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LDCs: That Giant Sucking Sound

The consequences of short-sighted rate making.
Fortnightly Magazine - July 2005
  1. of 21%" (Direct Testimony of Paul H. Raab, State Corporation Commission of Kansas, Docket No. 05-AQLG-367-RTS , November 2004, p. 5, lines 19-21).
  2. Direct Testimony of F. Jay Cummings, Missouri Public Service Commission, Case No. GR-2004-0209 , November 2003, p. 10. MGE's service area is split into the three geographic regions of Kansas City, Joplin, and St. Joseph. Separate residential regression analyses for each of MGE's three geographic regions produced adjusted R2 of at least 0.96, with weather and usage trend variables each significant at a 99 percent confidence level.
  3. AGA, "Patterns in Residential Natural Gas Consumption, 1997-2001" June 16, 2003, p. 5.
  4. Id. Separate small commercial (termed "small general service" in MGE's tariff) regression analyses for each of MGE's three geographic regions produced adjusted R2 of at least 0.94, with weather and usage trend variables each significant at a 99 percent confidence level.
  5. The HDD measure is typically used to measure the coldness of weather. The number of HDDs on a given day is the difference between 65 o and the average of the high and low temperatures for the day (with no HDDs if the average temperature is 65 o or higher). The number of annual HDDs is simply the sum of daily HDDs over the year. Data used in developing the figure comes from the usage trend analyses. The residential results are shown in tabular form on page 18 of the Surrebuttal Testimony of F. Jay Cummings, Missouri Public Service Commission, Case No. GR-2004-0209 .

 


Case Study 2 CenterPoint Energy Arkansas Sees 1.2 Mcf/Year Fall in Residential Use

The second study was prepared in conjunction with a CenterPoint Energy general rate case in Arkansas. This study covered the period from January 1987 through June 2004. The residential statistical analysis showed that residential use per customer, after taking into account weather variations, fell approximately 1.2 Mcf per year over this period. 1 These results fall in the same range as those found in AGA's studies. For residential customers in the South Census region that includes Arkansas, AGA found a 1.3 Mcf per year decline in per customer usage between 1990 and 1997 and a 1.2 Mcf annual decline between 1997 and 2001. 2

For CenterPoint Energy small commercial customers, my analyses revealed a 7.3 Mcf per year usage decline, after taking into account weather variations, over the 1994-2003 period. 3 With more than 380,000 residential customers and more than 48,000 small commercial customers in Arkansas, these trends have a significant impact on CenterPoint Energy's delivery service revenue collections.

Consistent with findings from other studies, CenterPoint Energy's Arkansas residential usage trend involves both base load and weather-sensitive load reductions. Figure 4 shows a consistently declining residential base load, approximated by average monthly usage during the months of July through September, over the 1987-2003 period. 4

The reduced weather-sensitivity of CenterPoint Energy's residential customers is revealed by comparing estimated weather-sensitive usage in recent years to years in the last decade with comparable weather, i.e., pairs of mild, approximately normal, or cold years. Figure 5 shows that CenterPoint Energy's Arkansas residential customer