June 29, 2020 Via Federal Express Honorable Mayor Todd Kana City Of
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June 29, 2020 Via Federal Express Honorable Mayor Todd Kana City of Magnolia 18111 Buddy Riley Road Magnolia, Texas 77354-5864 Dear Mayor Kana: Attached is a copy of the Statement of Intent of EPCOR Gas Texas Inc. (“EPCOR Gas” or the “Company”), to change gas utility rates within the incorporated areas of the City of Magnolia (“City”). The Company requests that the proposed rates and tariffs contained in the Statement of Intent become effective on August 4, 2020, which is 35 days from the date of this filing. No action on the part of the City is required to permit the Company’s proposed rates to take effect. Simultaneous with this city-level filing, the Company is also making a Statement of Intent filing with the Railroad Commission of Texas for the unincorporated areas of Austin, Colorado, Grimes, Harris, Montgomery and Waller Counties, Texas. Although there is no requirement that the Company file testimony with a city-level Statement of Intent filing, the Company is providing the City with a copy of the testimony that is being filed with the Commission. If you have any questions, please do not hesitate to contact me. Best regards, Ann M. Coffin Attorney for EPCOR Gas Texas Inc. AMC:ssm Attachment cc: Don Doering, City Administrator Sheryl Hubbard, Director of Rates, EPCOR USA STATEMENT OF INTENT OF EPCOR GAS TEXAS INC. TO CHANGE GAS UTILITY RATES WITHIN THE CITY OF MAGNOLIA To the City of Magnolia: EPCOR Gas Texas Inc. (“EPCOR Gas” or the “Company”), a “gas utility” under Gas Utility Regulatory Act (“GURA”) 1 § 101.003(7), respectfully files this Statement of Intent, pursuant to Subchapter C of Chapter 104 of the Texas Utilities Code to change gas utility rates within the City of Magnolia. The Company’s proposed rates were developed on a system-wide basis determined on the cost of providing service to its entire EPCOR Gas Texas Service Area, which is comprised of the City of Magnolia and the unincorporated areas of Austin, Colorado, Grimes, Harris, Montgomery, and Waller Counties, Texas. Collectively, the Company’s natural gas service area is referred to herein as the EPCOR Gas Texas Service Area. Contemporaneously with this filing, EPCOR Gas is also filing a Statement of Intent to Change Rates with the Railroad Commission of Texas (“Commission”).2 The Company requests that the proposed rate schedules and tariffs, attached as Exhibit A to this Statement of Intent and incorporated herein by reference, become effective on August 4, 2020, which is 35 days from the date of this filing. In support of its request, the Company respectfully shows as follows: I. INTRODUCTION AND SUMMARY OF THE RATE REQUEST EPCOR Gas is proposing to adopt rates for the EPCOR Gas Texas Service Area based on the cost of providing service to all customers, inclusive of both incorporated and unincorporated areas served by EPCOR Gas. 1 GURA §§ 101.001 et seq. 2 The Company is requesting the same relief in the Statement of Intent filing made with the Commission. Additionally, the Company has requested that the Commission: (1) render a finding that EPCOR Gas has fully complied with the Commission’s Accounting Order issued in Gas Utilities Docket (“GUD”) No. 10695; and (2) issue a favorable public interest determination pursuant to Tex. Util. Code § 102.051 regarding EPCOR proposal to consolidate its affiliated gas utility, Alamo Pipeline LLC, into EPCOR Gas. 1 If approved, the requested rates will increase EPCOR Gas’s revenues by $1,075,900 which is an increase of 0.7% including gas costs, or 26% excluding gas costs. Because the proposed changes will increase EPCOR Gas’s total aggregate revenues by more than 2.5%, the proposed rate change constitutes a “major change” in rates as that term is defined by Texas Utilities Code § 104.101. More specifically, the proposed rates and tariffs are expected to increase the annual revenue received from customers served within the City of Magnolia by $6,365, or 0.9%, including gas costs, or by $117,254, or 28%, excluding gas cost. As part of this rate filing, the Company is also requesting that the City approve changes to the Company’s Line Extension Tariff. The Company also seeks approval of a rate case expense recovery tariff to recover the reasonable rate case expenses associated with this filing through a surcharge on rates, as provided by law. The exact amount of rate case expense will not be known until the case is complete. The Company also proposes to update the heat and base load factors utilized in its Rider WNA (Weather Normalization Adjustment) tariff and to revise the months to which a weather normalization adjustor would apply for City of Magnolia customers. Further, the Company seeks to establish new depreciation rates for EPCOR Gas’s use. Finally, the Company also seeks a prudency determination with regard to its capital investment for the period January 1, 2019 through June 30, 2020. Plant investment made prior to this time period has been deemed prudent as part of the Company’s annual rate filings made pursuant to its Cost of Service Adjustment Tariff. 