AUGUSTA, Maine, Jan. 28 (TNSsro) -- The Maine Public Utilities Commission issued the following order rejecting stipulation (No. 2022-00025) on Jan. 27, 2023:
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SUMMIT NATURAL GAS OF MAINE, INC., Petition for Approval of an Alternative Rate Plan (35-A M.R.S. Sec. 4706)
ORDER REJECTING STIPULATION
SUMMARY
The Commission rejects the Stipulation filed on November 16, 2022 (the Stipulation) that was entered into by Summit Natural Gas of Maine, Inc., the Office of the Public Advocate, Backyard Farms LLC, Sappi North America, Inc., Huhtamaki, Inc., Competitive Energy Services, LLC, and the Industrial Energy Consumers Group (hereinafter the "Stipulating Parties").
BACKGROUND AND PROCEDURAL HISTORY
On January 27, 2022, Summit Natural Gas of Maine, Inc. (Summit or the Company) filed a letter notifying the Commission of its intent to file a request for approval of an ARP pursuant to 35-A M.R.S. Sec. 4706 on or about March 31, 2022. This new ARP would take effect after the expiration of Summit's current rate plan, approved in Docket No. 2012-00258, on December 31, 2022. According to the Company, the proposed ARP would be in effect for seven years and set starting rates at a level intended to generate additional revenues (i.e., above current levels) of approximately $2.8 million. The proposed rate plan would also allow, but not require, Summit to increase its rate schedules annually, subject to a cap.
On March 28, 2022, the Hearing Examiners issued a notice of proceeding setting a deadline of April 11, 2022, for petitions to intervene and scheduling an initial case conference for April 13, 2022. The Office of the Public Advocate (OPA) and Bangor Natural Gas Company (Bangor Gas) filed petitions to intervene on the same date./1
On March 29, 2022, on motion by Summit, the Hearing Examiners issued: (1) Temporary Protective Order No. 1 (Confidential Business Information); (2) Temporary Protective Order No. 2 (Competitively Sensitive Business Information); and (3) Temporary Protective Order No. 3 (Proprietary Model Information).
On March 30, 2022, the Efficiency Maine Trust (EMT) filed a petition to intervene. Competitive Energy Services, LLC (CES) filed a petition to intervene on March 31, 2022.
On March 31, 2022, Summit submitted its petition for approval of an ARP and its direct case. Under the proposed ARP, Summit would increase its distribution rates by 30 percent in year 1 of the rate plan, and then have the ability to increase those rates by up to an additional 15 percent each year in years 2 through 7. According to the Company, the proposed ARP would allow Summit to recover 48 percent of its asserted revenue deficiency, i.e. $19 million, by the conclusion of the seven-year term. Porter Dir. Test. at 13. This would, Summit contended, allow it to earn a "modest" return on equity, but not a "reasonable return" as it would not "satisfy Summit's revenue requirement as measured using traditional cost of service principles." Id. at 5-6. Summit stated that, based on a 12-month test year ending June 30, 2021, its current annual revenue deficiency is $40.1 million. Id.
In addition to its petition and Chapter 120 information, Summit's filing included the pre-filed direct testimony and exhibits of: (1) Tyson Porter, Summit's Senior Director of Regulatory Finance and Rates; (2) Ronald Amen of Atrium Economics, Summit's expert witness on revenue requirement, rate design, and expected customer bill impacts resulting from the proposed ARP; (3) Dylan D'Ascendis of Scott-Madden, Inc., Summit's expert witness on the Company's cost of equity and capital structure; (4) Matthew Jacobson, Summit's Director of Sales and Marketing, as the Company's expert witness on customer growth; (5) Fred Kirkwood, Summit's Chief Customer Officer, as the Company's expert witness on customer service; and (6) Jason Weekley, Summit's Senior Vice President and Chief Operations Officer, as the Company's expert witness on operational changes and safety and damage prevention metrics.
On April 8, 2022, the Hearing Examiners, citing the need for more time to investigate this matter, issued Suspension Order No. 1, under which approval of all of Summit's proposed schedules of rates, terms and conditions were suspended until July 31, 2022. Also on April 8, 2022, the Hearing Examiners issued a procedural order granting the OPA's petition to intervene.
