PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, PA 17105-3265

Public Meeting held June 11, 2015

Commissioners Present:

Gladys M. Brown, Chairman John F. Coleman, Jr., Vice Chairman James H. Cawley Pamela A. Witmer Robert F. Powelson

UGI Utilities, Inc.- Gas Division, M-2013-2371824 UGI Utilities, Inc.-Electric Division, UGI Penn Natural Gas, Inc., and UGI Central Penn Gas, Inc., Universal Service and Energy Conservation Plan for 2014-2017, Submitted in Compliance with 52 Pa. Code §§ 54.74 and 62.4.

OPINION AND ORDER

BY THE COMMISSION:

Before the Pennsylvania Public Utility Commission (Commission) for consideration and disposition is the Joint Petition for Settlement of All Issues (Joint Petition) filed on March 27, 2015, by UGI Utilities, Inc. – Gas Division (UGI Gas), UGI Utilities, Inc. – Electric Division (UGI Electric), UGI Penn Natural Gas, Inc. (UGI PNG), and UGI Central Penn Gas, Inc. (UGI CPG) (collectively the UGI Distribution Companies or UGI), the Office of Consumer Advocate (OCA) and the Pennsylvania Utility Law Project (PULP) (collectively, the Joint Petitioners). Each of the Joint Petitioners has also filed a Statement in Support of the Joint Petition (Statements in Support).

1. Background

The Electricity Generation Customer Choice and Competition Act (Electric Competition Act), 66 Pa. C.S. §§ 2801-2812, became effective on January 1, 1997. The Natural Gas Choice and Competition Act (Gas Competition Act), 66 Pa. C.S. §§ 2201- 2212, became effective on July 1, 1999. The primary purpose of these Competition Acts was to introduce competition into the retail electric and natural gas generation markets. These two Competition Acts established standards and procedures for the restructuring of the electric and natural gas utility industries. While opening the markets to competition, the Acts also include several provisions relating to universal service to ensure that electric and natural gas service remains available to all customers in the Commonwealth.

The universal service provisions of the Competition Acts, inter alia, tie the affordability of electric and natural gas service to a customer’s ability to maintain utility service. The Competition Acts define “universal service and energy conservation” as the policies, practices and services that help low income customers maintain utility service. The term includes customer assistance programs (CAPs), usage reduction programs, service termination protections and consumer education. 66 Pa. C.S. §§ 2202 and 2803. The Competition Acts commit the Commission to continuing, at a minimum, the policies, practices and services that were in existence as of the effective date of the laws. 66 Pa. C.S. §§ 2203(7) and 2802(10). Finally, the Competition Acts require the Commission to ensure that universal service and energy conservation services are appropriately funded and available in each utility distribution territory. 66 Pa. C.S. §§ 2203(8) and 2804(9). The General Assembly has acknowledged the importance of helping low- income customers maintain utility service. Under the Competition Acts, universal service programs are subject to the administrative oversight of the Commission, which must ensure that the utilities run the programs in a cost-effective manner. 66 Pa. C.S. §§ 2203(8) and 2804(9). Although the Competition Acts do not define “affordability,” the Commission’s Policy Statement provides guidance on affordable payments. 52 Pa. Code §§ 69.261-69.267. The Commission balances the interests of customers who benefit from the programs with the interests of the customers who pay for the programs. See Final Investigatory Order on CAPs: Funding Levels and Cost Recovery Mechanisms, Docket No. M-00051923 (Dec. 18, 2006), (Final CAP Investigatory Order), at 6-7.

To help meet these requirements, the Commission promulgated the Universal Service and Energy Conservation Reporting Requirements Regulations (Reporting Requirements). 52 Pa. Code §§ 54.71- 54.78 (electric) and §§ 62.1 - 62.8 (gas). These Reporting Requirements require each natural gas distribution company (NGDC) serving more than 100,000 residential accounts and each electric distribution company (EDC) serving more than 60,000 residential accounts to submit an updated Universal Service and Energy Conservation Plan (USECP) every three years to the Commission for approval. 52 Pa. Code §§ 54.74 and 62.4.1 UGI Gas, UGI PNG, and UGI CPG are jurisdictional NGDCs; UGI Electric is a jurisdictional EDC.

