/98 98-577 ME Maine Office of the Maine Public Return on equity, rate of return. Public Advocate Service Co.

12/98 U-23358 LA Louisiana Public Entergy Gulf Return on equity, rate of return. Service Commission States, Inc.

3/99 98-426 KY Kentucky Industrial Louisville Gas Return on equity Utility Customers, Inc. and Electric Co

3/99 99-082 KY Kentucky Industrial Kentucky Utilities Return on equity. Utility Customers, Inc. co.

4/99 R-984554 PA T. W. Phillips T. W. Phillips Allocation of purchased Users Group Gas and Oil Co. gas costs.

6/99 R-0099462 PA Columbia Industrial Columbia Gas Balancing charges Intervenors of Pennsylvania

10199 U-24182 LA Louisiana Public Entergy Gulf Cost of debt. Service Commission States,lnc.

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-l) Page 8 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

10199 R-00994782 PA Peoples Industrial Peoples Natural Restructunngissues Intervenors Gas Co.

10199 R-00994781 PA Columbia Industrial Columbia Gas Restructuring, balancing Intervenors of Pennsylvania charges, rate flexing, alternate fuel.

01/00 R-00994786 PA UGI Industrial UGI Utilities, Inc Universal service costs, Intervenors balancing, penalty charges, capacity Assignment.

01/00 8829 MD Maryland Industrial Gr. Baltimore Gas & Revenue requirements, cost allocation, 8 United States Electric Co. rate design.

02/00 R-00994788 PA Penn Fuel TransDortation PFG Gas, Inc., and Tariff charges, balancing provisions.

05/00 U-17735 LA Louisiana Public Louisiana Electric Rate restructuring. Sewice Comm. Cooperative

07/00 2000-080 KY Kentucky Industrial Louisville Gas Cost allocation Utility Consumers and Electric Co.

07/00 U-21453 LA Louisiana Public Southwestern Stranded cost analysis. U-20925 (SC), Service Commission Electric Power Co. u-22092 (SC) (Subdocket E)

09/00 R-00005654 PA Philadelphia Industrial Philadelphia Gas Interim relief analysis And Commercial Gas Works Users Group.

10/00 U-21453 LA Louisiana Public Entergy Gulf Restructuring,Business Separation Plan U-20925 (SC), Service Commission States, Inc. u-22092 (SC) (Subdocket 8)

11/00 R-00005277 PA Penn Fuel PFG Gas, Inc. and Cost allocation issues. (Rebuttal) Transportation Customers North Penn Gas Co

12/00 U-24993 LA Louisiana Public Entergy Gulf Return on equity. Service Commission States, Inc.

03/01 U-22092 LA Louisiana Public Entergy Gulf Stranded cost analysis. Service Commission States, Inc.

04/01 U-21453 LA Louisiana Public Entergy Gulf Restructuringissues. U-20925 (SC), Service Commission States, Inc. u-22092 (SC) (Subdocket B) (Addressing Contested Issues)

04/01 R-00006042 PA Philadelphia Industrial and PhiladelphiaGas Works Revenue requirements, cost allocation Commercial Gas Users Group and tariff issues.

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-1) Page 9 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

11/01 U-25687 LA Louisiana Public Entergy Gulf Return on equity. Service Commission States, Inc.

03/02 14311-U GA Georgia Public Atlanta Gas Light Capital structure Service Commission

08/02 2002-00145 KY Kentucky Industrial Columbia Gas of Revenue requirements Utility Customers Kentucky

09/02 M-00021612 PA Philadelphia Industrial Philadelphia Gas Transportation rates, terms, And Commercial Gas Works and conditions. Users Grouo

01/03 2002-00169 KY Kentucky Industrial Kentucky Power Return on equity. Utility Customers

02/03 02s-594E CO Cripple Creek &Victor Aquila Networks - Return on equity. Gold Mining Company WPC

04/03 U-26527 LA Louisiana Public Service Entergy Gulf States, Return on equity. Commission Inc.

10103 CV020495AB GA The Landings Assn., Inc. Utilities Inc. of GA Revenue requirement & overcharge refund

03/04 2003-00433 KY Kentucky Industrial Louisville Gas & Return on equity, Utility Customers Electric Cost allocation & rate design

03/04 2003-00434 KY Kentucky Industrial Kentucky Utilities Return on equity Utility Customers

4/04 04s-035E CO Cripple Creek & Victor Aquila Networks - Return on equity. Gold Mining Company, WPC Goodrich Corp., Holcim (US.) Inc., and The Trane Co.

9/04 U-23327, LA Louisiana Public Service Southwestern Electric Fuel cost review Subdocket B Commission Power Company

10104 U-23327 LA Louisiana Public Service Southwestern Electric Return on Equity Subdocket A Commission Power Company

06/05 050045-El FL South Florida Hospital Florida Power & Return on equity and HeallthCare Assoc. Light Co.

08/05 9036 MD Maryland Industrial Baltimore Gas & Revenue requirement,cost Group Electric Co. allocation, rate design, Tariff issues.

01/06 2005-0034 KY Kentucky Industrial Kentucky Power Co. Return on equity Utility Customers, Inc.

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(KAB-l) Page 10 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

03/06 05-1278- wv West Virginia Energy Appalachian Power Return on equity E-PC-PW-42T Users Group Company

04/06 U-25116 LA Louisiana Public Service Entergy Louisiana, Transmission Issues Commission LLC

07/06 U-23327 LA Louisiana Public Service Southwestern Electric Return on equity, Service quality Commission Power Company

08/06 ER-2006- MO Missouri Office of the Kansas City Power Return on equity, 0314 Public Counsel & Light Co. Weighted cost of capital

08/06 06s-234EG CO CF&I Steel, L.P. & Public Service Company Return on equity, Climax Molybdenum of Colorado Weighted cost of capital

01/07 06-0960-E-42T WV West Virginia Energy Monongahela Power & Return on Equity Users Group Potomac Edison

01/07 43112 AK AK Steel. Inc. Vectren South, Inc. Cost allocation, rate design

05/07 2006-661 ME Maine Offtce of the Bangor Hydro-Electric Return on equity, weighted cost of capital. Public Advocate

09/07 07-07-01 CT Connecticut Industrial Connecticut Light & Power Return on equity, weighted cost of capital Energy Consumers

10107 05-UR-103 WI Wisconsin Industrial Wisconsin Electric Power Co. Return on equity Energy Group, Inc.

1 1/07 29797 LA Louisiana Public Service Cleco Power :LLC 8. Lignite Pricing, support of Commission Southwestern Electric Power settlement

01/08 07-551-EL-AIR OH Energy Group Ohio Edison, Cleveland Electric, Return on equity Toledo Edison

03/08 07-0585, IL The Commercial Group Ameren Cost allocation, rate design 07-0585, 07-0587, 07-0588, 07-0589, 07-0590, (consol.)

04/08 07-0566 IL The Commercial Group Commonwealth Edison Cost allocation, rate design

06/08 R- 2 00 8 - 201 1621 PA Columbia Industrial Columbia Gas of PA Cost and revenue allocation, Intervenors Tariff issues

07/08 R-2008- PA Philadelphia Area PECO Energy Cost and revenue allocation, 2028394 Industrial Energy Tariff issues Users Group

J. UNNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-1) Page 11 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Partv Utility Subject

07/08 R-2008- PA PPL Gas Large Users PPL Gas Retainage, LUFG Pct. 2039634 Group

08108 6680-UR- WI Wisconsin Industrial Wisconsin P8L Cost of Equity 116 Energy Group

08/08 6690-UR- WI Wisconsin Industrial Wisconsin PS Cost of Equity 119 Energy Group

09108 ER-2008- MO The Commercial Group AmerenUE Cost and revenue allocation 0318

10108 R-2008- US. Steel & Univ. of Eauitable Gas Co. Cost and revenue 2029325 PA Pittsburgh Med. Ctr. allocation

10108 08-G-0609 NY Multiple Intervenors Niagara Mohawk Power Cost and Revenue allocation

12108 27800-U GA Georgia Public Service Georgia Power Company CWlPlAFUDC issues, Commission Review financial projections

03/09 ER08-1056 FERC Louisiana Public Service Entergy Services, Inc. Capital Structure Commission

