EXH. D-1(A)
SETTLEMENT AGREEMENT
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UNISOURCE ENERGY CORPORATION'S
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ACQUISITION OF CITIZENS COMMUNICATION COMPANY'S
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GAS AND ELECTRIC UTILITY ASSETS
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Staff of the Utilities Division ("Staff") of the Arizona Corporation
Commission ("Commission"), Citizens Communications Company ("Citizens"), a
Delaware corporation, UniSource Energy Corporation, an Arizona corporation
("UniSource"), Tucson Electric Power Company ("TEP"), an Arizona corporation
(collectively "the Parties") agree to the following proposed settlement
agreement ("Agreement") of the matters pending in Docket Nos. G-01032A-02-0598
("Gas Rate Case"), E-01032C-00-0751 ("PPFAC Case"), and E-01933A-02-0914,
E-01302C-02-0914, G-01302C-02-0914 ("Joint Application") (collectively,
"Consolidated Cases"). The Parties recognize that this Agreement is a proposed
settlement, thus is subject to the approval and/or the terms placed upon it by
the Commission.
WHEREAS, Citizens currently provides natural gas service in Santa Xxxx
County, Coconino County, Navajo County, Yavapai County and Mohave County and
electric service in Santa Xxxx County and Mohave County and UniSource desires to
purchase Citizens' electric utility assets in Arizona and Citizens' gas utility
assets in Arizona.
WHEREAS, all intervenors were provided notice of the settlement process,
including notice of meetings involving all intervenors and with opportunity to
participate and comment.
WHEREAS, the Parties have conducted discovery and have analyzed that
discovery and all materials filed in the Consolidated Cases, and the proposed
settlement set forth in this Agreement is based upon that analysis.
WHEREAS, UniSource will create one or more wholly-owned subsidiaries to own
and operate the electric utility assets and the gas utility assets purchased
from Citizens. For purposes of this Agreement, the subsidiary or company created
to own and operate the gas utility assets shall be referred to as "GasCo" and
the subsidiary or company created to own and operate the electric utility assets
shall be referred to as "ElecCo." GasCo and ElecCo, for purposes of this
Agreement, shall be collectively known as the "New Companies." UniSource may
create an intermediate holding company ("HoldCo") to finance and own the New
Companies.
WHEREAS, the Parties desire to adopt this Agreement to allow Citizens to
transfer to GasCo its Certificate(s) of Convenience and Necessity ("CC&N") to
provide natural gas service in Arizona and its Arizona assets related to
Citizens' gas utility business in Arizona ("Gas Assets"), as further set forth
in the Asset Purchase Agreement dated October 29, 2002, between Citizens and
UniSource, relating to the purchase of the Gas Assets ("Gas Asset Purchase
Agreement").
WHEREAS, the Parties desire to adopt this Agreement to allow Citizens to
transfer to ElecCo its CC&N(s) to provide electric service in Arizona and its
Arizona assets related to Citizens' electric utility business in Arizona
("Electric Assets"), as further set forth in the Asset Purchase Agreement dated
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October 29, 2002, between Citizens and UniSource, relating to the purchase of
the Electric Assets ("Electric Asset Purchase Agreement").
WHEREAS, the Parties agree that nothing in this Agreement is intended to,
in any way, restrict or modify the Commission's current authority or
jurisdiction over the New Companies, Citizens and TEP as provided under Arizona
law.
WHEREAS, the Parties agree that this Agreement is in accordance with A.R.S.
xx.xx. 40-301 et seq., A.R.S xx.xx. 40-281 et seq., A.A.C R14-2-803 and
R14-2-804.