The number of residential customers served and the number of customers enrolled into CAP by the UGI Distribution Companies were as follows:

1 UGI CPG has less than 100,000 residential accounts and UGI Electric has less than 60,000 residential accounts. Both utilities have voluntarily filed a USECP in conjunction with UGI Gas and UGI PNG. Residential Class Size and CAP Enrollment

Residential Customers CAP Enrollment UGI Companies as of December 31, 20142 as of June 30, 20143 UGI Gas 335,801 7,193 UGI PNG 151,874 5,756 UGI CPG 69,693 2,156 UGI Electric 55,828 2,121 Totals 613,196 17,226

2. History of the Proceeding

On August 1, 2014, the UGI Distribution Companies jointly filed an updated USECP for the period of January 1, 2014 through December 31, 2017 (August 2014 USECP). The UGI Distribution Companies’ August 2014 USECP included a needs assessment for UGI Gas and UGI PNG, as required under the Commission’s Regulations for NGDCs serving over 100,000 residential accounts. See, 52 Pa. Code §§ 62.4 and 62.7. Pursuant to the Commission’s Regulations, the needs assessment for each program component included: the number of identified low-income customers and an estimate of low-income customers, the number of identified payment troubled, low-income customers, an estimate of payment troubled, low-income customers, the number of customers who still need Low Income Usage Reduction Program (LIURP) services and the cost to serve that number, and the enrollment size of CAP to serve all eligible customers. 52 Pa. Code § 62.4(b)(3). The August 2014 USECP also included a program budget for each program component making up the USECP in accordance with the Commission’s Regulations at 52 Pa. Code § 62.4(b)(5).

2 Joint Petition at 2.

3 As reported to the Commission’s Bureau of Consumer Services. By Tentative Order entered on October 2, 2014, at the above docket (Tentative Order), the Commission conditionally approved the August 2014 USECP, finding, inter alia, that:

The Plan contains all of the components cited in the definition of universal service at 66 Pa. C.S. §§ 2202. The Plan also meets the requirements at 66 Pa. C.S. §§ 2203(8), which mandate that universal service programs be available in each large NGDC service territory and that the programs be appropriately funded. Finally, the Plan, in part, meets the submission and content obligations of the Universal Service Reporting Requirements at 52 Pa. Code §§ 54.74 and 62.4, the Low Income Usage Reduction Program (LIURP) regulations at 52 Pa. Code §§ 58.1-58.18 and the CAP Policy Statement at 52 Pa. Code §§ 69.261-69.267.

Tentative Order at 5.

The Tentative Order also sought further clarification and/or modification of the August 2014 USECP components and solicited public comment from interested parties. Tentative Order at 49-51. The UGI Distribution Companies, PULP, and the OCA were the only active parties to this proceeding; each filing comments and reply comments with respect to the August 2014 USECP.

On January 15, 2015, after close of comments, the Commission entered a Final Order at the above docket (Final Order) approving the August 2014 Plan in part, with prescribed modifications, and requiring an updated Plan to be filed within thirty days of the Final Order. The Commission ordered two issues reserved for thirty days to allow the Parties the opportunity to reach a consensus. The two issues reserved were: (1) the calculation of the UGI PNG and UGI Gas projected needs assessment; and (2) the UGI Gas program budget for its Low Income Usage Reduction Program (LIURP). Joint Petition at 4; Final Order at 70-71. Representatives from the Parties, and the Commission’s Bureau of Consumer Services (BCS) and Law Bureau met and conferred on January 28, 2015, and February 10, 2015. The Parties achieved consensus on revisions to the first reserved issue, the USECP projected needs assessment. A Revised Plan was timely filed at the above-referenced docket on February 17, 2015, in accordance with the Final Order. This Revised Plan incorporated the changes prescribed by the Final Order and the Parties’ agreed-upon changes to the needs assessment. Joint Petition at 4.