04109 E0021GR-08- MN The Commercial Group Northern States Power Cost and revenue allocation and rate 1065 design

05/09 08-0532 IL The Commercial Group Commonwealth Edison Cost and revenue allocation

07109 080677-El FL South Florida Hospital Florida Power & Light Cost of equity, capital structure, and Health Care Association Cost of short-term debt

07109 U-30975 LA Louisiana Public Service Cleco LLC, Southwestern Lignite mine purchase Commission Public Service Co.

10109 4220-UR-116 WI Wisconsin Industrial Northern States Power Class cost of service, rate design Energy Group

10109 M-2009- PA PP&L Industrial PPL Electric Utilities Smart Meter Plan cost allocation 2123945 Customer Alliance

10109 M-2009- PA Philadelphia Area PECO Energy Company Smart Meter Plan cost altocation 2123944 Industrial Energy Users Group

10109 M-2009- PA West Penn Power West Penn Power Smart Meter Plan cost allocation 2123951 Industrial Intervenors

11/09 M-2009- PA Duquesne Duquesne Light Company Smart Meter Plan cost allocation 2123948 Industrial Intervenors

1 1/09 M-2009- PA Met-Ed IndustrialUsers Group Metropolitan Edison, Smart Meter Plan cost allocation 2123950 Penelec Industrial Customer Pennsylvania Electric Co., Alliance, Penn Power Users Pennsylvania Power Co. Group

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-I) Page 12 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

03/10 09-1352- wv West Virginia Energy Users Monongahela Power Return on equity, rate of return E-42T Group Potomac Edison

03/10 EO15IGR- 09-1151 MN Large Power Intervenors Minnesota Power Return on equity, rate of return

0411 0 2009-00459 KY Kentucky IndustrialUtility Kentucky Power Return on equity Consumers

0411 0 2009-00548 KY Kentucky Industrial Utility Louisville Gas and Electric, Return on equity. 2009-00549 Consumers Kentucky Utilities

05/10 10-0261-E- wv West Virginia Appalachian Power C0.l EElDR Cost Recovery, GI Energy Users Group Wheeling Power Co. Allocation, & Rate Design

05/10 R-2009- ?A Columbia Industrial Columbia Gas of PA Class cost of service & 2149262 Intervenors cost allocation

0611 0 201 0-00036 KY Lexington-FayetteUrban Kentucky American Return on equity, rate of return, County Government Water Company revenue requirements

06/10 R-2010- PA PP&L Industrial Customer P?L Electric Utilities Rate design, cost allocation 21 6 1694 Alliance

0711 0 R-2010- PA Philadelphia Area Industrial PECO Energy Co Return on equity 21 61 575 Energy Users Group

07/10 R-2010- PA Philadelphia Area Industrial PECO Energy Co. Cost and revenue allocation 216 1592 Energy Users Group

07/10 9230 MD Maryland Energy Group Baltimore Gas and Electric Electric and gas cost and revenue allocation; return on equity

0911 0 10-70 MA University of Massachusetts- Western Massachusetts Cost allocation and rate design Arnherst Electric Co.

10110 R-2010- PA Duquesne Industrial Duquesne Light Company Cost and revenue allocation, 2179522 Intervenors rate design

11/10 P-2010- PA West Penn Power West Penn Power Co. Transmission rate design 2158084 Industrial Intervenors

11/10 10-0699- wv West Virginia Energy Appalachian Power Co. & Return on equity, rate of E-42T Users Group Wheeling Power Co. Return

11/10 10-0467 IL The Commercial Group Commonwealth Edison Cost and revenue allocafion and rate design

04/11 R-2010- PA Central ?en Gas UGI Central Penn Gas, Inc. Tariff issues, 22144 15 Large Users Group revenue allocation

0711 1 R-2011- PA Philadelphia Area PECO Energy Retainage rate 2239263 Energy Users Group

J. I(ENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-l) Page 13 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party UtiI i ty Subject

0811 1 R-2011- PA AK Steel Pennsylvania-American Rate Design 2232243 Water Company

0811 1 11AL-151G CO Climax Molybdenum PS of Colorado Cost allocation

0911 1 11-G-0280 NY Multiple Intervenors Corning Natural Gas Co. Cost and revenue allocation

1Oil 1 4220-UR-117 WI Wisconsin Industrial Energy Northern States Power Cost and revenue allocation, rate design Group

02/12 llAL-947E CO Climax Molybdenum, Public Service Company Return on equity, weighted cost of capital CF&I Steel of Colorado

07112 120015-El FL South Flonda Hospitals and Florida Power and Light Co, Return on equity, weighted cost of capital Health Care Association

07112 12-0613-E-PC WV West Virginia Energy Users American Electric PoweriAPCo Special rate proposal for Century Group Aluminum

07112 R-2012- PA PP&L Industrial Customer PPL Electric Utilities Corp Cost allocation 2290597 Alliance

09/12 05-UR-106 Wl Wisconsin Industrial Wisconsin Electric Power Co. Class cost of service, cost and revenue Energy Group allocation, rate design

0911 2 2012-00221 KY Kentucky lndustnal Louisville Gas and Electric, Return on equity. 201 2-00222 Utility Consumers Kentucky Utilities

10112 9299 MD Maryland Energy Group Baltimore Gas & Electric Cost and revenue allocation, rate design Cost of equity, weighted cost of capital

10112 4220-UR-118 WI Wisconsin Industrial Northern States Power Class cost of service, cost and revenue Energy Group Company allocation, rate design

10112 473-13-01 99 TX Steering Committee of Cities Cross Texas Transmission, Return on equity, Served by Oncor LLC capital structure

01/13 R-2012- PA Columbia Industrial Columbia Gas of Pennsylvania Cost and revenue allocation 2321748 et al. Intervenors

02/13 12AL-1052E CO Cripple Creek & Victor Gold Black HillslColorado Electric Cost and revenue allocations Mining, Holcim (US) Inc. Utility Company

0611 3 8009 VT IBM Corporation Vermont Gas Systems Cost and revenue allocation, rate design

07113 130040-El FL WCF Hospital Utility Tampa Electric Co Return on equity, rate of return Alliance

08113 9326 MD Maryland Energy Group Baltimore Gas and Electric Cost and revenue allocation, rate design, special rider

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-1) Page 14 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

0811 3 P-2012- PA PPBL Industrial Customer PPL Electric Utilities, Corp. Distribution System Improvement Charge 2325034 Alliance

09/13 4220-UR-119 WI Wisconsin Industrial Energy Northern States Power Co. Class cost of service, cost and revenue Group allocation, rate design

11/13 13-1325-E-PC WV West Virginia Energy Users American Electric PowerlAPCo Special rate proposal, Felman Production Group

06/14 R-2014- PA Columbia Industrial Intervenors Columbia Gas of Pennsylvania Cost and revenue allocation, rate design 2406274

oa/i4 05-UR-107 WI Wisconsin Industrial Energy Wisconsin Electric Power Co. Cost and revenue allocation, rate design Group

10/14 ER13-1508 FERC Louisiana Public Service Comm. Entergy Services, Inc. Return on equity et 81.

11/14 14AL-0660E CO Climax Molybdenum Co. and Public Service Co. of Colorado Retum on equity, weighted cost of capital CFI Steel. LP

11/14 R-2014- PA AK Steel West Penn Power Company Cost and revenue allocation 2428742

12/14 42866 TX West Travis Co. Public Travis County Municipal Response to complain of monopoly Utility Agency Utility District No. 12 power

311 5 2014-00371 Kentucky Industrial Utility Louisville Gas & Electric, Retum on equity, cost of debt, 2014-00372 KY Customers Kentucky Utilities weighted cost of capital

311 5 2014-00396 KY Kentucky Industrial Utility Kentucky Power Co. Return on equity, weighted cost of capital Customers

611 5 15-0003-G-42T WV West Virginia Energy Users Gp. Mountaineer Gas Co. Cost and revenue allocation, InfrastructureReplacement Program

9/15 15-0676-W42T WV West Virginia Energy Users Gp. West Virginia-American Appropriate test year, Water Company Historical vs. Future

911 5 15-1256-G- 390P wv West Virginia Energy Users Gp. Mountaineer Gas Co Rate design for Infrastructure Replacement and Expansion Program

10115 4220-UR- 121 WI Wisconsin Industrial Energy Gp. Northern States Power Co Class cost of service, cost and revenue allocation, rate design

12/15 15-1600-G- Rate design and allocation for 390P wv West Virginia Energy Users Gp. Dominion Hope Pipeline Replacement L Expansion Prog.