WHEREAS, the Parties agree that adoption of this Agreement is in the public
interest for the following reasons:
(a) UniSource shall, as part of this Agreement, forfeit its right to
pursue the recovery from retail ratepayers of any of the under-collected
Purchase Power and Fuel Adjustor Clause ("PPFAC") balance, currently the
subject of Docket No. E-01032C-00-0751, up through and including the date
of the closing of the purchase of Citizens' Electric Assets and Gas Assets
by UniSource. The forfeited PPFAC balance is currently estimated to be at
least $135 million as of July 28, 2003. Regardless of the actual amount of
the PPFAC balance that exists at the time of the closing of the purchase of
Citizen's Electric Assets and Gas Assets by UniSource, the right(s) to
recover from retail ratepayers shall be forfeited by UniSource, any of its
subsidiaries, and Citizens.
(b) In Docket No. G-01032A-02-0598, the Gas Rate Case, Citizens had
originally requested an increase in revenue requirement of $21,005,521, or
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a rate increase of 28.9 percent. Under this Agreement, GasCo shall only
receive an increase in the revenue requirement of $15,191,276, or an
increase of approximately 20.9 percent.
(c) Included is a $10 million permanent reduction to the gas rate base
amount due to a disallowance to the Buildout Program, thereby reducing the
revenue that needs to be recovered from ratepayers.
(d) Financing provisions will be in place to allow UniSource to
purchase the Electric Assets and Gas Assets while ensuring that the New
Companies, TEP and their customers will not be harmed by the acquisition by
UniSource.
(e) UniSource shall put into place a procedure to commence the process
of opening up the new ElecCo's service territories to retail electric
competition by no later than December 31, 2004.
(f) TEP shall provide a feasibility study and written plan to
consolidate or, in the alternative, coordinate the operations of ElecCo in
Santa Xxxx County with the operations of TEP when TEP files its next
general rate case. This study shall explore means to improve operations,
efficiency and service for the Santa Xxxx County ElecCo customers. In
determining the feasibility of such a plan, TEP will consider the impact of
consolidation on two-county bond financing.
(g) UniSource shall ensure participation by ElecCo in the
Environmental Portfolio Standard ("EPS").
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(h) UniSource shall take measures described in this Agreement to
ensure the safe operation of the gas pipeline system for GasCo.
(i) UniSource is an Arizona-based company that is well-known,
accessible, held in high regard by the community, and experienced in
providing quality utility services to Arizona citizens.
(j) Citizens will be able to focus upon its telecommunications
business in Arizona consistent with its corporate plan and strategy, in
order to xxxxxx continued and improved quality of service to Citizens'
telecommunications customers in Arizona.
ARTICLE I
INTRODUCTION
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1. Purpose of Agreement: Notice of Intentions and Admissions. The Parties
agree that the purpose of this Agreement is to resolve contested matters in the
Gas Rate Case, the PPFAC Case and the Joint Application in a manner consistent
with the public interest. The Parties further recognize that: (1) this Agreement
acts as a procedural device to propose its terms to the Commission; (2) this
Agreement has no binding force or effect until finally approved by an order of
the Commission; and (3) such approval must be given in a timely fashion so that
the transaction can close by July 28, 2003. Nothing contained in this Agreement
is an admission by any Party that any of the positions taken, or that might be
taken by each in this proceeding, is unreasonable or unlawful. In addition,
acceptance of this Agreement by any of the Parties is without prejudice to any
position taken by any Party in these proceedings.
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2. Staff Authority. The Parties recognize that: (1) Staff does not have the
power to bind the Commission; and (2) for purposes of settlement, the Staff acts
in the same manner as a party in proceedings before the Commission.
3. Commission Authority to Modify. The Parties further recognize that the
Commission will evaluate the terms of this Agreement, and that after such
evaluation the Commission may require modifications to the terms hereof before
accepting this Agreement.
4. Commission Approval. In the event that the Commission adopts an order
approving substantially all of the terms of this Agreement, such action by the
Commission constitutes approval of the Agreement in a timely fashion so that the
transaction can close by July 28, 2003, and thereafter the Parties shall abide
by its terms.