On April 11, 2022, petitions to intervene were filed by the Towns of Cumberland, Falmouth, and Yarmouth (collectively the "Towns"), Huhtamaki, Inc. (Huhtamaki), and the Industrial Energy Consumer Group (IECG). Sappi North America, Inc. (Sappi) and Backyard Farms Energy, LLC (BYF) each submitted a late petition to intervene on April 12, 2022.
The initial case conference was held as scheduled on April 13, 2022. The petitions to intervene of the Towns, Sappi, BYF, Huhtamaki, and EMT were granted on a mandatory basis as full parties. CES and the IECG were granted intervention on a discretionary basis for matters pertaining to Summit's transportation customers./2 Bangor Gas was granted discretionary intervention limited to filing briefs and comments with regard to any policy issues that affect gas utilities in general, and comments or exceptions to any Examiners' Report or draft order bearing on those issues.
In a Procedural Order issued on April 20, 2022, Staff expressed its concern regarding whether Summit's petition met the statutory considerations and standards set forth in 35-A M.R.S. Sec. 4706. Summit, the OPA, and CES submitted responsive comments and the issue was put before the Commission, which, in an Order issued on June 3, 2022, directed this case to proceed and noted several concerns and questions that needed to be examined./3 Order Directing Case to Proceed (June 3, 2022) (hereinafter "June 3rd Order").
After the issuance of the June 3rd Order, on June 6, 2022, Staff issued a Procedural Order setting a schedule for discovery on Summit's petition and supporting materials. On June 27, 2022, on motion by Summit, the Hearing Examiners issued Temporary Protective Order No. 4 (Critical Energy Infrastructure) and Temporary Protective Order No. 5 (Special Rate Agreements)./4 On an additional motion by Summit, on June 29, 2022, the Hearing Examiners issued Temporary Protective Order No. 6 (Employee Compensation).
Summit responded to written data requests on its initial filing and then responded to questions asked at a technical conference held on July 7 and 11, 2022, as well as oral data requests.
On July 14, 2022, the Hearing Examiners, citing the continuing need for additional time to investigate this matter, issued Suspension Order No. 2, under which approval of all of Summit's proposed schedules of rates, terms, and conditions was suspended until December 31, 2022.
CES filed the direct testimony of Dr. Richard Silkman on August 4, 2022, on a recommended regulatory structure for Summit and the Company's authority for special rate agreements. On August 5, 2022, the OPA filed the direct testimony of Paul Leparulo on Summit's cost of capital and Larry Holloway, P.E. on Summit's build-out of its distribution system. Mr. Holloway also recommended that any rate increase for Summit should be limited to 6.5% for 2023 with no increase in subsequent years so that its distribution service to residential customers would remain competitive with alternative fuels. Holloway Dir. Test. at 3.
On August 15, 2022, the Hearing Examiners issued a Bench Memorandum, summarizing the Commission Staff's perspective that Summit had neither satisfied the legal and evidentiary standards of 35-A M.R.S. Sec. 4706 for approval of an ARP nor adequately responded to the questions and concerns the Commission articulated in the June 3rd Order. The OPA, also on August 15, 2022, filed the direct testimony of Bion Ostrander addressing Summit's revenue requirement, rate design, and policy issues regarding the Company's requested rate increase.
Dr. Silkman and the witnesses for the OPA responded to written data requests, questions posed at technical conferences held on August 22, August 24, and September 1, 2022, as well as oral data requests.
On September 22, 2022, the Commission held a public witness hearing at the Town Hall in Cumberland, Maine. Eight people gave sworn testimony concerning Summit's request for approval of its proposed ARP.
On September 23, 2022, Summit filed the rebuttal testimony of Mr. Amen, Mr. D'Ascendis, and Mr. Jacobson. Summit also filed initial testimony by (1) Kurt Adams, President and Chief Executive Officer of Summit's parent company Summit Utilities, Inc. (SUI); (2) Helen Ayotte, Vice President of Engineering for SUI; and (3) Steven Birchfield, Executive Vice President and Chief Financial Officer for SUI. The OPA, also on September 23, 2022, filed the rebuttal testimony of Mr. Ostrander in response to the direct testimony of Dr. Silkman.
A second public witness hearing was held on September 29, 2022, at the Commission's offices in Hallowell, Maine. Five people gave sworn testimony concerning Summit's request for approval of its proposed ARP.