12/15 45188 TX Steering Committee of Cities Oncor Electric Delivery Co. Ringfence protections for cost of capital Served by Oncor

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. -(RAB-l) Page 15 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

211 6 9406 MD Maryland Energy Group Baltimore Gas & Electric Cost and revenue allocation, rate design, proposed Rider 5

3/16 39971 GA GA Public Service Comm Southern Company / Credit quality and service quality issues Staff AGL Resources

0411 6 201 5-00343 KY Kentucky Office of the Cost of equity, cost of short-term debt, Attorney General Atmos Energy capital structure

0511 6 16-G-0058 Brooklyn Union Gas Co., Cost and revenue allocation, rate design, 16-G-0059 NY City of New York KeySpan Gas East Corp. service quality issues

06/16 16-0073-E-C WV Constellium Rolled Products Appalachian Power Co. Complaint; security deposit Ravenswood, LLC

0711 6 9418 MD Healthcare Council of the Cost of equity, cost of service, Nationa! Capital Area Potomac Electric Power Co Cost and revenue allocation

0711 6 160021-El FL South Florida Hospital and Return on equity, cost of debt, Health Care Association Florida Power and Light Co. capital structure

07/16 16-057-01 Ul Utah Office of Consumer Svcs. Dominion Resources, Questar Gas Co. Credit quality and service quality issues

08/16 8710 VT Vermont kDt. of Public Service Vermont Gas Systems Return on equity, cost of debt, cost of capital

08/16 R-2016- 2537359 PA AK Steel Corp. West Penn Power Co Cost and revenue allocation

09116 2016-00162 KY Kentucky Office of the Return on equity, Attorney General Columbia Gas of Ky. cost of short-term debt

InfrastructureReplacement Program 09/16 16-0550-W-P WV West Va. Energy Users Gp West Va. American Water Co Surcharge

01/17 46238 TX Steering Committee of Cities Oncor Electric Delivery Co. Ring fencing and other conditions for Served by Oncor acquisition, service quality and reliability

02/17 454 14 TX Cities of Midland, McAllen, Sharyland Utilities, LP and and Colorado City Sharyland Dist. and Transmission Services, LLC Return on equity

02/17 2016-00370 Kentucky Industrial Utility Louisville Gas & Electric, Return on equity, cost of debt, 2016-00371 K? Customers Kentucky Utilities weighted cost of capital

0311 7 10580 TX Atmos Cities Steering Return on equity, capital structure, Committee Atmos Pipeline Texas weighted cost of capital

03117 R-3867-2013 Quebec, Canadian Federation of Canada Independent Businesses Gaz Metro Marginal Cost of Service Study

J. KENNEDY AND ASSOCIATES, INC. Exhibit No. ___(RAB-I) Page 16 of 16

Expert Testimony Appearances of Richard A. Baudino As of October 2017

Date Case Jurisdict. Party Utility Subject

05/17 R-2017- Philadelphia Industrial and Philadelphia Gas Cost and revenue allocation, rate design, 2586783 PA Commercial Gas Users Gp. Works Interruptible tariffs

0811 7 R-2017- Pennsylvania American Cost and revenue allocation, 2595853 PA AK Steel Water Co. rate design

811 7 17-3112-INV VT Vt. Dept. of Pubic Service Green Mountain Power Return on equity, cost of debt, weighted cost of capital

911 7 4220-UR-123 WI Wisconsin Industrial Energy Northern States Power Cost and revenue allocation, rate design Group

10117 201 7-00179 KY Kentucky Industrial Utility Kentucky Power Co. Return on equity, cost of short-term debt Customers, Inc.

10117 17-1066-G- West Va. Energy Users Gp. Mountaineer Gas. Co. Infrastructure Replacement and 39OP w Expansion Program

J. KENNEDY AND ASSOCIATES, INC.

Exhibi t-(RAB-2) Page 1 of 28

PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON

At as session of the PUBLIC SERVICE COMMISSION OF WEST VIRGINIA in the City of Charleston on the 1 3'h day of October 2015.

CASE NO. 15-0003-G-42T

MOUNTAMER GAS COMPANY Rule 42T tariff filing to increase rates and charges.

MOUNTAINEER GAS COMPANY Application to change depreciation rates.

COMMISSION ORDER

The Commission approves a Joint Stipulation and Agreement for Settlement that provides an increase in base rates of $7.7 million of the $12.2 million requested by the Mountaineer Gas Company in these cases. (I BACKGROUND On January 5,20 15, Mountaineer Gas Company (Mountaineer) made a tariff filing under Rule 42 of the Commission Rules for the Construction and Filing of Tariffs (Tariff Rules), 150 C.S.R. 2, to increase gas rates and charges by an additional $12.2 million in annual revenue, or an approximate 4.7 percent increase on a total-Company basis over current rates (based on a future test year) for hrnishing natural gas service to approximately 22 1,000 customers in Barbour, Berkeley, Boone, Braxton, Brooke, Cabell, Calhoun, Clay, Doddridge, Fayette, Gilmer, Grant, Greenbrier, Hancock, Hardy, Harrison, Jackson, Jefferson, Kanawha, Lewis, Lincoln, Logan, Marion, Marshall, Mason, McDowell, Mercer, Mineral, Mingo, Monongalia, Monroe, Nicholas, Ohio, Pendleton, Preston. Putnam, Raleigh, Randolph, Ritchie, Rome, Summers, Tucker, Tyler, Upshur, Wayne, Wetzel, Wirt, Wood, and Wyoming Counties in West Virginia.

Mountaineer included with its filing a supporting Tariff Rule 42 Exhibit for the historical test year (HTY) ending September 30, 2014, and a revised tariff showing an effective date of February 4, 2015. Mountaineer also filed an addendum to its Tariff Exhibit__(RAB-2) Page 2 of 28

42 Exhibit reflecting December 3 1, 2014 forecasted balances for rate base and depreciation expenses and adjustments for incremental revenues and gas costs, a Bridge Year presentation (October 1, 2014 - September 30, 2015), and a Future Test Year (FTY) filing reflecting forecasted rate base, capital structure, revenues, and expenses for the twelve month period immediately following the Bridge Year (October 1, 2015 - September 30, 2016). The difference in rate relief requests between the HTY and FTY presentations was approximately $3 million. Mountaineer advised that it intended to file an application for revised depreciation rates under the Commission Rules of Practice and Procedure (Procedural Rules) 150 C.S.R. I, Rule 20, and requested that the two cases be consolidated.

Mountaineer also filed a motion for limited waiver of that portion of Tariff Rule 23, requiring a public utility to give its customers separate written notice of a rate filing no later than fifteen days prior to its proposed effective date,

On January 8, 2015, Cornmission Staff filed motions to suspend the requested

~ rates and extend the protest and intervention periods so that customers receiving individual notice would have sufficient time to fiIe a protest. On January 12, 2015, Mountaineer filed a response to the Staff motions. Mountaineer did not oppose the extension of the protest and intervention periods, but explained that it had already sent to newspapers for publication Tariff Form 8 that included a protest and intervention date of February 5, 20 1 5.

On January 14, 2015, the Commission issued an Order granting the Mountaineer motion to waive the requirement that Mountaineer give its customers separate written I notice of its rate filing no later than fifteen days prior to its proposed effective date. The Commission required Mountaineer to use the notice included with the Order to provide separate written notice to customers with an extended protest period.

On January 1.5, 2015, Staff filed a Motion to Dismiss the Case or, in the Alternative, Require a Tolling of the Case. On January 20, 2015, Mountaineer fiIed a response in opposition to the Motion. The Commission denied the Staff Motion to Dismiss. Commission Order, January 2 1, 201 5.

On January 20, 201 5, Mountaineer requested revised depreciation rates pursuant to Procedural Rule 20. Mountaineer stated that the revised depreciation rates reflect approximately an $800,000 decrease in annual depreciation expense that is incorporated as an adjustment in the overall $12.2 million increase in base rates requested by Mountaineer in Case No. 1 5-0003-G-42T. Mountaineer recommended that the Commission suspend the proposed revision of its depreciation rates until the conclusion of the associated base rate proceeding and consolidate the two cases.