5. Effect of Modifications by the Commission. In the event that any
signatory Party to this Agreement objects to any modification to the terms of
this Agreement made by the Commission, such Party shall timely file an
Application for Rehearing under A.R.S. ss. 40-253. In the event that the Party
does not file such an application, that Party shall be deemed: (1) to have
accepted the modifications made by the Commission; and (2) to have conclusively
and irrefutably accepted that any modifications to the terms of this Agreement
are not substantial and therefore the Commission order adopts substantially all
of the terms of this Agreement.
6. Effect of an Application for Rehearing. If a signatory Party files an
Application for Rehearing that raises objections to any modifications of the
terms of this Agreement, then that Party shall be deemed to have withdrawn from
this Agreement. The withdrawing Party shall be relieved of its rights and
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obligations under this Agreement. The Agreement as modified shall remain in
effect and binding upon all of the remaining Parties.
7. Appeal of Commission Decision. If a signatory Party to this Agreement
files an Application for Rehearing, which is denied by Commission Order or by
operation of law, the Party shall timely file an appeal of the Commission's
decision pursuant to A.R.S. ss. 40-254 or ss. 40-254.01, as appropriate. In the
event that the Party does not file such an appeal, the Party shall be deemed:
(1) to have accepted the modifications made by the Commission; and (2) to have
conclusively and irrefutably accepted that any modifications to the terms of
this Agreement are not substantial, and therefore, the Commission's order adopts
substantially all of the terms of this Agreement.
ARTICLE II
TERMS AND CONDITIONS
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The Parties to this Agreement hereby agree to the following:
PART A
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TRANSFER OF ASSETS/CERTIFICATES AND ELECTRIC RETAIL COMPETITION
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8. Approval of Transfer of Electric Assets and Certificates. The Parties
agree to the transfer of Citizens' Electric Assets to ElecCo, pursuant to
X.X.X.xx. 40-285. The Parties further agree to the transfer of Citizens' CC&N(s)
to ElecCo to provide electric utility service in Arizona, and, if required, to
the transfer of Citizens' franchises, licenses and other similar authorizations
to ElecCo. The Parties further agree that ElecCo will provide copies of such
franchises, licenses and other similar authorizations to the Commission within
365 days of Commission approval of this Agreement. As part of the approval of
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the transfer of the Electric Assets, ElecCo shall be authorized to recover $1.8
million of the anticipated transaction costs related to the Electric Assets as
an offset to the negative acquisition premium so that these costs may be
capitalized in accordance with Generally Accepted Accounting Principles
("GAAP").
9. Approval of Transfer of Gas Assets and Certificates. The Parties agree
to the transfer of Citizens' Gas Assets to GasCo, pursuant to A.R.S.ss.40-285.
The Parties further agree to the transfer of Citizens' CC&N(s) to GasCo to
provide gas utility service in Arizona, and, if required, to the transfer of
Citizens' franchises, licenses and other similar authorizations to GasCo. The
Parties further agree that GasCo will provide copies of such franchises,
licenses and other similar authorizations to the Commission within 365 days of
Commission approval of this Agreement. As part of the approval of the transfer
of the Gas Assets, GasCo shall be authorized to recover $2.7 million of the
anticipated transaction costs related to the Gas Assets as an offset to the
negative acquisition premium so that these costs may be capitalized in
accordance with GAAP.
10. Creation of Intermediate Holding Company. The Parties agree that
UniSource, at its discretion, may form a holding company ("HoldCo") to finance
and to hold ownership in the New Companies.
11. Opening ElecCo's Service Territories to Retail Electric Competition.
Within one-hundred twenty (120) days of Commission approval of this Agreement,
UniSource shall file for Commission approval a plan to open the ElecCo's service
territories to retail electric competition. Topics which shall be addressed
include, but are not limited to the following: (1) unbundled tariffs; (2) system
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benefits charges; (3) assisting new suppliers in using transmission; and (4)
reliability must-run generation ("RMR"). The application shall include an
implementation date to open the ElecCo's service territories to competition no
later than December 31, 2004. UniSource further agrees to not oppose municipal
aggregation in principle as part of any plan to make retail access more likely
within ElecCo's service territories.