On September 28, 2022, the OPA filed a motion for an opportunity to file surrebuttal testimony, noting in part that Summit had introduced testimony from new witnesses. The Hearing Examiner, after an objection by Summit and a reply by the OPA, granted the OPA's request in a Procedural Order issued on October 4, 2022./5
A settlement conference was held on September 29, 2022, with the parties agreeing to participation by Staff as per section 8(D)(2) of Chapter 110 of the Commission's rules. Summit, on October 7, 2022, filed a motion requesting that the procedural schedule be suspended so the parties could focus on reaching a settlement in this proceeding. The Hearing Examiner granted this request in a Procedural Order issued on October 11, 2022, and additional settlement conferences were held with the parties and Staff on October 12 and October 26, 2022./6
Summit filed the Stipulation, together with a cover letter containing a supporting memorandum, on November 16, 2022. As noted above, in addition to Summit, the OPA, BYF, Sappi, Huhtamaki, CES and IECG have all entered into the Stipulation. Additionally, Summit reported that no party to this proceeding opposes the Stipulation, with the Towns and Bangor Gas taking no position on the Stipulation and EMT informing Summit that it has no objection.
The Hearing Examiner issued a Procedural Order on November 29, 2022 scheduling oral argument on the Stipulation before the Commission on December 9, 2022. At the request of Summit, oral argument was re-scheduled to January 11, 2023. Summit filed a Pre-Argument Memorandum on January 9, 2023 and on January 11, 2023 both the Company and the OPA presented arguments to the Commission in support of the Stipulation.
The Commission discussed the Stipulation during its deliberative session held on January 24, 2023.
III. DESCRIPTION OF THE STIPULATION
A. Rate Plan
The Stipulation sets forth a proposed ARP that would be effective from January 1, 2023, through June 30, 2027. Under this ARP, Summit's existing distribution rates would be those in effect on the date of the Stipulation. Those existing rates would then increase as follows:
* First, by an amount equal to nine percent above the existing rates, taking effect on April 1, 2023;
* Second, by an amount equal to 13 percent above those rates in effect on November 30, 2023, taking effect on December 1, 2023;
* Third, by an amount equal to nine percent above those rates in effect on June 30, 2024, taking effect on July 1, 2024;
* Fourth, by an amount equal to nine percent above those rates in effect on June 30, 2025, taking effect on July 1, 2025; and
* The fifth, and final, distribution rate increase would be by an amount equal to nine percent above those rates in effect on June 30, 2026, taking effect on July 1, 2026.
All increases would be applied as equal percentages across all rate classes with tariff rates and each rate element (both volumetric and the monthly charge). The ARP gives Summit the ability to elect, in the Company's sole discretion, to implement lesser percentage increases on each of the effective dates listed above than those allowed pursuant to the Stipulation. If Summit does elect to implement a lesser increase, it must provide informational notice to the Commission and the other Stipulating Parties 30 days prior to the date of the increase.
B. Net Plant Adjustment
Summit's initial filing included a net plant in service amount for the end of the test year (June 30, 2021) of $325,778,660. (Exhibit RJA-11). As described in the Stipulation, both the OPA and Commission Staff questioned whether this amount was appropriate given concerns about the prudence of the Company's investments and the Commission's directive that those investments were to be made at shareholder risk./7 To address these concerns: (1) the Stipulation establishes a net plant balance for Summit, as of June 30, 2021, of $272,778,660, which would be a reduction of 16.3 percent, or $53 million, from the amount in Summit's filed case, with the Stipulating Parties agreeing this is reasonable and that the expenditure of this adjusted net plant amount was not imprudent; (2) subject to the Commission's authority pursuant to 35-A M.R.S.A. Sec. 1321, the Stipulating Parties agree that they will not seek in this or any other proceeding a reduction of net plant in the amount of $272,778,660 on the grounds that the capital expenditures in that amount as June 30, 2021 were imprudently incurred; and (3) Summit will apply the agreed $53 million reduction in net plant to the steel main subaccount of net plant as of the date of the Stipulation.
C. Cost of Service Study
The Stipulation requires that Summit, at least six months before filing its next rate case, will file with the Commission a class cost of service study, including the supporting data and analysis, that contains a percentage allocation of total revenue requirement to each rate class, including one or more transportation customer classes.
