Current through Register Vol. 39, No. 6, September 16, 2024
(a) Purpose. - The purpose of this rule is to
establish guidelines for applications of an LDC seeking cost recovery for the
construction of natural gas development infrastructure under
G.S.
62-133.15.
(b) Definitions. - As used in this section:
1. "Commission" means the North Carolina
Utilities Commission.
2. "Economic
development infrastructure" is the natural gas infrastructure placed in service
to serve an eligible project.
3.
"Economically infeasible" refers to that portion of investment in economic
development infrastructure that has a negative net present value.
4. "Eligible economic development
infrastructure costs" are the economically infeasible portion of an economic
development infrastructure project investment.
5. "Eligible project" means a project that
the Department of Commerce has designated as eligible under
G.S.
143B-437.021.
6. "LDC" means a natural gas local
distribution company.
7. "Net cash
inflows" are the expected margin revenues, exclusive of gas costs recovered
under G.S. 62-133.4, generated from the
provision of natural gas service to Eligible Projects.
8. "Net cash outflows" are reasonable and
prudent economic development infrastructure costs. Such costs include, but are
not limited to, the following:
(a) planning
costs;
(b) development
costs;
(c) construction costs and an
allowance for funds used during construction and a return on investment once
the project is completed, calculated using the pretax overall rate of return
approved by the Commission in the LDC's most recent general rate
case;
(d) a revenue retention
factor;
(e) depreciation;
and
(f) property
taxes.
9. "Net present
value (NPV)" means the present value of expected future net cash inflows over
the useful life of economic development infrastructure, minus the present value
of net cash outflows.
10. "Rate
adjustment surcharge (RAS)" is a yearly surcharge that allows an LDC to charge
a Commission approved rate to recover the eligible economic development
infrastructure costs.
(c) Application. - An application to recover
eligible economic development infrastructure costs under this section shall
contain all of the following information:
(1)
Documentation showing the infrastructure is designed to serve an eligible
project.
(2) A precise geographic
description, a map or maps of the area proposed to be served, a detailed
description of the proposed physical facilities, including their projected
operating parameters and characteristics, and the arrangements that have been
or are proposed to be made to obtain rights of-way.
(3) Documentation of a binding commitment
from the prospective customer or the occupant of the eligible project to the
LDC regarding the need to take natural gas service for a period of at least 10
years from the date the gas is made available.
(4) A market study, including an analysis of
any potential customers and volumes, probable conversions from other fuels, and
projected growth and economic development resulting from the
infrastructure.
(5) An engineering
study that includes the proposed design of the system (including a pipe network
flow analysis), routing (including a review of planned or proposed state
highway improvements), and construction cost estimates.
(6) An NPV analysis conducted in a generally
accepted manner that provides support for the eligible economic development
infrastructure costs.
(7) The
estimated beginning and ending dates of the proposed construction of the
infrastructure, including the date service to the eligible project is proposed
to begin, and specific itemized construction budgets.
(8) Proposed rates to be charged under the
RAS mechanism.
(d)
Approval of Cost Recovery. - Once an eligible project has been approved by the
Department of Commerce, the LDC may file an application with the Commission for
authority to recover the estimated eligible economic development infrastructure
costs.
(1) The Commission shall provide for
notice of each request for approval filed under this Rule and shall afford an
opportunity for review and comment by interested parties. The Commission shall
set the request for hearing if it deems it appropriate.
(2) The Commission shall enter an order
approving or denying the eligible economic development infrastructure costs on
a project-specific basis. The order shall include a finding of the negative net
present value of economic development infrastructure costs for each eligible
project. The negative NPV is the maximum amount to be recovered through the RAS
for an eligible project.
(3) The
LDC may request modifications to eligible economic development infrastructure
costs approved by the Commission. If the Commission finds the requested change
is material, the Commission shall provide for appropriate notice and shall
afford an opportunity for review and comment by interested parties. The
Commission shall set the proposal for hearing if it deems it
appropriate.
(e) Cost
Recovery. - Once economic development infrastructure is placed in service, the
LDC may recover the economic development infrastructure costs approved by the
Commission in an annual RAS. The RAS will terminate upon the earlier of the
full recovery of the approved economic development infrastructure costs, or the
effective date of rates in the LDC's next general rate case, provided that the
underlying infrastructure investment is included in calculating such
rates.
(f) Computation of the
economic development infrastructure revenue requirement. - The LDC shall file
information for each year showing the computation of the Economic Development
Infrastructure revenue requirement. The total annual revenue requirement will
be calculated for each year, as follows:
|
Economic Development Infrastructure
Costs |
$X,XXX,XXX |
|
Less: Accumulated depreciation |
XXX,XXX |
|
Less: Accumulated deferred income
taxes |
XXX,XXX |
|
Net Economic Development Infrastructure
Costs |
$X,XXX,XXX |
|
Pre-tax rate of return set forth in the relevant
rate order |
X.XX% |
|
Allowed pre-tax return |
$X,XXX,XXX |
|
Plus: Depreciation expense |
XXX,XXX |
|
Total |
$X,XXX,XXX |
(g) Computation of the RAS. - The LDC will
file for Commission approval each year information showing the computation of
the RAS for each rate schedule and the revised tariffs that it proposes to
charge customers during the 12-month period. To compute the RAS, the Economic
Development Infrastructure revenue requirement shall first be apportioned to
each customer class based on margin apportionment established in the LDC's most
recent general rate case.
The amount of the economic development infrastructure
revenue requirement apportioned to each rate schedule shall then be divided by
the annual therms established in the LDC's most recent general rate case
proceeding for each rate schedule to determine the RAS to the nearest
one-thousandth cent per therm.
(h) RAS Deferred Account. - The LDC shall
maintain an RAS Deferred Account for the purpose of recording (1) the economic
development infrastructure revenue requirement for the year (2) the monthly RAS
collected from customers, and (3) the interest on the RAS Deferred Account.
Interest will be applied to the RAS Account at the LDC's authorized net-of-tax
overall rate of return.
Each month the LDC shall credit the RAS Deferred Account
for the amount of the RAS collected from customers. The amount of the RAS
collected from customers shall be computed by multiplying the RAS for each rate
schedule by the corresponding actual therms of usage billed customers for the
month.
(i) Reports. - Each
LDC with an approved RAS shall provide the following reports to the Commission:
1. Monthly RAS Deferred Account reports
reflecting the activity recorded for the month.
2. Annual RAS Deferred Account report to
recover the balance in the account and an annual computation of the Economic
Development Infrastructure revenue requirement supporting the RAS for the next
12-month period.
3. Annual reports
by March 1 of each year the Eligible Project is under construction summarizing
the total infrastructure costs for the preceding calendar year, the remaining
balance to be spent on total infrastructure costs, and the estimated completion
date of the infrastructure.
4.
Annual reports by March 1 of each year for completed Eligible Projects,
providing the total amounts recovered from the RAS for each project, the amount
of gas consumed each year for each project, and all customer additions and the
respective natural gas load for each project. Annual reports on completed
eligible projects are required until the LDC's next general rate
case.
NCUC Docket No. G-100,
Sub 93, 10/17/2017; NCUC Docket No. G-100, Sub 93,
03/27/2018.