12. Stranded Costs for ElecCo. UniSource agrees that ElecCo's stranded
costs are equal to zero. Stranded Costs, for purposes of this Agreement, are
limited to those costs related to generation, which includes those costs related
to the purchase power contract between Pinnacle West Capital Corporation
("PWCC") and Citizens implemented on June 1, 2001, as well as all costs related
to generation for the generation units in Santa Xxxx County.
13. Operational Consolidation of the Santa Xxxx Division of ElecCo with
TEP. At the time of TEP's next general rate case filing, TEP and UniSource shall
submit a feasibility study and written plan for consolidation or, in the
alternative, coordination of operations of ElecCo in Santa Xxxx County with TEP.
The filing shall analyze the ability of TEP to retain two-county bond financing
while consolidating the Santa Xxxx County operations of ElecCo and TEP; the
filing shall also include a comparison of the benefits of the above-described
operational consolidation or coordination with the costs of defeasing or
redeeming the two-county financing, if there is no ability to retain such
two-county financing with the consolidation.
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14. Environmental Portfolio Standard ("EPS"). ElecCo and TEP shall
cooperate jointly in efforts to comply with the EPS.
15. Incorporation. ElecCo, GasCo and HoldCo shall be incorporated in
accordance with the laws of the State of Arizona.
PART B
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FINANCING PROVISIONS
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16. Approval of Financing Plan. The Parties agree that the New Companies
shall be authorized pursuant to A.R.S. xx.xx. 40-301 et seq., A.R.S. ss. 40-285
and A.A.C. R14-2-801 et seq., (1) to issue or guarantee up to $175 million of
debt securities for the purpose of funding a portion of the purchase price and
initial working capital requirements of the New Companies; (2) to issue or
guarantee additional debt securities, when appropriate, under the terms of a new
revolving credit agreement that shall provide ongoing liquidity support to the
New Companies; (3) to enter into indentures or security agreements which grant
liens on some or all of the properties held by the New Companies to secure the
debt obligations of the New Companies; (4) to issue common stock to UniSource or
HoldCo; and (5) to acquire bridge financing. The details of the financing plan
are set forth in Appendix A, attached hereto. Approval of the financing plan
above is conditioned on TEP agreeing to a loan structure and treatment as
follows:
(a) TEP shall be authorized to loan up to $50 million to UniSource
("TEP loan") for the sole purpose of funding the purchase of Citizens'
electric utility business and gas utility business. The TEP loan shall not
exceed $50 million and shall have a maturity not to exceed four years. The
TEP loan shall be secured by UniSource with a pledge of one hundred percent
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of HoldCo's or the New Companies' common equity. This section is authorized
pursuant to A.A.C. R14-2-804.
(b) The fixed annual rate of interest on the TEP loan shall be equal
to 383 basis points above the yield-to-maturity on an equivalent four-year
United States Treasury Security as determined on the initial date of the
loan.
(c) The interest income that TEP receives via the TEP loan to
UniSource shall be allocated in the following manner:
(1) 264 basis points of the interest income from the TEP
(2) loan shall be recorded as a deferred credit and used to
offset rates in the future.
(3) The remaining interest income shall be used toward building
the equity capitalization of TEP.
(4) The deferred credit balance shall bear an annual interest
rate of six percent.
(d) TEP's ratepayers shall be held harmless from any demonstrable
increase in TEP's cost of capital as a result of the TEP loan (including,
but not limited to, a decline in bond rating) shown in TEP's next rate
case. The effects of any demonstrable increase in TEP's cost of capital as
a result of the TEP loan may be considered for offset by any actual
demonstrable benefits of the acquisition in establishing the revenue
requirement in such future TEP rate cases.