The Parties subsequently achieved consensus on the UGI Gas LIURP budget. Joint Petition at 4. The Joint Petition was filed on March 27, 2017. Attached to the Joint Petition was, inter alia, the Second Revised USECP dated March 17, 2015 (Second Revised USECP). The terms of the Joint Petition regarding the revised projected needs assessment and LIURP budget are described, supra.

3. Discussion

Pursuant to our Regulations at 52 Pa. Code § 5.231(a), it is the Commission’s policy to promote settlements. However, the Commission must review proposed settlements to determine whether the terms are in the public interest. Pa. PUC v. Philadelphia Gas Works, Docket No. M-00031768 (Order entered January 7, 2004).

4. UGI Gas and UGI PNG Projected Needs Assessment

5. Terms of the Joint Petition

In the Final Order, the Commission addressed a number of issues pertaining to the UGI Gas and UGI PNG projected needs assessment, including: (1) the methodology for calculating “identified” and “estimated” payment-troubled low-income customers; and (2) the methodology for determining the number of customers in need of LIURP. Accordingly, the Commission deferred these issues for thirty days to afford the Parties an opportunity to reach consensus and present it to the Commission. Final Order at 58-59. The Joint Petitioners report that, in consultation with BCS and the Law Bureau, they have agreed to the following changes to the revised projected needs assessment:

a. Strike the figure for “Estimated Number of Payment- Troubled, Low-Income Customers” as a separate line item, since, due to the methodology employed by the UGI Distribution Companies, this figure equals the “Identified Payment- Troubled Low-Income Customers” set forth in the needs assessment;

b. Refine LIURP eligibility criteria to include in the LIURP- eligible pool of customers, those who had not received weatherization services within the past seven (7) years - resulting in a net increase of LIURP-eligible customers; and

c. Restate in the Plan the policy of the UGI Distribution Companies to grant exceptions, where warranted, on a case-by-case basis to customers who do not meet the Plan’s LIURP eligibility criteria and report such exceptions annually to the Commission.

Joint Petition at 5.4

The Joint Petitioners additionally agreed to add a reference to the category “Enrollment Size of CAP” to indicate that the Final Order directs the UGI Distribution Companies to petition to eliminate CAP enrollment limits within ninety days of the Final Order and that, pending such change, the current ceilings will remain in effect.5 Joint Petition at 5.

4 The changes to the revised projected needs assessment are reflected in Appendix B to the (black-line) Second Revised USECP, submitted as Exhibit C to the Joint Petition.

5 We note that UGI Distribution Companies filed a Petition for the Elimination of Customer Assistance Program Enrollment Limits on April 15, 2015, at this docket. 6. Positions of the Joint Petitioners

The OCA states that since UGI’s methodology for calculating “identified” and “estimated” customers is identical, there is no need to include the “estimated” number in the Projected Needs Assessment. OCA Statement in Support at 3. The OCA submits that deleting the “estimated” number clarifies UGI’s process for identifying eligible CAP customers. Id.

PULP points out that the modification of the criteria for the LIURP pool of eligible customers, from those customers who had not received weatherization services in the past ten years to the past seven years, will result in a net increase in LIURP-eligible customers. PULP reports that the number of UGI Gas customers determined to be in need of LIURP increased from 4,158 to 7,449 customers, or 3,291 additional customers. Similarly, the number of UGI PNG customers in need of LIURP increased from 5,365 to 7,238, or an increase of 1,873. PULP Statement in Support at 3.

PULP avers that the ten-year requirement unreasonably reduced the numbers of customers who were in need of, and would benefit from LIURP services. PULP submits that UGI’s modification of its projected needs assessment will result in long-term savings for all residential customers. PULP explains that the eligibility modification will reduce the energy burdens of CAP customers, and therefore, the CAP costs paid by other residential customers. PULP concludes that this modification will enable UGI to better fulfill its universal service obligations in a cost-effective manner. PULP Statement in Support at 4.