D. Competitive Pricing Study
At least six months before it files its next rate case, Summit will file in this Docket a study of the competitive market for residential and commercial heating in Maine, including a survey and analysis of alternative regulatory pricing mechanisms the Commission may consider in the context of setting rates that are competitive with alternative energy sources.
E. Special Rate Agreements
The Stipulation would not change, or require the change of, the terms of any special rate agreement (SRA) between Summit and any customer in effect as of the date of the Stipulation. As provided in Section 8 of Exhibit A to the Stipulation ("Rate Plan") approved in Docket No. 2012-00258, Commission approval would continue to not be required for Summit to enter into future SRAs with customers./8 Summit would file in Docket 2013-00174, for informational purposes, any SRAs it entered into with customers. When an SRA agreement is filed, Summit would indicate its view of the relationship of the contract price to short-run marginal cost, how the Company calculated marginal cost, and, if the contract rate is lower than short-run marginal cost, Summit will indicate why, in the Company's view, it is prudent to enter into the SRA rate agreement. The Commission could then investigate to determine whether the special rate being provided was prudent or reasonable.
F. Service Installation Requirements
The Stipulation requires that the Service Installation Requirements established in Paragraph 10 of the Rate Plan approved in Docket No. 2012-00258, will continue through the term of the ARP./9
G. Stay-Out and Off-Ramps
Under the terms of the Stipulation, Summit will not file a base rate proceeding pursuant to 35-A M.R.S. Sec. 307, or an alternative rate plan proceeding pursuant to 35-A M.R.S. Sec. 4706, that has a rate effective date earlier than June 30, 2027. The Company does, however, reserve the right to: (1) file a petition for temporary rate relief pursuant to 35-A M.R.S.A. Sec. 1322; and (2) adjust rates pursuant to the terms of the rate plan described above.
IV. DISCUSSION AND DECISION
A. Standard of Review
To accept a Stipulation, the Commission must find that:
a. The parties joining the stipulation represent a sufficiently broad spectrum of interests that the Commission can be assured that there is no appearance or reality of disenfranchisement;
b. The process that led to the stipulation was fair to all parties;
c. The stipulated result is reasonable and is not contrary to legislative mandates, and;
d. The overall stipulated results are in the public interest. MPUC Rules ch. 110 Sec. 8(D)(7).
For the reasons set forth below, the Commission does not find that all of these requirements for approval have been satisfied in this instance.
B. Whether the Parties to the Stipulation Represent a Sufficiently Broad Spectrum of Interests
The parties to the Stipulation include Summit, the OPA, BYF, SAPPI, CES, and the IECG, which represent a sufficiently broad spectrum of interests in this case to satisfy the first requirement for approval.
C. Whether the Process that Led to the Stipulation Was Fair to All Parties
As described in Summit's cover letter filed on November 16, 2022, all parties received notice of and participated in the settlement process that led to the Stipulation. Likewise, all parties and the Commission's Staff were given the ability to provide feedback on the terms of the Stipulation. There has been no suggestion from the parties who are not signatories to the Stipulation that the settlement process was anything but fair. The Commission, therefore, finds that the second requirement for approval has also been satisfied.
D. Whether the Stipulation is Reasonable, in the Public Interest, and Consistent with Legislative Mandates
Section 8(D)(4) of Chapter 110 also requires that a stipulation be reasonable, not contrary to legislative mandate, and in the public interest. Whether the Stipulation here is contrary to legislative mandate depends, in significant part, on whether the stipulated result is just and reasonable for customers as well as Summit.
The Commission, in rate cases, regularly evaluates the potential for rate shock to utility customers./10 The rate increases Summit's customers would see under the ARP proposed in the Stipulation are significant, with an initial increase of 9% on April 1, 2023 followed by: (1) another 13% percent increase on December 1, 2023; (2) a 9% increase on July 1, 2024; (3) a 9% increase on July 1, 2025; and (4) a final 9% increase on July 1, 2026. The result would be a 22% increase in the first eight months of the proposed ARP alone and taking into account the compounding effect of these increases customers would face an overall increase of approximately 60% during the term of the proposed ARP. Then, Summit would be able to seek additional increases effective as early as one year after the final increase under the ARP.