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17. Equity Investment in New Companies. The New Companies shall be
authorized pursuant to A.R.S.ss.40-301 et seq., to issue common stock to
UniSource or HoldCo to evidence their ownership interest. To the extent required
pursuant to A.A.C. R14-2-803, the Parties agree that UniSource shall be
authorized to capitalize the New Companies in the range of $75 million to $125
million.
18. Waiver of Prior Decisions. Decision No. 60480, as amended by the
Settlement Agreement adopted in Decision No. 62103, requires UniSource to invest
at least thirty (30) percent of the proceeds of a public stock issuance in TEP.
The Parties agree that UniSource and TEP shall be granted a waiver of this
requirement for the sole purpose of financing the acquisition of Citizens'
Electric Assets and Gas Assets as set forth in this Agreement and in the Joint
Application by UniSource and Citizens.
19. Capital Structure of ElecCo and GasCo. UniSource agrees that until such
time as GasCo's equity capitalization equals forty (40) percent of total
capital, GasCo will not issue dividends to either HoldCo and/or UniSource which
comprise more than seventy-five (75) percent of GasCo's earnings. UniSource
further agrees that until such time as ElecCo's equity capitalization equals
forty (40) percent of total capital, ElecCo will not issue dividends to either
HoldCo and/or UniSource which comprise more than seventy-five (75) percent of
ElecCo's earnings. For purposes of this provision, the common equity ratio shall
be calculated by dividing the common equity by the sum of such common equity,
preferred equity and long-term debt (including current maturities of such debt).
Either ElecCo or GasCo may apply for a waiver of this provision, which shall be
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processed within sixty (60) days of such application and where this provision
may be suspended up to sixty (60) days.
20. Capital Structure of TEP. UniSource agrees that until such time as
TEP's equity capitalization equals forty (40) percent of total capital, TEP
shall not issue dividends to UniSource which comprise more than seventy-five
(75) percent of TEP's earnings. This change shall serve as a modification to
Commission Decision No. 60480, Attachment A, Condition 20, which was the
Commission Decision that established UniSource as a holding company for TEP. For
purposes of this provision, the common equity ratio shall be calculated by
dividing the common equity by the sum of such common equity, preferred equity
and long-term debt (including current maturities of such debt). TEP may apply
for a waiver of this provision, which shall be processed within sixty (60) days
of such application and where this provision may be suspended up to sixty (60)
days.
PART C
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CITIZENS GAS DIVISION/GASCO RATE CASE
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For purposes of this part, Appendix B, which contains schedules in support
of this Agreement, is incorporated herein as part of this Agreement.
21. Fair Value Rate Base. For ratemaking purposes and for purposes of this
Agreement, the Parties agree to a Fair Value Rate Base ("FVRB") Number of
$142,132,013 as of October 29, 2002. See Appendix B, Schedule 2.
22. Rate of Return. For ratemaking purposes and for purposes of this
Agreement, the Parties agree that a reasonable rate of return on the FVRB equals
7.49 percent. This number is based on a cost of capital of 9.05 percent, which
is further based on a cost of equity of 11.00 percent and a cost of debt of 7.75
percent for original cost rate base. This agreed upon rate of return on FVRB is
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the result of negotiation. See Appendix B, Schedule 1.
24. Revenue Requirement. For ratemaking purposes and for purposes of this
Agreement, the Parties agree that GasCo's increase in revenue requirement equals
$15,191,276. See Appendix B, Schedule 1.
25. Rate Design. The Parties agree to the rate design attached hereto as
Appendix B, Schedule 3 and incorporated herein by this reference. The rate
design includes the following provisions.
(a) A monthly customer service charge equaling $7.00 for all
residential customers. This represents an increase of $2.00 to the monthly
service charge of $5.00.
(b) A base cost of gas implicit in the commodity rates for all tariff
classes shall be $0.400 per therm.