UGI states that the clear expression of its ability to grant exceptions, where warranted, to LIURP eligibility criteria, is intended to encourage greater participation in LIURP. UGI adds that the associated reporting of exceptions to the Commission will strengthen the Commission’s oversight of the employment of these exceptions. UGI Statement in Support at 5.

7. Disposition

We concur that since UGI’s methodology for calculating “identified” and “estimated” customers is identical, there is no need to include the “estimated” number in the Projected Needs Assessment. Therefore, we find that the elimination of the “Estimate of Number of Payment-Troubled, Low-Income Customers” entry on the Companies’ Revised Projected Needs Assessment removes the redundant entries and avoids potential confusion.

We find that expanding the pool of LIURP-eligible customers to those that have not received weatherization services in the past seven years is in the public interest. Expanding the number of customers eligible for LIURP should reduce the overall energy consumption of CAP customers and thereby reduce the CAP costs recovered from other residential customers.

We also concur that UGI Distribution Companies’ policy to grant exceptions to customers that do not meet the Plan’s LIURP eligibility criteria should be delineated in the Second Revised USECP. This will clarify that the UGI Distribution Companies have the flexibility to make exceptions where appropriate. The UGI Distribution Companies’ commitment to submit annual reports of the exceptions will facilitate the Commission’s review of those circumstances where deviations from the eligibility criteria may have been warranted. 8. UGI Gas LIURP Budget

1. Terms of the Joint Petition

In the Final Order, the Commission found that since the Needs Assessments for UGI Gas and UGI PNG were not accurate, the Commission could not accept the proposed LIURP budgets. The Commission recognized that while UGI PNG’s budget has been set as part of the settlement of a prior proceeding, a revised Needs Assessment might illustrate the need for a revision to the LIURP budget. The Commission also found that these companies should provide the method they use to establish their “jurisdictional revenues” and provide supporting documents and/or spreadsheets. Final Order at 70. Therefore, in addition to the issues related to the Projected Needs Assessment, supra, the Commission also deferred the issue of UGI Gas’ LIURP budget for thirty days to afford the Parties an opportunity to reach consensus and present it to the Commission. The Commission also stated that the Parties may confer with BCS and/or the Law Bureau during this period. Id. at 71.

As noted by the Commission at page 64 of the Final Order, Section 58.4 of the Commission’s LIURP Regulations provide in pertinent part that:

(a) General guidelines for gas utilities. Annual funding for a covered natural gas utility’s usage reduction program shall be at least .2% of a covered utility’s jurisdictional revenues. Covered gas utilities shall submit annual program budgets to the Commission. A covered gas utility will continue to fund its usage reduction program at this level until the Commission acts upon a petition from the utility for a different funding level, or until the Commission reviews the need for program services and revises the funding level through a Commission order that addresses the recovery of program costs in utility rates.

52 Pa. Code § 58.4(a). In the Joint Petition, the Joint Petitioners explain that UGI Gas’ current funding level and recovery mechanism for its LIURP program was established in the Application Proceeding of UGI Utilities, Inc. to Acquire the Natural Gas Distribution Assets of the PG Energy Division of Southern Union, at Docket Nos. A-120011F2000, A-1215146F5000, and A-125146 (Order entered August 17, 2006) (Acquisition Order). The Joint Petitioners note that in the Acquisition Order, the Commission approved the following settlement term, set forth in paragraph E(5) of the Parties’ Joint Exceptions in Settlement of the Acquisition Proceeding, dated August 4, 2006:

UGI will increase LIURP spending to 0.2 percent of jurisdictional revenues for its gas division and will be permitted to recover 50% of the incremental amount in its CAP Rider through the completion of UGI’s next base rate proceeding. Funding of LIURP may be addressed and modified in UGI’s next base rate proceeding.6

Joint Petition at 6 (footnote added).