2 Exhibit-(RAB-2) Page 3 of 28

On January 28, 201 5, Staff filed a Motion to Enforce Procedural Rules. In support of its motion, Staff noted that Mountaineer failed to file with its documents filed under seal a statement that a motion for protective treatment would be filed within one week as required by Procedural Rule 4.1 .f. Additionally, Mountaineer failed to file a redacted version of the confidential filing as required by Procedural Rule 4.1.e. Staff requested that the Commission require Mountaineer to file a motion requesting confidential treatment and a redacted version of its confidential material.

By Order issued January 30, 201 5, the Commission suspended the proposed rates and charges in Case No. 15-0003-G-42T and the revised depreciation rates in Case No. 15-0048-G-D until 12:Ol a.m. on November 2, 2015. The Commission declined to consolidate the depreciation matter fully with the associated base rate proceeding, but it adopted the same procedural deadlines for both cases. An evidentiary hearing was scheduled to begin July 15, 2015 in Case No. 15-0003-G-42T with the evidentiary hearing in the depreciation case immediately fotlowing the rate case hearing. The Commission also granted CAD’Srequest to intervene in the rate proceeding.

The Commission granted intervenor status in both cases to the Consumer Advocate Division (CAD) and the Independent Oil and Gas Association of West Virginia, Inc. (IOGA). The Commission granted intervenor status to the West Virginia Energy Users Group (WVEUG) in Case No. 15-0003-G-42T. See Orders entered in these cases on January 30,2015, February 6,2015, and March 9 and 16,2015.

Also on January 30, 2015, Mountaineer filed a Motion for Protective Order, requesting that the Cornmission grant permanent confidentiai treatment of certain labor cost information, an internal budget analysis of employee benefits costs and available plans, and customer-specific data comparing actual billings rendered during the test year with what bills would have been if a special contract with a transportation customer had been in place during the test year. Mountaineer argued that it is unnecessary to file a public version of the documents filed under seal because very little information would be left after redaction. Mountaineer also filed a confidential version of supporting document SD G-9.1, inadvertently omitted from its initial confidential filing on January 15, 2015.

On February 4, 201 5, Mountaineer withdrew its request for confidential treatment of the internal budget analysis of employee benefits costs and available plans except for two columns of estimated employee salaries found on page twenty-four of the document. Mountaineer released a public, redacted version of the document.

On March 3, 201 5, Mountaineer filed affidavits demonstrating publication of its rate request in newspapers throughout its service territory. It also filed a completed Tariff Form 6 on March 19, 2015, stating that it had provided the required notice of the proposed rates to customers.

3 Exhibit-(RAB-2) Page 4 of 28

On March 27, 2015, the Commission scheduled public comment hearings and reiterated the procedural schedule set by the January 30, 2015 Order. A corrective order was issued on March 30,201 5 to correct a typographical error in the Order.

On April 7, 2015, the Cornmission entered an Order partially granting Staff's Motion to Enforce Procedural Rules and ordering Mountaineer to file public redacted versions of all the documents filed under seal. Pursuant to thc Order, Mountaineer filed public redacted versions of the documents on April 20, 20 15.

On April 24, 20 15, Staff filed a Motion to Extend Discovery Period. Mountaineer did not oppose the motion. On May 4, 2015, the Commission entered an Order granting Staff's Motion to Extend Discovery Period and extending the discovery period until June 29, 201 5 as reflected in a revised procedural schedule included in the Order.

On June 10, 2015, Staff filed a Motion to Deny Use of Future Test Year. On June 22, 2015, Mountaineer filed a Response to Staff's Motion. On June 25, 2015, the Commission issued an Order denying the Staff Motion.

On June 15-17 and July 14, 2015, the Commission conducted public comment hearings in Mountaineer's service territory. The Commission received comments from customers expressing concern about the proposed rates and other issues.

On July 13, 2015, Mountaineer filed a First Amendment to its Motion for Protective Order, requesting protective treatment for additional information.

Eighty-six individuals filed electronic or written comments expressing concern regarding the proposed rates.

On July 14, 2015, Mountaineer, Staff, and Intervenors CAD and WVEUG (Stiputating Parties) filed a Joint Stipulation and Agreement for Settlement (Joint stipulation) attached hereto as Appendix A and incorporated in this Order. The Joint Stipulation included revenue requirement presentations fi-om Mountaineer and Staff. IOGA did not join in the Joint Stipulation, but indicated that it will not oppose the Joint Stipulation should the Commission adopt it. Joint Stipulation at 7 1. The Stipulating Parties represented that they would sponsor the Joint Stipulation at the evidentiary hearing scheduled for July 15, 2015. On July 15, 2015, CAD filed its revenue requirement presentation.

The Commission admitted the pre-filed testimony filed by the parties at the July 15,2015 Hearing. Transcript of the July 15,20 15 Commission Hearing (Tr.) at 44.

On July 17, 2015, Mountaineer filed a response to the Commission request of the parties at the July 15, 20 15 evidentiary hearing to consider whether any materials covered

4 Exhibit-(FUB-2) Page 5 of 28

in the Motion for Protective Order might be publicly disclosed. Mountaineer stated that in consultations with the parties on this issue, none identified any material it questioned or wished to challenge as ineligible for permanent protection from disclosure.

DISCUSSION

Joint Stipulation

The substantive provisions of the agreement of the Stipulating Parties are set forth in Paragraph 1 I of the Joint Stipulation settlement. The Stipulating Parties agreed that Mountaineer should receive a base rate increase of $7.7 million based on a return on equity of 9.75 percent, resulting in an overall increase in base rates of three percent. The Stipulating Parties attached a financial schedule depicting the proposed rates and charges associated with the base rate increase as Exhibit 1 to the Joint Stipulation. Exhibit la shows the agreed allocation of additional revenue to customer classes, and Exhibit 2 shows Mountaineer’s revenue requirement calculation. Staff filed a separate revenue requirement calculation on July 14, 2015, the same date that the Joint Stipulation was filed and on July 15, 20 15, CAD filed its revenue requirement presentation.

As noted in Subparagraph 1 l(b) of the Joint Stipulation and at the July 15, 2015 hearing, Mountaineer will propose a decrease in its PGA, to be effective November 1, 2015, in its upcoming Tariff Rule 30-C filing. Tr. at 29, 32. This decrease will more than offset the increase in base rates addressed in the Stipulation, resulting in a net decrease in overall rates and charges. The Stipulating Parties requested that the Commission shorten the original suspension period by one day, to November 1, from November 2, 2015, in order to permit the siinultaneous implementation of the two rate changes. Id.

The Stipulating Parties recoinmended the depreciation rates shown in Exhibit 3 of the Joint Stipulation as a reasonable resolution of all depreciation issues and requested the Commission authorize Mountaineer’s use of those rates on and after November 1, 2015. Subparagraph I l(c) of Joint Stipulation.

As discussed in Subparagraph 1l(d) of the Joint Stipulation, Mountaineer plans to file an application seeking approval for a multi-year comprehensive plan for infrastructure replacements, upgrades, and extensions that will include an Infrastructure Replacement Cost Recovery Rate (IRCR Rate) pursuant to Senate Bill 390 (W.Va Code $24-2-lk). The IRCR Rate would permit Mountaineer to recover an allowance for return on the net incremental rate base, related income taxes, depreciation expense and property taxes associated with the eligible components included in Mountaineer’s Infrastructure Replacement Program (IRP). Mountaineer agreed that the incrementat rate base amount on which the allowance for return is to be calculated will include a separate rate base

5 Exhibit-( FUB-2) Page 6 of 28

deduction related to the level of annual depreciation expense reflected in current base rates and corresponding to the type of capital investment provided for in its plan. Subparagraph 1 l(d) of Joint Stipulation. Exhibit 4 to the Joint Stipulation shows an example of a depreciation offset, and Exhibit 5 shows a scheduie of the agreed-upon depreciation amounts for transmission and distribution assets to be used in calculating the rate base deduction. Id.

As indicated in Subparagraph ll(e) of the Joint Stipulation and at the hearing, Mountaineer withdrew its request to have the Commission determine its revenue requirement on the basis of a future test year presentation, but without prejudice to its ability to seek such a determination in a future case. Tr. at 34.

The Stipulating Parties recommended that the Commission defer a ruling on the Motion for Protective Order. Subparagraph 1 l(f) of Joint Stipulation.

