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Another Side to Decoupling: Share the Gain, Not the Pain

The New Jersey Board of Public Utilities finds incentive programs may be a better way.

Fortnightly Magazine - August 2007

Washington.

7. California is the only state that has adopted decoupling for both gas and electric utilities. Decoupling programs began there in the late 1970s and early 1980s.

8. The requirement to reduce the allowed ROE was dropped in subsequent proceedings.

9. See briefing paper entitled Revenue Decoupling for Natural Gas Utilities issued April 2006. http://www.nrri.ohio-state.edu/NaturalGas.

10. The need for a mechanism to offset earnings attrition was pressed by utilities in the late 1970s and early 1980s when inflation and interest rates were soaring, resulting in “pancaked” rate filings.

11. Gas-delivery charges to commercial and industrial customers represent an even smaller percentage of those customers’ total bills.

12. A gas utility typically needs the full capacity it has contracted for or has on site, e.g., LNG, propane air facilities, for only a few days during the year. However, contracts with its pipeline suppliers usually require payment based on 365 days use per year.

13. For example, the New York Public Service Commission had set a target date of 2002 for when virtually all gas customers in the state would purchase their gas supplies from third-party suppliers. This goal has not been met and is not likely to be met in the foreseeable future.

14. A copy of the order approving the program and the stipulation setting forth the details of the program is available on the NJBPU’s Web site, at http://www.state.nj.us/bpu/home/home.shtml.

15. The rate counsel is a separate state agency charged with representing the consumers’ interest before the board.

16. Each company is required to perform an analysis as to the feasibility of introducing inverted rates for the gas-supply component of its charges.

17. Both companies had existing weather-normalization clauses. Adjustments for weather would follow the same procedure as was used prior to the CIP.

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