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W.Va. Approves LDC Price-cap Plan

Fortnightly Magazine - February 1 1996

The West Virginia Public Service Commission (PSC) has approved a new incentive regulation plan for Mountaineer Gas Co., a natural gas local distribution company (LDC). The plan creates price caps that are slightly below current rates and assigns the LDC the risks and benefits of any efficiency gains or losses during the three-year plan period. The settlement also calls for a $3-million rate reduction, and forbids the utility to file for a rate increase during the three-year period. Mountaineer fully assumes the risks and benefits of the fluctuating gas market. The PSC observed that the plan was "somewhat generous" to the LDC, given current financial conditions, natural gas markets, and the large overrecovery accrued by Mountaineer for the current purchased-gas adjustment (PGA) period. Nevertheless, the PSC said it was unlikely the LDC would be able to continue to purchase gas at such favorable prices and that, overall, the plan would create the proper incentives for the LDC to operate efficiently. Re Mountaineer Gas Co., Case Nos. 95-0011-G-42T,

Oct. 19, 1995 (W.Va.P.S.C.).

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