The Commission finds that the ARP proposed in the Stipulation would produce a very steep increase in rates and result in rate shock for most of Summit's customers. The only customers that would avoid this outcome are those with SRAs, because under the Stipulation they would see no changes to their rates or any other terms of their agreements. Although Summit may not be able to change the terms of its existing SRAs, non-special rate customers should not be facing a rate increase that may be larger than necessary if they are subsidizing the SRA customers by absorbing the full impact of rate increases that should potentially be shared across Summit's entire customer base. The Stipulation neither addresses this issue nor explains why it would not be appropriate to impute additional revenues to the Company from the SRA customers as a proxy for increasing those customers' rates together with all other customers' rates.
The Commission is also very concerned that the rate increases in the proposed ARP shift to Summit's customers the consequences of the risks the Company and its shareholders knowingly took when Summit made the business decision to invest in Maine's competitive fuel market and build a greenfield natural gas system./11 That decision was based on Summit's projection of making a $150 million investment in infrastructure in the area of the Kennebec River valley with the expectation that the Company would obtain 15,000 customers during the term of its original rate plan. Summit Natural Gas of Maine, Inc., Petition for Authority to Provide Natural Gas Utility Service Pursuant to 35-A M.R.S. Sections 2102, 2104 and 2105, Order Approving Stipulation at 2 (Jan. 29, 2013)./12 In hindsight, neither of those projections have proven to be accurate. To date, Summit has invested more than $300 million and after ten years of operations has only approximately 5,000 customers on its system. Porter Dir. Test. at 8; Amen Ex. RJA-11.
Summit contends that it is a "growth utility" and as such needs more time to grow into its system. The Company describes itself as remaining "committed to bringing more customers onto its system and expanding the system strategically where it makes business sense to do so." Summit Pre-Argument Memorandum at 2. Summit also argues that it is the public policy of Maine to encourage "growth utilities" to expand, noting that in 1997 the Legislature enacted P.L. 1997, c. 707, Sec. 10, "An Act to Facilitate Local Distribution of Natural Gas." Id.
Asserting that Summit is a "growth utility," however, does not change the fact that the Company has fallen critically short of its projections for adding customers. Although Summit has a stated goal to add more customers, the Commission, based on the record and the statements made at oral argument, does not see that Summit has presented any viable and actionable plan to add any significant number of new customers. In addition, the public policy referenced by Summit was enacted roughly 25 years ago. Regardless of the original intent of that policy and the fact that the resulting statute, 35-A M.R.S. Sec. 4706, remains in place as a grant of discretion to the Commission, the Legislature has created new policies that are contrary to its policy in 1997. One example in particular is the Legislature's revision to section 101 of Title 35A, which, as of 2021 requires the Commission to reduce greenhouse gas emissions. 35A M.R.S. Sec. 101; P.L. 2021, c. 279, Sec. 1.
Summit's failure to meet its original customer projections, while at the same time spending more than double its planned investment, raises the central question of whether its existing customers should absorb the costs of building a system to serve the thousands of additional customers who were expected but did not, and may not, materialize. In approving Summit's original ARP, the Commission explained that "[a]s time progresses, alternative equipment ages (and even becomes inoperative) and customers become more dependent and limited in their energy options, the more traditional attributes of monopoly regulation may become more appropriate." Summit Natural Gas of Maine, Inc., Petition for Authority to Provide Natural Gas Utility Service Pursuant to 35-A M.R.S. Sections 2102, 2104 and 2105, Order Approving Stipulation at 12 (Jan. 29, 2013). The Commission envisioned a long period of time, potentially the life of some of the Company's assets, before traditional ratemaking treatment would be appropriate. Thus, when considering the Stipulation and its proposed ARP and given that the Company's investment risk was knowingly borne by Summit and its shareholders, the Commission's obligation here is to ensure that rates for customers are just and reasonable, while the Company continues to bear responsibility for the investment decisions it has made. 35-A M.R.S. Sec. 4706(1) (among the factors the Commission may consider in approving an alternative rate-making mechanism is "the reallocation of risk between investors and ratepayers"). The Commission therefore finds that the Stipulation would shift too much of the consequences of the risk Summit and its shareholders voluntarily undertook in building the Company's system and impose them on customers in the form of un-reasonable rate increases.
