Natural Gas Rate Plans

ALAGASCO RATE PLANS

Rate Stabilization and Equalization Plan

     Each month the Natural Gas Section examines the books and records of Alabama Gas Corporation (Alagasco), determines the return on average common equity for the preceding 12-month period and reports the financial and operational results of the previous month, including the return on average common equity, to the Commission. The Section also graphically summarizes the recent capital structure and returns.
     Under the Rate Stabilization and Equalization (RSE) plan, the only time the company can increase base rates is December 1. If the projected return, based on the budget approved by the Alagasco board of directors, is less than the approved range, base rates are increased December 1 to bring the projected return at the end of the rate year to the midpoint of the range. If the projected return is more than the approved range, rates are decreased to bring the return to the midpoint of the range. If the projected return is within the approved range, no adjustment is made.
     Subsequent points of test, based on the projected return at September 30, the end of the rate year, can yield only decreases effective April 1, July 1, and October 1, or no change.

Cost Control Measure

     RSE includes an incentive program, the Cost Control Measure, under which the utility must keep growth in operation and maintenance expenses below a specified range or face penalties.

Real-Time Temperature Adjustment

     Alagasco has a real-time temperature adjustment, which adjusts bills for the effect of abnormally high or low temperatures on the recovery of non-gas costs.

Gas Supply Adjustment

     The wholesale price of natural gas is set by the market. Neither Alagasco nor this Commission has any control over the wholesale price of natural gas. The transportation rates paid to have the gas transported from the producer to Alagasco are set by the Federal Energy Regulatory Commission.
      Because the wholesale price of natural gas is subject to wide swings both up and down, Alagasco sought and got approval many decades ago to adjust effective rates up or down to recover these costs and no more. The utility is authorized to make such adjustments as needed, according to an approved tariff. Alagasco is not allowed to earn a return on the Gas Supply Adjustment (GSA). That is, the recoveries through the GSA are dollar-for-dollar, and no more.
     The section monitors all four of these programs to ensure they are conducted in accordance with the approved tariff.