The Joint Petitioners, in consultation with BCS and the Law Bureau, have agreed to the following changes to the LIURP budget:

a. Commencing on January 1, 2016, UGI Gas shall increase its annual LIURP budget to $1.1 million, and the UGI Distribution Companies shall revise Appendix A “Funding Commitments of Each Company for Each Universal Service Program” to reflect the increased UGI Gas LIURP budget.

b. UGI Gas shall be permitted to recover LIURP expenditures greater than $600,000, and up to the $1.1 million LIURP budget, through its LISHP [Low Income Self Help Program] Rider as follows: UGI will be entitled to recover 50% of the difference between $600,000 and an

6 As reflected in the Final Order, UGI Gas’ proposed $650,000 2015-2017 budget for LIURP is based on two percent of jurisdictional revenues. Final Order at 6667. amount equal to 0.2% of UGI Gas’s jurisdictional revenues for the prior calendar year plus the difference between the 0.2% jurisdictional revenue amount and the $1.1 million LIURP budget.

Joint Petition at 7.

The Joint Petitioners also support corresponding modifications to UGI Gas’ LISHP Rider which is attached to the Joint Petition as Exhibit B.7 As proposed, the revised LISHP Rider would become effective on one day’s notice. Similarly, the revised LIURP budget resulted in modifications to the Companies’ 2014-2017 USECP attached to the Joint Petition as Exhibit C to the Second Revised USECP.8

9. Positions of the Joint Petitioners

As discussed, supra, the Commission directed the UGI Distribution Companies to reconsider UGI Gas’s LIURP funding level in the context of updated needs assessment figures. Final Order at 70-71. In the Revised Needs Assessment filed February 17, 2015, and included in the Joint Petition, supra, UGI Gas’ LIURP-eligible customers increased from 4,158 to 7,449. UGI submits that, as directed by the Commission, the Companies carefully considered the revised needs assessment and its impact on UGI Gas’ LIURP funding. Accordingly, UGI and the OCA explain that the Settlement will provide a significant increase of $450,000 over the proposed $650,000 2015-2017 UGI Gas LIURP budget. UGI and the OCA state that this increased funding will address the weatherization needs of greater numbers of customers, and will benefit participating CAP customers by reducing their overall natural gas usage. UGI Statement in Support at 7; OCA Statement in Support at 5. The OCA points out that the reduced

7 A black-line version of the proposed LISHP Rider is attached to the Joint Petition as Exhibit A which reflects the proposed changes to the Rider.

8 These changes to the USECP are reflected on pages A-4 and A-5 of Appendix A to Exhibit C of the Second Revised USECP. usage levels will also benefit non-CAP residential customers by decreasing the cost of the discount provided to CAP customers and recovered from non-CAP customers. OCA Statement in Support at 5.

PULP submits that the proposed modification to the UGI Gas LIURP budget is “reasonable and appropriate.” PULP Statement in Support at 5. PULP explains that the budgeted increase in LIURP funding is based upon the modified and “rationally increased needs assessment levels,” the parallel efforts of other utilities, and the requirement of the Choice Acts that universal service programs, including those for energy efficiency and conservation, be appropriately funded. PULP Statement in Support at 5.

The OCA argues that the Joint Petition will also preserve the benefit of the funding mechanism established in the Acquisition Proceeding. The OCA explains that this will allow the expansion of LIURP without charging all costs to residential ratepayers and allows for the further expansion of LIURP. OCA Statement in Support at 5-6.

10. Disposition

We concur with the Joint Petitioners that the proposed increase of $450,000 in the UGI Gas budget of LIURP funding is reasonable considering, inter alia, the increased Revised Needs Assessment for LIURP services addressed, supra. Consistent with our findings on the Revised Needs Assessment, supra, this increased funding will address the weatherization needs of greater numbers of customers and will benefit participating CAP customers by reducing their overall natural gas usage. In addition, the reduced usage levels will also benefit non-CAP residential customers by decreasing the cost of the CAP discount that is recovered from non-CAP customers. We also support the terms of the Joint Petition whereby UGI will be entitled to recover only fifty percent of the difference between $600,000 and an amount equal to 0.2 percent of UGI Gas’s jurisdictional revenues. Therefore, UGI Gas’ contribution to LIURP costs will keep pace with any future changes (increases) in its jurisdictional revenue.