Finally, in addition to the rate increases contained in the Stipulation, the provisions related to net plant are also concerning in that they bar the OPA and other signatories from challenging the prudency of Summit's investments in net plant. Given the importance of that issue, this provision is striking and would impede the ability of the OPA to litigate this very important issue that will impact Summit's customers.
The Commission, for the reasons described above, finds that the Stipulation as presented is contrary to legislative mandate and not in the public interest because it results in rates that are not just and reasonable for Summit's customers and places upon those customers the consequences of risks voluntarily undertaken by the Company. The Commission does not, however, reject the idea that a stipulation, albeit for a shorter period of time and containing a rate increase reasonably reflecting an increase in Summit's costs of serving its existing customers, might be appropriate and provide the Company some additional revenue while it decides how to best address the central issues raised in this case.
Accordingly, the Commission
ORDERS
1. That the Stipulation executed by Summit Natural Gas of Maine, Inc., the Office of the Public Advocate, Backyard Farms LLC, Sappi North America, Inc., Huhtamaki, Inc., Competitive Energy Services, LLC, and the Industrial Energy Consumers Group, filed on November 16, 2022 is rejected. A copy of the Stipulation is attached hereto as Attachment 1 and incorporated by reference; and
2. That the Hearing Examiner, in consultation with the parties, issue a schedule to resume litigation in this proceeding.
Dated at Hallowell, Maine, this 27th day of January, 2023
BY ORDER OF THE COMMISSION
Harry Lanphear, Administrative Director
COMMISSIONERS VOTING FOR: Bartlett
Davis
Scully
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Footnotes:
1/ The OPA's motion to intervene was accompanied by an objection to the notice of proceeding that Summit proposed to send to its customers pursuant to section 8(A) of Chapter 110, the Commission's rules of practice and procedure. The OPA withdrew this objection on April 8, 2022.
2/ In a Procedural Order on Supplemental Petitions to Intervene issued on April 28, 2022, the Hearing Examiners granted IECG intervention on a mandatory basis with no limits on its participation as a party after IECG represented that it has at least one member taking service from Summit at a tariff rate.
3/ These included concerns about the size of the rate increase embodied in the proposed ARP, the Company's current financial position, the prudency of Summit's investments and expenses, whether the Company has impaired assets, and the reasonableness of Summit's special rate agreements with its commercial and industrial customers. June 3rd Order at 2-3. The Commission also identified the need to determine whether Summit overbuilt its distribution system, based upon incorrect projections of customer growth and demand, and if so, who should bear the cost of that overbuilt system. Id. at 3.
4/ Summit, on July 25, 2022, filed a Second Amended Objection to the Release of Confidential Information, responding in part to oral data requests posed at the technical conference held on July 7th and July 11th and asserting that neither intervening parties (other than the OPA) nor their counsel should have access to special rate agreements (SRAs), Summit's marginal cost studies, and other information related to SRAs. For the Commission's resolution of this issue and a description of the related process, see the Order on Request for Reconsideration issued in this proceeding on September 13, 2022.
5/ Hearing Examiner Trost did not participate in this case after September 16, 2022.
6/ The settlement conferences were noticed through both Procedural Orders issued in the docket and emails from the Hearing Examiner to the parties. All parties either attended each settlement conference or indicated via email to the Hearing Examiner that they would not attend but did not object to the relevant conference proceeding in their absence.
7/ See, e.g., Summit Natural Gas of Maine, Inc., Request for Protective Order for Annual Report Information, Docket No. 2014-00057, Order Granting Protection of Annual Report Information at 2 (Apr. 30, 2014) ("Further, to promote the penetration of natural gas service in Maine, the Maine Legislature concluded that gas utilities should be allowed to act more like their competitors, making entrepreneurial expansion decisions and entering special rate contracts without regulatory oversight so long as these actions were taken at the risk of shareholders, not ratepayers. 35-A M.R.S. Sec.Sec. 2104, 4706 and 4707 (P.L. 1997, ch. 707 (effective April 3, 1998))."); Summit Natural Gas of Maine, Inc., Petition for Authority to Provide Natural Gas Utility Service Pursuant to 35-A M.R.S. Sections 2102, 2104, and 2105, Docket No. 2012-00258, Order Approving Stipulation at 10 (Jan. 29, 2013) ("We expect that LDCs will expand based on their own business judgments as to their costs of expansion, the likely business which expansion might generate, and their willingness to accept the risk that such expansions might be less than fully successful.") (quotation omitted).