26. Purchase Gas Adjustor ("PGA"). The Parties agree that the PGA bank
balance shall not be affected by this Agreement and that UniSource and/or GasCo
shall abide by previous Commission orders regarding treatment of the PGA bank
balance. The Parties further agree that GasCo shall abide by all Commission
requirements when seeking recovery of any amounts in the PGA bank balance and/or
establishing a surcharge to recover such amounts. In connection with the
implementation of the new $0.400 per therm base cost of gas, the existing
limitation of $0.100 per therm over twelve months within which the PGA rate may
now fluctuate without formal Commission approval, shall be increased to $0.150
per therm for a period of twelve consecutive months, beginning with the first
calendar month after Commission approval of this Agreement. At the end of the
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twelve consecutive months, the PGA rate shall revert to the previous $0.100 per
therm over twelve months limitation.
PART D
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ELECTRIC PURCHASE POWER & FUEL ADJUSTOR CLAUSE ("PPFAC")
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27. PPFAC Balance, Base Rate for Purchase Power, and the Adjustor Rate for
Purchase Power. The Parties agree that effective from the date of the closing of
the purchase of Citizens' electric utility assets, the adjustor rate shall be
set at $0.01825 per kilowatt hour ("kWh"). The base rate for purchase power
shall remain at $0.05194 per kWh. The total cost for purchase power shall equal
the base rate plus the adjustor rate, or $0.07019 per kWh. The composition of
the total cost for purchase power is set forth in the attached Appendix C.
UniSource, any of its subsidiaries, and Citizens shall forfeit their right to
pursue recovery from retail ratepayers of the PPFAC balance existing prior to
and including the date of closing.
28. Renegotiation of the PWCC Contract. This provision refers to the
purchase power contract signed by Citizens and PWCC on June 1, 2001. UniSource
agrees that it shall, in good faith, attempt to renegotiate the PWCC Contract.
Any and all savings from any successfully renegotiated purchase power contract
with PWCC and/or any amendment to the existing purchase power contract with PWCC
shall be shared between ElecCo's customers and UniSource. Sixty (60) percent of
the savings shall go directly towards the benefit of ElecCo's ratepayers and
forty (40) percent of the savings shall go to UniSource. The above-described
sharing from renegotiating the PWCC contract and/or amending the existing PWCC
contract shall only apply for the duration of the existing or renegotiated PWCC
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contract, whichever duration would expire sooner. Once that timeframe expires,
any and all savings shall be passed through directly to ElecCo's customers.
PART E
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PIPELINE SAFETY PROVISIONS
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29. Staffing of Safety Personnel. UniSource shall not allow the acquisition
to diminish staffing that would result in service and/or safety degradation in
either of the current Citizens Arizona Gas Division sections, Northern Arizona
Gas Division ("NAGD") or Citizens Santa Xxxx Gas Division ("SCGD"), service
territories.
30. Maintaining Field Offices. UniSource shall continue to maintain fully
operational current local field offices in the NAGD and SCGD service
territories, as appropriate, to maintain the quality of service and ensure
pipeline safety.
31. Not Using Contract Personnel for Operations and Maintenance Duties.
UniSource shall continue Citizens Arizona Gas Division's current practice of not
using contract personnel for the performance of operation and maintenance
functions, such as, leak survey and valve maintenance.
32. Adopting Citizens' Gas Divisions Operations and Maintenance Procedures
for GasCo. UniSource shall adopt the most recent version of Citizens Arizona Gas
Division's operations and maintenance manuals and procedures, including but not
limited to the emergency plan, and agrees to make revisions and additions to
only those specific sections as necessary. Such section updates shall be
provided to the Commission's Chief of the Office of Pipeline Safety ("OPS").
33. Quality of Service. UniSource shall use all commercially reasonable
efforts to prevent the quality of service in either of the current Citizens
Arizona gas divisions (NAGD or SCGD) service territories from diminishing as a
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result of the acquisition. The number of service complaints, the response time
to service complaints and service interruptions should not increase as a result
of the acquisition.
