Mobile Gas Service Corporation Rate Plans
Rate Stabilization and Equalization Plan
Each month the Natural Gas Section examines the books and records of
Mobile Gas Service Corporation
(Mobile Gas), 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. It also graphically summarizes the historical capital structure and
returns.
Under the Rate Stabilization and Equalization (RSE) plan, the only time Mobile Gas
can receive an increase in base rates is December 1. If the projected return,
based on the budget approved by the Mobile Gas 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 fiscal year to the midpoint of the range. If the
projected return is more than the approved range, base 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 fiscal 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.
Purchased Gas Adjustment
The wholesale price of natural gas is set by the market. Neither Mobile Gas
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
Mobile Gas are set by the Federal Energy
Regulatory Commission.
Because the wholesale price of natural gas is subject to wide swings both up and down,
Mobile Gas 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. Mobile Gas is not allowed to
earn a return on the Purchased Gas Adjustment (PGA). That is, the recoveries through
the PGA are dollar-for-dollar, and no more.
The section monitors all three of these programs to ensure they are conducted in
accordance with the approved tariff.