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 134 F.E.R.C. P61,129; 2011 FERC LEXIS 353

Federal Energy Regulatory Commission - Commission

February 17, 2011

Docket No. RP08-306-000

Opinion

 [*61661]  Table of Contents

Paragraph Numbers

I. Background

II. Levelized Rate Structure

A. Levelization Methodology

B. Levelization Deferral Period

C. Escalation Clause in Levelized O&M Expenses

III. Cost-of-Service Issues

A. Overall Cost-of-Service

B. Operations and Maintenance (O&M)

1. Pipeline Integrity Projects (PIP)/Maintenance of

Mains Expenses

2. Outside Services (Account 923)

3. Ad Valorem Tax

4. Regulatory Commission Expenses (Account 928)

C. Negative Salvage

1. Treatment of Interim Retirement Costs

2. Labor Costs

3. Appropriate Recovery Period for Negative Salvage

D. Depreciation Rate Increase

1. Adequacy of Portland's Depreciation Study

2. ALJ's Depreciation Rate Recommendation

IV. Return On Equity

A. Rate Base -- Prepaid Taxes in Working Capital

B. Derivation of ROE

C. Composition of the Proxy Group

1. TC Pipelines

2. Southern Union

3. Boardwalk

4. Spectra Energy Corp. (Spectra Corp.)

5. Spectra Energy Partners (Spectra Partners)

6. El Paso Partners

7. National Fuel

8. Remaining Proposed Companies

a. Enbridge, ETP, Enterprise, KMEP and ONEOK

b. Williams, TransCanada, NiSource and El Paso

Corporation

D. DCF Analysis

1. Dividend Yield Calculation

2. Time Period for Calculating DCF

E. Portland's Placement in the Proxy Group

V. Rate Design

A. At-Risk Condition

B. Credit for Interruptible Transportation (IT) or

Parking and Lending Revenues (PAL)

C. Androscoggin and Rumford Bankruptcy Proceeds

Appendix A

Appendix B

 [**3]   [*61662]  

1. This order addresses briefs on and opposing exceptions to an Initial Decision (ID) issued on December 24, 2009 by the Presiding Administrative Law Judge (ALJ) in the captioned proceeding. 1 The ID set forth the ALJ's findings concerning a general rate case filed by Portland Natural Gas Transmission System (Portland) pursuant to section 4 of the Natural Gas Act (NGA) on April 1, 2008.

2. In this order, the Commission affirms the ALJ in part and reverses the ALJ in part. The Commission affirms the ALJ's findings in the ID with regard to levelized rates, two out of four cost-of-service issues raised, negative salvage, and in part on determinations relating to depreciation. The Commission reverses the ALJ in part with regard to the appropriate return on equity (ROE), resulting in a 12.99 percent ROE instead of the 11.65 percent adopted by the ALJ. The Commission also reverses the ALJ in part [**4]  on two cost-of-service issues, ad valorem taxes and Pipeline Integrity Projects (PIP)/Maintenance of Mains. In addition, the Commission reverses the ALJ's proposal to allow Portland to file for an increased depreciation rate, finding that there is insufficient record evidence to support such a change. The Commission also reverses the ALJ's recommendation that Portland be required to credit its interruptible transportation (IT) and Park and Loan (PAL) revenues against its cost-of-service. Instead, the Commission requires Portland to allocate costs to its IT/PAL services based upon a projected volume of interruptible transportation, subject to the condition that Portland's overall rate design volumes must satisfy the at-risk condition of Portland's original certificate orders. Consistent with this determination to require Portland to allocate costs to its IT/PAL services, we reverse the ALJ with regard to the treatment of bankruptcy proceeds and require Portland to include billing determinants associated with the bankruptcy.

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 134 F.E.R.C. P61,129 *;  2011 FERC LEXIS 353 **

Portland Natural Gas Transmission System

Subsequent History:

As Amended March 21, 2011.

CORE TERMS

pipeline, proxy, Settlement, costs, percent, argues, rates, test period, dividend, projected, contracts, cost-of-service, per day, calculating, methodology, determinants, proceeds, expenses, billing, depreciation, at-risk, interruptible, natural gas, estimated, Certificate, facilities, iterative, volumes, contends, annual