The Stipulating Parties asserted that each had compromised its initial positions on a number of issues in ultimately reaching the Joint Stipulation.

Each of the Stipulating Parties, however, supported and recommended approval of the substantive provisions set forth in Paragraph 11 of the Joint Stipulation, without agreeing to a specific calculation of the $7.7 million rate increase, as a reasonable resolution of the issues raised in this proceeding, within the overall context of the settlement. Tr. at 36, 46, 47, 50; Joint Stipulation at 712. Therefore, they recommended that the Commission accept the Joint Stipulation in complete resolution of these cases,

The parties jointly acknowledged and represented that the pre-filed direct and rebuttal testimonies and exhibits filed in this case, and the testimony offered in sponsorship of the Joint StipuIation, adequately supports the Joint Stipulation despite disputes among the parties on a wide range of ratemaking issues. They also recommended that the Commission admit their respective pre-filed testimony and exhibits into the evidentiary record without the necessity of each witness sponsoring the testimony at hearing. Joint StipuIation at 113.

The Stipulation discusses the components of rate base to be included in the Mountaineer filing for an IRCR Rate pursuant to Senate Bill 390, including a separate rate base deduction related to the level of annual depreciation expense reflected in current base rates and corresponding to the proposed type of capital investment provided for in its plan.

Subsection (f)( 1) of Senate Bill 390, specifies that: “An allowance for return shall be calculated by applying a rate of return to the average planned net incremental increase to rate base attributable to the infrastructure program.” (Emphasis added.) We determine

6 Exhibit-(RAB-2) Page 7 of 28

that the stipulated treatment of annual depreciation expense built into base rates comports with the Subsection (f)( 1) reference to an increase to rate base.

The annual depreciation expense corresponding to the proposed type of capital investment provided for in Mountaineer’s IRP is included in customer rates and is accounted for as an increase in the Accumulated Reserve for Depreciation specific to the utility plant accounts use for the IFP plant additions. This increased Accumulated Reserve for Depreciation reduces rate base. To increase net rate base in Mountaineer’s TRP accounts, as provided for in subsection (f)( l), the utility must make annual capital expenditures in excess of the annual depreciation credits to the Accumulated Reserve for Depreciation. Therefore, the Commission agrees that the determination of the net incremental rate base attributable to Mountaineer’s IRP shouId be net of annual depreciation expense reflected in current base rates and determines that this is consistent with subsection (f)( 1) of Senate Bill 390.

There is another expense built into base rates that results in an increase in a balance sheet account that is also used as a rate base deduction. That expense is the amount allowed for Deferred Income Taxes. Just as depreciation expense related to IRP plant accounts results in an increased rate base deduction, Deferred Income Tax expense related to IRP plant accounts also results in an increased rate base deduction. To increase net rate base in IRP accounts, the utility must make annual capital expenditures in excess of both the annual depreciation credits and annual Deferred Income Tax credits accumulated on the balance sheet.

The Joint Stipulation does not specifically address the base rate level of annual Deferred Income Tax expense associated with Mountaineer’s IRP accounts. The Commission does not interpret that omission as a determination that the annual Deferred Income Tax expense built into base rates should be disregarded in the development of the net incremental increase to rate base attributable to Mountaineer’s IRP. In the upcoming Senate Bill 390 filing by Mountaineer, we will consider treating the annual Deferred income Tax expense built into base rates in the same way as the Joint Stipulation described the offset for annual depreciation expense. Because this issue has not been addressed in any prior case, this is not a final ruling by the Commission on annual Deferred Income Tax expense as it relates to the Senate Bill 390 allowance for return on net infrastructure investment. If there is dispute regarding this treatment of annual Deferred Income Tax expense to determine the net incremental increase to rate base attributable to the LRP, we will consider the arguments in the Mountaineer Senate Bill 390 filing.

The Commission appreciates the significant efforts of the parties to reach a reasonable and just settlement in these proceedings. Stipulations are a significant assistance to the Commission in carrying out its statutory duties and frequently resolve cases in a prompt, fair, reasonable, cost effective, and expedited fashion based on arms-

7 Exhibit-(RAB-2) Page 8 of 28

length negotiations. Settlenients can significantly reduce litigation costs for the benefit of all parties and the ratepayers.

It is evident that the parties have engaged in substantial compromise. The Joint Stipulation reflects substantial compromises of the positions of all parties to this case.

The Joint Stipulation represents a substantial, diligent and good faith effort to reach an agreement. The testimony supporting the Joint Stipulation, the pre-filed testimony, and other evidence demonstrate that the cost of service and rate design recommendations in the Joint Stipulation are fair and reasonable.

The obligation of the Commission in rate proceedings is to balance the interests of the parties, ratepayers and the State based on a review of all of the evidence, not just evidence submitted in favor of the Joint Stipulation. The full record in this case, however, supports the agreed revenue requirement and resolution of the other issues. The revenue allocation and rate design are appropriate given the cost of service study evidence, and Mountaineer’s pending Tariff Rule 30-C filing (Case No. 15-1 134-G-30C). Accordingly, the Commission will adopt the Joint Stipulation attached to this Order in resolution of the issues presented in these cases. The rates and charges set forth in the Joint Stipulation are fair and reasonable and should be approved. I( Effective Date of Revised Rates The Stipulating Parties requested that the effective date of the rates approved in this case be changed from November 2, 2015, to November 1, 2015, to coincide with the date interim rates will go into effect in Case No. 15-1134-G-30C. Joint Stipulation at 11l(b). Given the relatively short period of time between the requested date of November 1,2015, and the suspension date of November 2,20 15, and the conhsion that would likely be caused by two rate changes within one week, the Commission finds that it is in the public interest to revise the suspension date in these cases. The rates approved in Attachment A will go into effect for all services rendered on or affer November 1, 20 15.

Protective Treatment Requests

In the January 30, 2015 Motion for Protective Order, Mountaineer requested permanent protective treatment of certain labor cost information, an internal budget analysis of employee benefits costs and available plans, and customer-specific data comparing actual billings rendered during the test year with what bills would have been if a special contract with a transportation customer had been in place during the test year. On July 13, 2015, Mountaineer filed the First Amendment to Motion for Protective Order, requesting protection for additional materials that can be classified with, and share the same bases for protection as, the information described in the January 30, 2015

8 Exhibit-(RAB-2) Page 9 of 28

Motion. Mountaineer also sought to protect three new categories of confidential information not initially addressed in the Motion: Tax Data, Compensation Data, and Debt Placement Data.

Mountaineer asserted that the information filed under seal is exempt from the West Virginia Freedom of Information Act and meets the criteria adopted by the Supreme Court of Appeals of West Virginia in State ex rel. Johnson v. Tsapis, 187 W.Va. 337,419 S.E. 2d 1 (1992), for determining the need for permanent protective treatment. No other party or individual has opposed the relief requested in the protective treatment requests.

The parties recommended that the Commission defer a ruling on all matters raised in the protective treatment requests in their Joint Stipulation. Subparagraph 1 l(f) of Joint Stipulation.

The Commission concludes that it is not necessary to resolve the issue of confidential treatment at this time. No entity has requested that the Commission provide copies of any information subject to a protective treatment request. The Commission will continue to segregate and maintain the documents subject to the requests under seal until the future time, if any, that the Commission receives a Freedom of Information Act request for them. On receipt of that filing, the Commission will notify Mountaineer and provide them with an opportunity to argue whether the documents are entitled to permanent protective treatment. West Virginia-American Water Company, Case No. 10-0920-W-42T (Commission Order, April 18, 2011) at 48,66.

FINDINGS OF FACT

1. Mountaineer filed revised tariffs reflecting increased base rates and charges amounting to approximately $12.2 million annually. January 5, 201 5 Filings.

2. Separately, Mountaineer requested revised depreciation rates under Procedural Rule 20, resulting in an $800,000 decrease in annual depreciation expense that Mountaineer incorporated as an adjustment in the overall $12.2 million base rate increase. January 20,20 15 Filing.

3. Mountaineer published a proper filing notice in each of the counties where it provides service, satisfied all publication requirements, and provided evidence of proper notice to the Commission. March 3, 2015, May 22, 2015, June 17, 2015, and June 30, 2015 Affidavits of Production.

