JOHN N. HUGHES Attorney at Law Professional Service Corporation 124 West Todd Street Frankfort, Kentucky 40601
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JOHN N. HUGHES Attorney at Law Professional Service Corporation 124 West Todd Street Frankfort, Kentucky 40601 Telephone: (502) 227-7270 Email: [email protected] November 13, 2020 Kent Chandler Acting Executive Director Kentucky Public Service Commission 211 Sower Boulevard Frankfort, KY 40602-0615 RE: Atmos Energy: Case 2020-00289 Dear Mr. Chandler: Atmos Energy Corporation submits its responses to the Commission’s First Request for Information in the above captioned proceeding. If there are any questions about this matter, please contact me. I certify that the electronic filing is a complete and accurate copy of the original documents to be filed in this matter, which will be filed within the time designated by the Commission’s COVID-19 orders and that there are currently no parties in this proceeding that the Commission has excused from participation by electronic means. Sincerely, John N. Hughes Attorney for Atmos Energy Corporation COMMONWEALTH OF KENTUCKY BEFORE THE PUBLIC SERVICE COMMISSION ELECTRONIC REQEUST OF ATMOS ENERGY ) CORPORATION FOR MODIFICATION AND ) EXTENSION OF ITS GAS COST ADJUSTMENT ) CASE NO. PERFORMANCE BASED RATEMAKING ) 2020-00289 MECHANISM ) AFFIDAVIT The Affiant, Brannon C. Taylor, being duly sworn, deposes and states that the attached responses to Commission Staffs first request for information are true and correct to the best of his knowledge and belief. STATE OF r~ ~Sv-c.. COUNTY OF \j\J \ ~ ~~ 0\AM~ ------------~-- SUBSCRIBED AND SWORN to before me by Bram1on C. Taylor on this the __th day of November, 2020. My Commission Expires: ~ \'tJ \~ V Case No. 2020-00289 Atmos Energy Corporation, Kentucky Division Staff DR Set No. 1 Question No. 1-01 Page 1 of 6 REQUEST: Refer to Atmos’s August 31, 2020 motion to modify and extend its Performance-Based Ratemaking (PBR) mechanism (Motion), Report on Performance-Based Ratemaking (Report), pages 3 and 4, which describes the Requests for Proposal (RFP) for potential asset managers to provide single-source contracts for its distribution systems served by Texas Gas Transmission/Trunkline Pipeline/ANR Pipeline Company (Texas Gas/Trunkline/ANR) and Tennessee Gas Pipeline (Tennessee Gas). a. Provide a summary of the contract terms of each of the successful bidders for the Texas Gas/Trunkline/ANR and Tennessee Gas specific contracts, along with a detailed explanation of why each was chosen over competing bidders. b. Provide a breakdown of the annual gas commodity and transportation cost savings achieved in each of the two Texas Gas/Trunkline/ANR and Tennessee Gas distribution systems for each year of the four years covered by the Report. c. Provide a comparison of the annual gas commodity and transportation cost savings achieved in each of the two distribution systems with commodity and transportation costs savings achieved in the two systems for each year of the ten years ending June 2016. RESPONSE: a. Please see confidential Attachment 1 for a list of Atmos Kentucky’s Gas Supply and Asset Management Agreements in effect during the four years of this PBR review period, June 2016 through May 2020. Also, please see confidential Attachment 2 through confidential Attachment 5 for the four RFP recommendations that explain how each of these were chosen in the competitive bidding RFP process. Additionally, please see confidential Attachment 6 through confidential Attachment 9 for the four Gas Supply and Asset Management Agreements that contain sections summarizing the contract terms. b. The following four charts provide a breakdown of the annual gas commodity and transportation cost savings achieved by pipeline service area: Texas Gas/Trunkline/ANR and Tennessee Gas Pipeline for each year of the four years covered by the Report. Please note, Atmos Energy has a single PBR for total gas costs in the state of Kentucky. The Company’s KY PBR reporting file was not set up to show total costs broken out between the pipeline areas, and as such, there may be slight rounding differences between the amounts reported in the following charts and the amounts reported in the filed 4th Year PBR Report. Subsequent to Atmos Energy Case No. 2020-00289 Atmos Energy Corporation, Kentucky Division Staff DR Set No. 1 Question No. 1-01 Page 2 of 6 filing its 4th year report, the Company noted that a small capacity release transaction occurring over the three months December 2017, January 2018 and February 2018, with total capacity release savings of $16,789 were reported within the Transport Discount line rather than the Capacity Release line item. In the Atmos Energy PBR mechanism, capacity release savings are categorized within the TIF PBR tariff section, so even though these nominal amounts were not itemized specifically as capacity release savings, the total TIF savings included these capacity release savings. The chart that follows for the 2017-2018 PBR year separately itemizes the capacity release amount. Case No. 2020-00289 Atmos