States Differ on Capacity-release Revenues

Bucking the current trend among state utility regulators, the Indiana Utility Regulatory Commission (URC) has denied a request by Northern Indiana Public Service Co., a natural gas local distribution company (LDC), to retain a portion of the revenues it receives from pipeline capacity-release transactions. The LDC asked the URC to permit shareholders to retain 50 percent of the revenues gained from participation in the "secondary market" for interstate pipeline capacity instead of flowing them back to ratepayers through the quarterly gas-cost adjustment (GCA) mechanism. The company claimed that ratepayers would benefit if it had an "adequate incentive" to devote more resources to such transactions. The URC found the revenues clearly within the statutory definition of "gas costs" subject to reconciliation through the adjustment clause. It had consistently found gas commodity, interstate pipeline capacity, and storage costs recoverable through the GCA. It further noted that the Federal Energy Regulatory Commission's Order 636 specified that releases of interstate pipeline capacity be shown as credits against releasing shippers' existing bills. Since capacity and storage costs had always received adjustment clause passthrough, the URC reasoned that any associated credits should receive the same treatment. The URC added that applying the suggested 50-percent incentive to capacity-release revenues counted under the 1995 GCA would have covered the entire cost of the LDC's Gas Supply Management Division, a level of incentive "that is generous indeed." Re Indiana Public Service Co., Cause No. 40180, Dec. 28, 1995 (Ind.U.R.C.).