4. The Stipulating Parties filed the Joint Stipulation with the Commission. July 14,2015 Filing.

9 I Exhibit-(RAB-2) Page 10 of 28

5. As a part of the Joint Stipulation, Mountaineer has withdrawn its request to have the Commission determine its revenue requirement on the basis of a future test year. Joint Stipulation at TI l(e).

6. The material terms of the settlement are outlined in Paragraph 11 of the Joint Stipulation. The Stipulating Parties agree and recommend that the increase in ~ revenue requirement should be $7,700,000, and that it should be based on a return on equity of 9.75%. a.at al l(a). 7. The Stipulating Parties recommended that the Commission admit their respective pre-filed testimony and exhibits into the evidentiary record. u.

8. The Stipulating Parties support the Joint Stipulation as a reasonable resolution of the cases and represent that each and every one of the provisions set forth in the Joint Stipulation acceptably resolves or defers each issue raised in this matter. Joint Exhibit 1.

9. The Joint Stipulation does not specifically address the base rate level of annual Deferred Income Tax expense associated with Mountaineer’s IRP accounts.

10. Mountaineer requested permanent protective treatment of the information filed under seal in this proceeding including material produced in discovery and testimony. January 30, 2015 Motion for Protective Order, July 12, 2015 First Amendment to Motion for Protective Oder.

11. The Stipulating Parties request that the effective date for the implementation of revised rates be moved from November 2, 20 15, to November 1, 20 15, to coincide with the date interim rates will go into effect in Case No. 15-1 134-G-30C.

CONCLUSIONS OF LAW

1. The terms and conditions of the Joint Stipulation are just and reasonable. W. Va. Code S24-2-4a.

2. The Joint Stipulation properly balances the interests of Mountaineer, its customers, and the State as required under W. Va. Code $24-1-1(b).

3. The Joint Stipulation will produce adequate revenue for Mountaineer to be able to operate and raise needed capital but wil1 not produce more than adequate revenue for its operations.

4. The rates set forth within Exhibit 1 to the Joint Stipulation are just and rea$onable.

10 Exhibit-(RAB-2) Page 11 of 28

5. The depreciation rates set forth within Exhibit 3 to the Joint Stipulation are just and reasonable.

6. In light of Mountaineer’s withdrawal of its request to have the Cominission determine its revenue requirement on the basis of a hture test year, the Commission makes no determinations relative to the use of a future test year in this proceeding.

7. The pre-filed testimony, associated exhibits filed in these cases, and the testimony offered in sponsorship of the Joint Stipulation support the reasonableness of the Joint Stipulation.

8. If there is dispute regarding this treatment of annual Deferred Income Tax expense to determine the net incremental increase to rate base attributable to the IRP, we will consider the arguments in the Mountaineer Senate Bill 390 filing.

9. It is not necessary to resolve the issue of confidential treatment at this time. Case No. 10-0920-W-42T (Commission Order, April 18, 201 1) at 48,66.

10. Given the relatively short period of time between the requested date of November 1,20 15, and the suspension date of November 2,20 15, and the confwion that would likely be caused by two rate changes within one week, it is in the public interest to revise the suspension date in these cases.

ORDER

IT IS TI-IEREFORE ORDERED that the Joint Stipulation attached hereto as Appendix A is approved and adopted in full resolution of these cases.

IT IS FURTmR ORDERED that Mountaineer shall prepare and file, within fifteen calendar days of the date of this Order, an original and six copies of appropriately notated revised tariff sheets, to be effective for all services rendered on and after November 1, 2015, reflecting the approved $7.7 miIlion base rate increase and the base rate components of each tariff schedule as summarized in Exhibit 1 to the Joint Stipulation.

IT IS FURTHER ORDERED that the request for permanent protective treatment of the material filed under seal in this proceeding is deferred pending a request for that information.

IT IS FURTKER ORDERED that the Executive Secretary maintain the information filed under seal in these proceedings separate and apart from the remnants of

11 Ex hibit-(RAB-2) Page 12 of 28

the case files pending a further Commission Order issued after review of any request to inspect or copy the sealed information.

IT IS FURTHER ORDERED that these proceedings be removed from the Commission docket of active cases on entry of this Order.

IT IS FURTHER ORDERED that the Executive Secretary of the Commission serve a copy of this Order by electronic service on all parties of record who have filed an e-service agreement, by United States First Class Mail on all parties of record who have not filed an e-service agreement, and on Staff by hand delivery.

A True Copy, Teste,

Ingrid Ferrell Executive Secretary

SMS/sm 150003cl.docx

12 Exhibit-(RAB-2) Page 13 of 28

Appendix A

PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON

Case No. 15-0003-G-42T

MOUNTAINEER GAS COMPANY Rule 42T Tariff Filing to Increase Rates and Charges

Case No. 15-0048-G-D MOUNTAINEER GAS COMPANY Application b Change Depreciation Rates

JOINT STPULATION AND AGREEMENT FOR SETTLEMENT

Pursuant to W. Va. Code 9 24-1-9(0 and Procedurai Rule i3(dj, Mountaineer Gas

Company (“Company”), the Staff of the Public Service Commission of West Virginia

(‘‘Staff”); the Consumer Advocate Division of the Commission (the “CAR”}, and selected

commercial customers of the Company that have collectively intervened as the West Virginia Energy Users Group (“WVEUG“)’ (collectively, the “PPafties”)join in this Joint Stipulation and Agreement for Settlement (“Joint Stipulation’). The Independent Oil and Gas

Association of West Virginia (“IOGA”) does not join in the Joint Stipulation, but has indicated

it will not oppose the Joint Stipulation should the Commission adopt it.

In this Joint Stipulation, the Parties propose to the Commission a comprehensive settlement of the Company’s pending general rate and depreciation cases. The Patties recommend that the Commission approve the Joint Stipulation without modification and thereby establish rates to meet the Company’s revenue requirement set forth herein.

’ WVEUG members for purposes of these cases are ArcelorMittal Weirton LLC, Constellium Inc., and QuadGraphics, Inc.

I 48344484.2533 .~2 Exhibit-(RAB-2) Page 14 of 28

Introduction and Procedural History

1. On January 5, 2015, the Company filed proposed revisions to its tariffs

reflecting increased rates and charges amounting to approximately $12.2 million annually, or an overall increase of 4.7% on a total-Company basis over then-existing rates, for

furnishing gas service to approximately 221,000 customers. On January 20, 2015, the

Company requested revised depreciation rates under Rule 20, the application of which resulted

in a decrease of approximately $800,000 in annual revenues, which had been incorporated into

the base rate request.

2. By order entered January 30, 2015, the Commission suspended the proposed

base rate increase and the implementation of new depreciation rates until 12:Ol a.m. on

November 2, 2015, established a procedural schedule, and required public notice, among other

things.

3. The Commission instituted a formal investigation into the reasonableness of

the revised rates and charges and the supporting data fiIed by the Company.

4. During the course of this proceeding, the CAD, WVEUG, and IOGA filed

petitions to intervene, each of which the Commission granted through subsequent orders.

5. In accordance with the procedural schedule, the Parties filed the testimonial

and documentary evidence of these witnesses:

Company: Scott F. Klemm, C. David Lokant, Adrien M. McKenzie, Dale L. Parris, and Tom M.Taylor

CAD: Ralph C. Smith, Suzanne 0. Akers, and James S. Gmen Staff: Edwin L. Oxley, David L. PauIey, Teny R. Eads, Dixie L.

L 4834-4484-2$33.~2 Exhibit-( RAB-2) Page 15 of 28

Kellmeyer, Eric F. deGruyter, and Joshua Allen

WVEUG: Richard A. Baudino

6. The Parties undertook extensive formal and informal discovery, including an examination of the Company's books and records and a review of extensive data responses and other documents provided by the Company.

7. Six public comment hearings were conducted (and two more are scheduled for

July 14, 201 5)in different areas of the Company's service territory to obtain customer input.

8. The Company represents that it has satisfied all posting and publication requirements and provided evidence thereof to the Commission.

9. The Company filed a Motion for Protective Order on January 30, 2015, as amended {"Motion for Protective Order") seeking permanent confidential treatment of certain information it had filed with the Commission and provided to other Parties under interim protective agreements.

10. To avoid the additional expense that will result from litigating these cases, and in an attempt to achieve certainty in the outcome, the Parties have endeavored to address or eliminate all issues in the general rate and depreciation cases and to reach a recommended comprehensive resolution of those cases.