8/ Paragraph 8 of the Rate Plan approved in Docket No. 2012-00258 reads as follows:
8. Special Rate Agreements. Unless specifically requested by SNG Maine, Commission approval will not be required for SNG Maine to enter into special rate agreements with customers. SNG Maine will file, in Docket No. 2012-00258, for informational purposes any special rate contracts it enters into with customers. When the contract is filed, SNG Maine will indicate its view of the relationship of the contract price to short-run marginal cost, and, if the contract rate is lower than short-run marginal cost, will indicate why, in SNG Maine's view, it is prudent to enter into the contract. The Commission may investigate the Special Rate Agreement rate to determine whether the rate is prudent or reasonable.
Summit Natural Gas of Maine, Inc., Petition for Authority to Provide Natural Gas Utility Service Pursuant to 35-A M.R.S. Sections 2102, 2105, and 2105, Docket No. 201200258, Order Approving Stipulation, Exhibit A to Stipulation at 10. (Jan. 29, 2013).
9/ Paragraph 10 of the Rate Plan approved in Docket No. 2012-00258 reads as follows: 10. Service Installation Requirements.
(a) Service Commitment. SNG Maine shall abide by the Service Line Construction Policy laid out in Exhibit 2 to this Rate Plan.
(b) Service Installation Metric. In the event SNG Maine does not provide service by the "estimated installation date" given to a particular customer under the Service Line Construction Policy, SNG Maine shall remit a one-time payment to that customer in the amount of $50 per week up to a maximum overall payment of $250.
(c) Form Service Installation Contract. SNG Maine shall develop, to the satisfaction of the Consumer Assistance Division Director, and file in this docket a form service installation contract that sets out these parameters in a manner that is understandable to potential customers.
(d) Quarterly Reporting. SNG Maine will record, and report to the Commission quarterly, on its performance with respect to Subparagraph (b) of this Paragraph 10. In addition, with respect to other types of service appointments where the customer's presence (or an agent of the customer) is required, SNG Maine will report on the percentage of times that SNG Maine personnel arrive at a customer's premises on time or within thirty (30) minutes of the scheduled appointment. SNG Maine will report this metric with respect to (1) pre-service construction appointments and (2) post-connection service calls each year with its Annual Adjustment to Standard Distribution Rates.
Summit Natural Gas of Maine, Inc., Petition for Authority to Provide Natural Gas Utility Service Pursuant to 35-A M.R.S. Sections 2102, 2105, and 2105, Docket No. 201200258, Order Approving Stipulation, Exhibit A to Stipulation at 10-11 (Jan. 29, 2013).
10/ One example of "rate shock" occurs "where the Commission approves a large increase in a utility's revenue requirement, and the rates charged to customers to recover that revenue requirement suddenly and dramatically increase." The Maine Water Company - Biddeford and Saco Division, Request for Approval of Rate Increase, Docket No. 2021-00053, Order at 9 (June 23, 2021).
11/ This assignment of risk is articulated in the Commission's "long standing policy that shareholders, and not ratepayers, should bear the risk for the costs of uneconomic expansion." Maine Natural Gas Corporation, Proposed Increase in Rates (35-A M.R.S.A. Sec. 307), Docket No. 2015-00005, Order Rejecting Stipulation at 13 (Jan. 8, 2016). Summit, in the course of its regulatory history before the Commission, has been put on notice of this policy several times. See, e.g., Summit Natural Gas of Maine, Inc., Request for Protective Order for Annual Report Information, Docket No. 2014-00057, Order Granting Protection of Annual Report Information at 2 (Apr. 30, 2014); Summit Natural Gas of Maine, Inc., Petition for Authority to Provide Natural Gas Utility Service Pursuant to 35-A M.R.S.A. Sections 2102, 2104, and 2105, Docket No. 2012-00258, Order Approving Stipulation at 10 (Jan. 29, 2013).
12/ The Commission notes that at present this proceeding has not involved an examination of the prudency of Summit's investment. But given the nature of the investment decision Summit made, undertaken at shareholder risk, a traditional prudency analysis is neither necessary nor applicable.
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