Energy Corporation, Kentucky Division Staff DR Set No. 1 Question No. 1-01 Page 3 of 6 c. Please note, Atmos Energy has a single PBR for total gas costs in the state of Kentucky. The Company’s Kentucky PBR reporting file was not set up to show total costs broken out between the pipeline areas. Older PBR periods preceding the last KPSC Order in Case No. 2015-00298 (in which the Commission reviewed the Company’s PBR records and the Company’s reported savings for the four year period June 2011 - May 2015) are more difficult to break into the requested groupings due to the age of the records. Atmos Energy retained the annual PBR Case No. 2020-00289 Atmos Energy Corporation, Kentucky Division Staff DR Set No. 1 Question No. 1-01 Page 4 of 6 reports, but the supporting detail is in varying formats with some having passed beyond their record retention period. The two charts that follow provide a breakdown of the annual gas commodity and transportation cost savings achieved by pipeline service area: Texas Gas/Trunkline/ANR and Tennessee Gas Pipeline for two PBR report periods, June 2014 – May 2015 and June 2015 – May 2016. At this time the Company offers a third chart that is a multi-year summary of the annual gas commodity and transportation cost savings for the period June 2006 to May 2016. Atmos Energy will continue to assess the data to see if the breakout comparison by pipeline area can be provided for the years requested. Case No. 2020-00289 Atmos Energy Corporation, Kentucky Division Staff DR Set No. 1 Question No. 1-01 Page 5 of 6 ATTACHMENTS: ATTACHMENT 1 - Staff_1-01_Att1 - KY Gas Supply and Asset Management Agreements (CONFIDENTIAL), 1 Page. ATTACHMENT 2 - Staff_1-01_Att2 - KY TGP RFP AMA Apr15-Mar17 Recommendations (CONFIDENTIAL).pdf, 2 Pages. ATTACHMENT 3 - Staff_1-01_Att3 - KY TGT AMA RFP Nov15-Oct20 Recommendations (CONFIDENTIAL).pdf, 2 Pages. ATTACHMENT 4 - Staff_1-01_Att4 - KY TGP RFP AMA Apr17-Mar20 Recommendations (CONFIDENTIAL).pdf, 2 Pages. ATTACHMENT 5 - Staff_1-01_Att5 - KY TGP RFP AMA Apr20-Mar23 Recommendations (CONFIDENTIAL).pdf, 3 Pages. Case No. 2020-00289 Atmos Energy Corporation, Kentucky Division Staff DR Set No. 1 Question No. 1-01 Page 6 of 6 ATTACHMENT 6 - Staff_1-01_Att6 - KY TGP RFP AMA Apr15-Mar17 Addendum (CONFIDENTIAL).pdf, 35 Pages. ATTACHMENT 7 - Staff_1-01_Att7 - KY TGT AMA RFP Nov15-Oct20 Addendum (CONFIDENTIAL).pdf, 42 Pages. ATTACHMENT 8 - Staff_1-01_Att8 - KY TGP RFP AMA Apr17-Mar20 Addendum (CONFIDENTIAL).pdf, 38 Pages. ATTACHMENT 9 - Staff_1-01_Att9 - KY TGP RFP AMA Apr20-Mar23 Addendum (CONFIDENTIAL).pdf, 40 Pages. Respondent: Brannon C. Taylor Case No. 2020-00289 Atmos Energy Corporation, Kentucky Division Staff DR Set No. 1 Question No. 1-02 Page 1 of 2 REQUEST: Refer to the Report, page 6. a. Explain in detail how the Transportation Cost Component of Atmos’s PBR mechanism produced approximately half of the total $28 million PBR savings achieved over the last four years and approximately 42 percent of the $32.6 million transportation cost savings achieved over the 22 years of the program. b. Explain why Atmos proposes to retain the Off-System Sales and Capacity Release components if they are inactive. Explain any barriers to implementing those components in the future if they are removed for inactivity. RESPONSE: a. The Kentucky PBR mechanism incentivizes the Company’s Gas Supply Planning Department. to seek out, negotiate and obtain interstate pipeline discounts at the time capacity is contracted or upon renewal (which generally occurs every 3 – 5 years). The Planning Department has studied the markets and interstate systems and the availability of capacity at receipt locations that provide the best opportunities for generating savings. The Planning Department has frequent conversations with the various pipeline representatives to stay abreast of developments and gauge new opportunities to generate savings. One example is a relatively recent form of capacity utilization between Atmos Energy utility divisions called segmentation. Here is a summary write up regarding one such transaction: The PBR program is a State Public Service Commission approved mechanism for customers and shareholders to participate in savings. Releasing unutilized capacity segments is an avenue for savings in the Mississippi PBR program. Obtaining discounted capacity is a method to generate savings in the Kentucky PBR program. Atmos Energy identified a cost savings opportunity for its Mississippi (Atmos MS) and Kentucky (Atmos KY) divisions. Atmos MS can create savings by releasing TGT capacity to Atmos KY. The TGT capacity is shared via a segmented capacity release, essentially dividing the transportation path into an Atmos MS segment and an Atmos KY segment. This provides a lower demand charge than the Atmos MS and Atmos KY divisions would pay if they individually acquired capacity from TGT. Savings generated through this release flows through the MS and KY PBR programs. Consistent with other divisional releases, the releasing party releases the capacity to the replacement party for half the base contract rate.