The Settlement Terms

11. The Parties agree and recommend that the Commission adopt the Joint

Stipulation as the basis for its resolution of these cases. The terms and conditions of the Joint

Stipulation, each of which is an essential arid integral element of a fair and reasonable resolution in the public interest, are set forth below.

3 4834-1484-2533.~2 Exhibit-( RAB-2) Page 16 of 28

(a) The Company will implement a0 increase of $7,700,000 in base rate

revenues, which is expected to result in an overall increase in rates of

approximately 3 percent (“Rate Increase”), to be effective on November 1,

2015. A schedule setting forth the proposed rates and charges is attached as

Exhibit 1, and Exhibit la shows the agreed allocation of additional revenue

to customer classes. The Company’s sample revenue requirement

presentation supporting the Rate Increase is attached as Exhibit 2; the CAD

and Staff anticipate providing their presentations at or before hearing, The

Parties stipulate that the Rate Increase is premised on a return on equity of

9.75%.

(b)In its upcoming 30-C filing, the Company will propose a decrease in its

PGA rate, to be effective November 1, 201 5, that will more than offset the

Rate Increase, resulting in a net decrease in overall rates and charges on that

date. To permit the simultaneous implementation of the two rate changes,

the Parties request that the Commission shorten the current suspension

period by one day, to November 1 fiom November 2,201 5.

(c) The Rate Increase includes the impact on depreciation expense of the

depreciation accrual rates shown in Exhibit 3. The Parties recommend this

set of accrual rates as a reasonable resolution of all depreciation issues and

ask the Commission to authorize the Company to use those rates on and

after November 1,20 15.

(d) The Company anticipates filing an application under SB 390 (W.Va. Code 924-2-1k)for approval of a multi-year comprehensive plan for infrastructure

4 48344484-2533.~2 Exhibit-(RAB-2) Page 17 of 28

replacements, upgrades and extensions to its system. Under §24-2-ik, the

Company will be permitted to recover an allowance for return on the net

incremental rate base, related income taxes, depreciation expense and

property taxes associated with its approved infrastructure program. In

determining the rate increment for the infrastructure program, MGC agrees

that the net incremental rate base amount on which the allowance for return

is to be calculated will, in addition to the traditional components of rate

base, include a separaje rate base deduction related to the level of annual

depreciation expense reflected in current base rates and corresponding to the

proposed type of capital investment provided for in its plan (see example of

depreciation offset in Exhibit 4). Exhibit 5 is a schedule of the agreed-upon

depreciation amounts for transmission and distribution assets to be used in

calculating the rate base deduction.

(e) In consideration for the other components of the Joint Stipulation and in

recofition of the 201 5 SB 390 filing, the Company withdraws its request to

have the Commission determine its revenue requirement on the basis of a future test year presentation, without prejudice to its ability to seek such a

determination in a future case.

(f) The Parties recommend that the Commission defer a ruling on the Motion

for Protective Order.

5 Exhibit-(RAB-2) Page 18 of 28

General Provisions

12. The Parties support this Joint Stipulation and represent that each of its provisions acceptably resolves all issues raised in these cases. Based on the record, the Parties recommend that the Commission accept this Joint Stipulation in complete resolution of these cases.

13. The Parties support the Joint Stipulation without agreeing specifically on the exact methods used to arrive at the Rate Increase. The Parties represent that the Parties' pre- filed direct and rebuttal evidence and exhibits, as well as the testimony to be offered in sponsorship of this Joint Stipulation, even though it reflects significant areas of dispute among the Parties on a wide range of ratemaking issues, is adequate to support the Joint Stipulation.

The Parties ask that their respective pre-filed testimony and exhibits be admitted into the evidentiary record without the necessity of each witness's sponsorship or attendance at henring.

14. This Joint Stipulation results from a review of all evidence and filings in these cases, the Parties' analyses of the existing and foreseeable financial condition of the Company, the existing statutory and regulatory framework, and extensive, good faith negotiation. The

Joint Stipulation embodies substantial compromises and modifications by the Parties of their respective positions, and is proposed to expedite and simplifj. the resolution of these cases in the context of an overall settlement.

15. The Parties recommend that the Commission adopt this Joint Stipulation as being in the public interest, without adopting or recommending the adoption of any of the compromise positions set forth herein as ratemaking principles applicabfe to future regulatory proceedings, except as may otherwise be provided herein. Each component of the Joint

6 483444842533.~2 Exhibit-(RAB-2) Page 19 of 28

Stipulation (including this paragraph) is integral to and inseparable from the others, and no

Party advocates the Commission‘s resolution of any issue proposed in this Joint StipuIation other than in the contexl of its support for the Joint Stipulation as a whole.

16. This Joint Stipulation is subject to the Commission’s acceptance and approval.

It will be ineffective until and unless approved by tbe Commission in all of its material terms and without modification. If the Commission does not grant that approval, then the Parties reserve their rights to fully advocate their positions, unlimited by the terms of the Joint

Stipulation.

[Signature pages follow]

7 Exhibit-(RAB-2) Page 20 of 28

WHEREFORE, the Parties respectfully recommend and request that the Commission make appropriate findings of fact and conclusions of law adopting and approving the Joint

Stipufation in its entirety, including the anached exhibits.

Dated and effective this 13chday of July, 2015.

MOUNTAINEER GAS COMPANY

John Philip Melick, Esq. JACKSON KELLY PLLC 1600 Laidley Tower Post O%ce Box 553 Charleston, West Virginia 25322 (304) 340-1000

THE STAFF OF THE PUBLIC SERVICE COMMISSION OF WEST VIRGINIA

Linda S, Bouvette, Esq. Lucas Head, Esq. Public SeMce Commission 201 Brooks Street, P 0 Box 812 Charleston, WV 25323

CONSUMER ADVOCATE DIVISION

By Counsel

Thomas White, Esq. Consumer Advocate Division 700 Union Building 723 Kanawha Boulevard, East Charleston, WV 25301 Exhibi t-(RAB-2) Page 21 of 28

I

WHEREFORE, the Parties respectfully recommend and request that the Commission 1 .. .. __ ...... _- ...... -- ...... -. - .. i ! make appropriate findings of fact and conclusions of law adopting and approving the Joint I ... Sqpul-a~o-n-i-n.i.a-e-n%r-w; scls.h,-gme amhed-ejrh47Eiit*...... - ... --..... -- -- ......

__ . _..__.___I_.__ r___~____~,_I_- ...... - ^._ 1'" Dated and effective this 13" day of Jdy, 2015. ! ...... MOUNTA-I22JEEiRGM.~~~-

... By-Counsel . . . . -. . i--..,- -. _-.. - ...... I---_ .- - . . I_ ...... I Christopher L. CaIlas, Bsq. John Philip Melick, Esq. JACKSON KELLY PLLC 1600 hidley Tower Post Office Box 553 Charleston, West Virginia 25322 (304) 340- 1000

THE STAFF OF THE PUBLIC SERVICE COMMISSION OF WEST VIRGMIA By Counsel

Linda S. Bouvette, Esq. Lucas Head, Esq. Public Service Commission 201 Brooks Street, P 0 Box 812 Charleston, WV 25323

CONSUMER ADVOCATE DNTSION n

Consumer Advocate Division 700 Union Building 723 Kanawha Boulevard, East Charleston, WV 25301 ..

