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LDC Affiliate Goodwill Adjustment Overturned

Fortnightly Magazine - September 1 1996

The Minnesota Supreme Court has overturned a decision of the Minnesota Public Utilities Commission (PUC) to impute revenues while setting rates for Minnegasco (em a division of Noram Energy Corp. and a natural gas local distribution company (LDC) (em in order to compensate ratepayers for the value of corporate goodwill enjoyed by an affiliated customer appliance business. (The state Court of Appeals had upheld the PUC in a 1995 ruling. See Minnegasco, a Division of Noram Energy Corp. v. Minnesota Public Utilities Commission, 529 N.W.sd 413, 160 PUR4th 453 (Minn. Ct. App. 1995).) The court also reversed the PUC's ruling that the LDC could allocate gas-leak repair costs according to whether the leak occurred in Minnegasco gas lines or in customer gas lines, equipment, or appliances.

According to the court, the PUC lacked the authority to impute revenues for goodwill in setting rates because: 1) the value of goodwill is not a cost of furnishing utility service, and 2) no subsidy is created where ratepayers did not bear the cost of creating that value. The court also ruled that the PUC erred in its decision on allocating gas-leak costs, because state law requires that gas utilities be permitted to recover all compliance costs associated with pipeline safety regulations. Minnegasco, a Division of Noram Energy Corp. v. Minnesota Public Utilities Commission, C5-94-1820, C7-94-1821, June 13, 1996 (Minn.).

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