CenterPoint Energy 2014 Annual Report Download - page 67

CERC
Cost of Service Adjustment (COSA) Rate Adjustments.
In March 2008, NGD filed a request to change its rates with the Railroad
Commission of Texas (Railroad Commission) and the 47 cities in its Texas Coast service territory, including a request for an annual cost of
service adjustment mechanism, or COSA, that adjusts rates annually for changes in invested capital as well as certain operating expenses. In
2008, the Railroad Commission approved the implementation of rates increasing annual revenues from the Texas Coast service territory by
approximately $3.5 million and a COSA mechanism. The approved rates were contested by a coalition of nine cities and certain state agencies in
an appeal to the Travis County District Court. In 2010, the district court ruled that the Railroad Commission lacked authority to impose the
approved COSA mechanism both in those nine cities and in those areas in which the Railroad Commission has original jurisdiction, and also
found that the commission’
s order lacked findings to support the inclusion of certain affiliate expenses in rates. The decision by the District
Court placed at risk certain revenues collected pursuant to COSA mechanisms. The Railroad Commission and NGD appealed the court’
s ruling
on the COSA mechanism. In October 2011, the court of appeals reversed the district court’
s ruling on the COSA mechanism. The cities and state
agencies appealed that decision to the Texas Supreme Court. In January 2014, the Texas Supreme Court confirmed that the Railroad
Commission had authority to approve the COSA rate adjustments utilized by NGD and remanded the case back to state district court. In April
2014, the district court remanded the case to the Railroad Commission to correct deficiencies in the commission’
s 2008 order related to certain
affiliate expenses but affirming the commission’s order in all other respects. The matter is currently pending at the Railroad Commission.
Minnesota Rate Proceeding.
On August 2, 2013, NGD filed a general rate case in Minnesota to increase base rates by $44.3 million
(including the movement of a $15 million energy efficiency rider into base rates), based on a rate base of $700 million and return on equity
(ROE) of 10.3%. In compliance with state law, NGD implemented interim rates reflecting $42.9 million dollars of the requested increase for gas
used on and after October 1, 2013. This rate filing is intended to recover significant capital expenditures NGD is making in Minnesota and
included moving $15 million of energy efficiency expenditures to base rates. Evidentiary hearings were held before an administrative law judge
(ALJ) in January 2014. On April 9, 2014 the ALJ issued its findings of fact and recommendations, which support a $31.6 million revenue
increase based on a 9.59% ROE. In May 2014, the Minnesota Public Utility Commission (MPUC) entered an order approving a rate increase of
$33 million based on a 9.59% ROE and a 52.6% equity ratio. The MPUC also authorized the implementation of a three-
year pilot revenue
decoupling mechanism with an effective date of July 1, 2015. NGD implemented final rates in the fourth quarter of 2014. Since the adopted
revenue increase is less than the interim revenue increase, a refund to customers, which had already been accrued, was completed in December
2014.
Houston, South Texas and Beaumont/East Texas Gas Reliability Infrastructure Programs (GRIP). NGD’
s Houston, South Texas and
Beaumont/East Texas Divisions each submitted annual GRIP filings on March 31, 2014. For the Houston Division, CERC has asked that its
GRIP filing to recover costs related to $66.6 million in incremental capital expenditures that were incurred in 2013 be operationally suspended
for one year so as to ensure earnings more consistent with those currently approved. For the South Texas Division, the filing is to recover costs
related to $15.9 million in incremental capital expenditures that were incurred in 2013. The increase in revenue requirements for this filing
period is $1.8 million annually based on an authorized rate of return of 8.75%. Rates were implemented for certain customers in May 2014. In
those areas in which the jurisdictional deadline was extended by regulatory action, the rates were implemented in July 2014 after final approval
by the Railroad Commission of Texas (Railroad Commission). For the Beaumont/East Texas Division, the first GRIP filing is to recover costs
related to $31.4 million in incremental capital expenditures that were incurred in 2012 and 2013. The increase in revenue requirements for this
filing period is $3.0 million annually based on an authorized rate of return of 8.51%. Rates were implemented for certain customers in May
2014. In those areas in which the jurisdictional deadline was extended by regulatory action, the rates were implemented in July 2014 after final
approval by the Railroad Commission.
Oklahoma Performance Based Rate Change (PBRC
). In March 2014, NGD made a PBRC filing for the 2013 calendar year proposing to
increase revenues by $1.5 million. On July 3, 2014, the Oklahoma Corporation Commission approved a joint stipulation by NGD and the
intervening parties resulting in a rate increase of $0.3 million, which included an adjustment to amortize over five years $1.5 million of expense
incurred within the 2013 test year. New rates went into effect on July 3, 2014.
Arkansas Government Mandated Expenditure Surcharge Rider (GMESR).
On May 1, 2014, NGD made a filing with the Arkansas Public
Service Commission (APSC) requesting to increase revenue under its interim GMESR by an additional $1.8 million. Interim rates were
implemented upon filing and are subject to refund pending a final order from the APSC.
Mississippi Rate Regulation Adjustment (RRA).
On May 1, 2014, NGD filed for a $4.1 million RRA with an adjusted ROE of 9.27%. On
August 5, 2014, the Mississippi Public Service Commission approved a joint stipulation for a revenue adjustment
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