11. Other Conditions of Settlement

In addition to the modifications to the Revised Needs Assessments and LIURP budget addressed, supra, the Joint Petitioners also established seven additional conditions of the Joint Petition. The first two conditions (Paragraph Nos. 23 and 24) would be applicable if the Commission acted to modify the terms of the Joint Petition. Since we are adopting the Joint Petition without modification, we do not need to address these conditions. The last condition (Paragraph No. 29) incorporates the three Statements in Support submitted by the Joint Petitioners. Joint Petition at 8-10.

We shall accept the following four remaining conditions (Paragraph Nos. 25-28) to the extent that they place conditions on the Joint Petitioners and do not restrict any action of the Commission. The remaining four conditions set forth in the Joint Petition are as follows:

25. This Joint Petition may not be cited as precedent in any future proceeding, except to the extent required to implement the Joint Petition.

26. This Joint Petition is being presented only in the context of this proceeding in an effort to resolve all issues identified in the proceeding in a manner which is fair and reasonable. The Joint Petition is the product of compromise. This Joint Petition is presented without prejudice to any position which any of the Parties may have advanced and without prejudice to the position any of the Parties may advance in the future on the merits of the issues in future proceedings except to the extent necessary to effectuate the terms and conditions of this Joint Petition.

27. The Parties acknowledge and agree that this Joint Petition shall have the same force and effects as if the Parties had fully litigated this proceeding.

28. The Parties acknowledge and agree to not challenge the LIURP funding mechanism set forth in this Joint Petition until the next base rate case for UGI Gas.

Joint Petition at 9-10.

12. Conclusion

Consistent with the foregoing discussion, we shall: (1) adopt the Joint Petition; (2) allow UGI Distribution Companies to file the proposed revision to Rider LISHP, as set forth in Appendix B to the Joint Petition, to become effective on one day’s notice; and (3) adopt the final-form version of the Second Revised USECP, as set forth in Appendix C to the Joint Petition, THEREFORE,

IT IS ORDERED:

1. That the Joint Petition for Settlement of all Issues filed on March 27, 2015, by UGI Utilities, Inc. – Gas Division , UGI Utilities, Inc. – Electric Division, UGI Penn Natural Gas, Inc., UGI Central Penn Gas, Inc., the Office of Consumer Advocate and the Pennsylvania Utility Law Project, is granted consistent with this Opinion and Order.

2. That UGI Utilities, Inc. is authorized to file a tariff supplement containing the revision to Rider LISHP – Low Income Self Help Program as set forth in Appendix B to the Joint Petition for Settlement of all Issues filed by UGI Utilities, Inc. – Gas Division, UGI Utilities, Inc. – Electric Division, UGI Penn Natural Gas, Inc., UGI Central Penn Gas, Inc., the Office of Consumer Advocate and the Pennsylvania Utility Law Project, to become effective on one (1) day’s notice.

3. That a final form version of the Second Revised Universal Service and Energy Conservation Plan for the Four-Year Period January1, 2014 to December 31, 2017, filed on March 17, 2015, by UGI Utilities, Inc. – Gas Division , UGI Utilities, Inc. – Electric Division, UGI Penn Natural Gas, Inc., UGI Central Penn Gas, Inc. as set forth in Appendix C to the Joint Petition for Settlement of all Issues filed by UGI Utilities, Inc. – Gas Division, UGI Utilities, Inc. – Electric Division, UGI Penn Natural Gas, Inc., UGI Central Penn Gas, Inc. the Office of Consumer Advocate and the Pennsylvania Utility Law Project, is approved

4. That any directive, requirement, disposition, or the like contained in the body of this Opinion and Order, which is not the subject of an individual Ordering Paragraph, shall have the full force and effect as if fully contained in this part.

BY THE COMMISSION,

Rosemary Chiavetta Secretary

(SEAL) ORDER ADOPTED: June 11, 2015 ORDER ENTERED: June 11, 2015