8 Exhibit-(RAB-2) Page 22 of 28

WEST VIRGINIA ENERGY USERS GROUP

Lee F. Feinberg, Esq. Spilman Thomas & Battle, PLLC PO Box 273 Charlestoi~,WV 25321 -0273

Barry A. Naum, Esq. Spilman Thomas 62 Battle, PLLC 1100 Bent Creek Blvd., Suite 101 Mechanicsburg, PA 17050

9 48344484-2533 .~l Exhibit-(RAB-2) Page 23 of 28

111 12) (3) 141 (5) e) ((3) (W ($8) ff9) a % s t S 5 5 5 % F?S 5.714,778 3.50 10.10 10.10 3.405 0.381 12.60 3.024 3.405 0.381 12.60 2827 3.225 0.398 14.08 Gs 1,89(1,W 2.43 31.75 31.75 2380 0.177 8.W 2.213 2.390 0.177 8.00 2.068 2250 0.182 8.80 GS-SPC 223 0.03 31.75 31.75 - 0.00 2213 2.390 o.in 8.00 LGS 34.432 1.72 460.90 485.00 24.10 523 1.690 1.720 0.030 1.78 1.690 1.720 0.030 1.78 1.537 1.570 0.033 2.15 LGS -SPC 8.378 03 460.90 485.00 24.10 5.23 1.690 1.720 0.050 1.78 1s 21 253 4.98 978.50 9a5.00 6.50 0.66 0.195 0.206 0.011 5.64 0.195 0.m 0.011 5.w 0.165 0.206 0.011 5.64 IS - SPC 720 0.11 978.50 965.00 6.50 0.68 0.1- 0206 0.Ml 5.M LIS 0.00 978.50 985.00 6.50 0.66 0.118 0.122 0.w 3.39 0.’118 0.122 0.004 3.39 0.116 0.122 0.004 3.39 LIS - SPC 0.00 515.00 575.00 - 0.00 0.118 0.118 - 0.00 NGV 33245 1.36 10.10 10.10 . 0.00 3.02q 3,405 0.381 12.60 3.021 3.405 0.381 12.80 2.827 3.225 0.348 14.08 ws 221 1.63 83.40 %[email protected] 13.81 1.087 1.180 0.083 7.57 1.067 1.180 0.083 7.57 0.616 0.620 0.004 0.65 ws-SPC 0.00 83.40 B5.00 11.60 13.91 1.097 1.180 0.083 7.57 1.097 1.180 SubfObl 7,705,058 Exhi b i t-( RAB-2) Page 24 of 28

sm

I 5m

I-s -l 0 0 Q 0 0 Xrn

4.1~) 2: 2724.7 n2n 148 14¶ rcrr 5.4%

0.0160

D w.w cnaw 6.60 32 m.m m.m - 1ll.On 8.211 I 10.601 I nm.030 I W.M6 I 1z.m.m Exhibit-(RAB-2) Page 25 of 28

Exhibit 2 Page 1 of 1

MOUNTAINEER GAS COMPANY Case No. 164003-042T Company's Sample Revenue Requirement

Rate Base $ 198,127,642 Rate of Return 0.238% Return on Rate Base $ 18,321,755

Gas Cost 140,754,538 08M Expense 70,950.951 Oepreciation 11,361,192 Other taxes 20,026,252 Federal Income Tax 5,218,082 State income Tax 927,830 Revenue Required $ 265,560,400

Going Level Revenue 258,273,204 Subtotal $ 7,287,196 Additional B&O taxes 328,633 Additional Uncollectibles 88,171

Gross Revenue increase

Clieni Work\4823-5622-6085.~1-7/13/1S Exhibit-(RAB-2) Page 26 of 28

Exhibit 3 Page 1 of 1 MOUNTAINEER GAS COMPANY Care No. f6400342T Stipufsted Depreclatlon Rates

Plant Depreciation Line Account __c Rate (1) (2) '(k lntanglble Plant 1 30 1 Organization nls 2 302 Franchises and Consents 2.69% 3 303 Miscellaneous Intangible Plant 14.36%

Transmis~ionPlant 4 365.10 Land and Land RQMo N'e 5 365.20 Rights-of-Way 0.00% 0 366 Struclures & Improvements 4.12% 7 367 Mains 1.84% 8 359 Measuring & Reg. Station Equip 4.96%

Distribution Plant B 374.190 Land and Land Riphts fila 10 374.292 Righttiof-Way 0.00% 11 375 Structures & Improvements 5.71% 12 376 Mains 1.84% 13 377 Compressor Station Equlpmen! 6.67% 14 378 Mees. L Reg. Stat. Eq - Oeneml 4.28% 15 379 Mess. 6 Reg. Stat. Eq - City Gate 4.10% 16 380 SefViCWS 3.00% 17 381 Meters 4.00% 18 381.1 ERTs 6.67% 19 382 Meter Installations 4.00% 20 382.1 ERT Instaliation 6.67% 20 383 House Regulator8 4.00% 21 384 House Regulator Installation 4.00./0 22 385 Measudng & Reg. Station Equip 3.00% 23 388 Other Property an Customers' Premises 4 .owe 24 387 Other Equipment 1o.Dox

General PImt 25 389 Land end Land Rlghts n/8 26 390 Structures & Improvements 2.50% 27 391 Office Furniture 6 Equipment 0.50% 28 391.1 Office Furniture 6 Equipment - Oats Handling 16.67% 29 391.401 Computer Hardwere - PC's, Etc. 20.00% 30 391.402 Computer Hardware - Mainframe 16.67% 31 391.405 Computer Softwarn - Accounting 14.36% 32 391.406 Computer Software - Materials Management 14.36% 33 391.408 Computer Software - License 14.36% 34 391.409 Computer Software - Engineering 14.36% 35 392.001 Trensportatlon Equipment - Small Trues 16.67% 36 392.41 I Transportation Equipment - Mad TN&S 16.67% 37 392.41 1.1 Twne. Equipment - Mrtd. Trucks (Used) 33.34% 38 392.412 Transportation Equipment - Hvy Trucks 7.10% 39 382.413 Transportation Equipment - Traikrs 4.88% 40 392.414 Trsnsportatlon Equipment - ATVs 12.10% 41 393 Stores Equipment 5.00% 42 394 Tools, Shop 6 Garage Equipment 8.12% 43 395 Leboratory Equipment 10.00% 44 3% Power Operated Equipment 7.10% 45 398.415 Trenchers and Backhoes 7.10% 46 397 Communications Equipment 9.61% 47 398 MisOaltsnaous Equipment ?Bo% 48 490 Leasehold Improvement 10.00% Clicni Wotk\4822-5562-8325.~1-7/13/~5 Exhibit-(RAB-2) Page 27 of 28

Example SI3 390 Apptlutlon Calculation of Incremental Rate Bake and Calculation of Depreciation Fxpense Year 1

13-Month Annual &wage satre.: Account 376 Mains Proposed Incremental Investment under 58 390

t. Calculation of Return on Incremental Fate Base

Proposed lnoemental Investment (Rare Base) $ u,ooo,o0O 5 6.000.000 Exnnpk I.=: DepreClatbo Expense on 55390 tnvesfment (220,800) (110,400) Tradiiionai Rate Base CaklNtion (taxes Dot included) 11,779,200 5889.600 CaWaw

Loss: Depredation Offset per paragraph 1l.d of stiitlpuBtlon (5,136,536) (2,568,268) lob; Stipubtbn. ElhBi5 58390 Rate Base $ 6,642,664 $ 3,321,332

H. Calculation of Depreciation Expense

Pmposed Incremental Investment (Rate Bare) 5 12.000.ow S 6,000,000 fapk 0eprrcl;rt)on Expense 1.84% 1.84% Total oepreciation ~xpense(kcumutated Deprewtbn) $ 220,800 $ 110,400 Exhibit-(RAB-2) Page 28 of 28

MOUNTAINEER GAS COMPANY Case No. 15-0003442T Stipulated Transmission & Distribution Depreciation Expense Amount Included in Cost of Service

Plant Depreciation Line Account Expense (1) (2)

Transmission Plant 1 365.10 Land and Land Rights 2 365.20 Rights-of-way 3 366 Structures 8 Improvements 24 1 4 367 Mains 39,331 5 369 Measuring 8 Reg. Station Equip 6 Total 39,572

Distribution Plant 7 374.190 Land and Land Rights 8 374.292 Rights-of-way 9 375 Structures B Improvements 2,188 10 376 Mains (A) 5,136,536 11 377 Compressor Station Equipment 12 378 Meas. & Reg. Stat. Eq - General 420,873 13 379 Meas. & Reg, Stat. Eq - City Gate 14 380 Services 2,898,399 15 381 Meters 745,209 16 381.1 ERTs 19,396 17 382 Meter Installations 337,191 18 382.1 ERT Instalfatton 15,502 18 383 House Regulators 19 384 House Regulator Installation 18,838 20 385 Measuring 8 Reg. Station Equip 138,694 21 386 Other Property on Customers' Premises 22 387 Other Equipment.. 10,706 23 Total 9,74 3,535

24 Total Transmission & Distribution Depreclatlon Expense

(A) - Amount excludes the deprecation sssoclated with the assets excluded in rate base in accordance with Case No. 06-1 838-0-PC.

Client Work\4847-8328-4261.v 1-7110/15