2 II. JURISDICTION EPCOR Gas is a gas utility as that term is defined in § 101.003(7) of the Texas Utilities Code. Pursuant to Texas Utilities Code § 103.001, the City of Magnolia has exclusive original jurisdiction to set the rates EPCOR Gas requests for customers within the municipal jurisdiction of the City of Magnolia. Consistent with such jurisdiction, the proposed rates identified in Exhibit A are applicable to the Company’s natural gas service within the City of Magnolia. III. DETAILS OF PROPOSED CHANGES A. Rate Filing Package In addition to this Statement of Intent, the Rate Filing Package consists of the following: • Exhibit A Proposed Tariffs and Schedules • Exhibit B Proposed Revenue Change by Class • Exhibit C Average Bill Impact by Class • Exhibit D Direct Testimony and Exhibits • Exhibit E Proposed Notice • Exhibit F Proposed Protective Agreement • Exhibit G Cost of Service Schedules • Exhibit H Workpapers B. Test Year The Company’s proposed cost of service as set forth in this Statement of Intent and Rate Filing Package is based on the 12-month period ended December 31, 2019, as adjusted for known and measurable changes. C. Class and Number of Customers Affected The proposed changes to the Company’s rate schedules will affect all customers served by EPCOR Gas within the City of Magnolia. The table below shows the approximate number of incorporated customers by class, who will be affected by the proposed rate changes: 3 Table 1 Customer Classes Affected Customers Customer Class City of Magnolia Residential 388 Commercial 64 Exhibit B, attached, shows the amount of the proposed change for each class of customers. D. Proposed Rate Schedules and Tariffs In developing the proposed rates, the Company has used the system-wide cost of providing service to the entire Texas service area served by EPCOR Gas. The proposed changes to rates are set out below: RATE R – RESIDENTIAL SALES Charge Current Proposed Customer Charge $21.39 $30.50 Consumption Charge $9.4276 $9.4276 RATE C – COMMERCIAL SALES Charge Current Proposed Customer Charge $21.39 $45.00 Consumption Charge Per Mcf $9.4276 $12.1623 Exhibit C, attached, shows the effect of the proposed change to an average bill for each class of customers. For the incorporated areas served by EPCOR Gas (excluding gas cost) residential customers will see a 20.1% increase in the average monthly bill, commercial customers will see a 35.3% increase in the average monthly bill.3 3 The Average Monthly Usage per Mcf used to determine the percentage change is as follows: Residential (2.5Mcf); Commercial (27.0 Mcf). 4 E. Depreciation Rates The Company requests approval of new depreciation rates for EPCOR Gas and all of its natural gas assets. F. Other Proposed Tariff Changes In addition to the proposed change in rates, the Company proposes minor revisions to its Rider WNA and line extension policy: (1) Rider WNA. The Company proposes to update the heat load and base load factors reflected in its Rider WNA. The Company requests these changes in order to synchronize these factors with proposed rates and the updated billing determinant calculations used to develop the proposed rates. Further, the Company seeks to revise the months to which a weather normalization adjustor would apply for City of Magnolia customers. (2) Line Extension Tariff. Provide a mechanism for recovery of expenses related to line extensions. (3) Rate Case Expense Tariff. Provides for recovery of rate case expenses associated with this filing through a surcharge on rates, as provided by law. The exact amount of rate case expense will not be known until the case is complete. G. Asset Consolidation. The Company proposes to consolidate the assets of Alamo Pipeline LLC and Pinehurst Utility Construction LLC into EPCOR Gas. H. Effective Date The Company requests that the Commission order the proposed rates to be effective for bills rendered on and after August 4, 2020, which is 35 days after the filing date. 5 I. Witness Testimony Attached as Exhibit D to the Statement of Intent is the direct testimony supporting the Company’s requested revenue requirement. The attached testimony includes the following witnesses: • David Billinger, the Director of Operations for EPCOR Gas, will provide an overview of the business and operating issues that the Company faces, the capital investments made under EPCOR USA’s ownership and the current Operations & Maintenance expenses of the Company. His testimony will also provide the roadmap of the Company’s proposal to consolidate and merge the operations of Alamo Pipeline LLC and Pinehurst Utility Construction LLC into EPCOR Gas’s operations.