34. Inspection of Installation by Contract Personnel. With regard to the
installation of new service lines and main extensions on the acquired gas
system, GasCo's personnel shall independently inspect any and all work done by
any contract personnel on any and all portions of either of the acquired gas
division sections.
PART F
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MISCELLANEOUS PROVISIONS
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35. Negative Acquisition Adjustment. UniSource agrees that it shall
permanently credit customers for the negative acquisition adjustments of
$30,700,000 for GasCo and $93,624,000 for ElecCo, cited in Appendix B, Schedule
1 and Appendix B, Schedule 4 respectively, until fully amortized over the life
of the plant related to this Agreement and that it shall not seek any other
treatment. As a result, the net plant in service for the electric system
purchased by UniSource shall be $93,800,000 as of October 29, 2002. See Appendix
B, Schedule 4. UniSource agrees that the negative acquisition adjustments shall
be initially recorded as a credit in FERC Account 114; Gas Plant Acquisition
Adjustments and Electric Plant Acquisition Adjustments, respectively. Upon
completion of the transaction and final accounting, GasCo and ElecCo shall
transfer the amounts in FERC Account 114, Gas/Electric Plant Acquisition
Adjustments, to FERC Account 108, Accumulated Provision for Depreciation of
Gas/Electric Utility Plant. GasCo and ElecCo shall then establish sub-accounts
to FERC Account 108 to record an allocation of the total negative acquisition
adjustment to each FERC plant account. The sub-accounts shall be amortized at
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the same rates as the depreciation rates for the corresponding plant accounts.
The amortization of the negative acquisition adjustment shall be recorded as a
debit to FERC Account 108 and a credit to account 406 (Amortization of
Gas/Electric Plant Acquisition Adjustments), and shall reduce the depreciation
expense included in the cost of service for recovery in rates. The negative
acquisition balance shall reduce rate base included in cost of service for
recovery in rates until fully amortized.
36. Prudency Reviews.
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(a) The Parties agree that the Commission shall not conduct any prudency
reviews of Citizens' gas procurement practices, accounting practices or balances
existing on or before October 29, 2002.
(b) In Decision No. 57647, the Commission required Citizens to conduct a
buildout program (the "Buildout Program"). The Commission approved the proposed
Buildout Program in Decision No. 58664. The Parties agree that the Commission
shall not conduct any further prudency reviews of the Buildout Program beyond
the $10 million reduction currently incorporated into the gas rate base figures
set forth in Article II, Part C of this Agreement. The $10 million reduction is
a disallowance from gas rate base that shall be a permanent write-down of plant
as an adjustment to the gas rate base due to a prudence review of the Buildout
Program.
37. Additional Acquisition Costs. The Parties agree that ElecCo's
ratepayers shall be held harmless from any recovery directly related to the
increase in acquisition costs that will result under Section 3.3(a)(iii) of the
Electric Asset Purchase Agreement if the transaction closes after October 29,
2003. The Parties further agree that GasCo's ratepayers shall be held harmless
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from any recovery directly related to the increase in acquisition costs that
will result under Section 3.3(a)(iii) of the Gas Asset Purchase Agreement if the
transaction closes after October 29, 2003.
38. Capital Expenditures. The Parties agree that work orders closed after
October 29, 2002 through the date of closing of the transaction related to the
Electric Assets and the Gas Assets shall be included in the rate base for ElecCo
and GasCo (subject to prudency review) on a dollar-for-dollar basis (i.e., not
reduced by the negative acquisition adjustment) in the next rate filing.
39. Rate Moratorium. The Parties agree that neither GasCo nor ElecCo shall
file a general rate case for a period of three years from the date of the
Commission order approving substantially all of the terms of this Agreement;
provided, however, that GasCo and ElecCo shall not be prohibited from seeking a
change in rates in the event of: (a) conditions or circumstances that constitute
an emergency; or (b) material changes to the cost of service resulting from
federal, tribal, state or local laws, regulatory requirements, judicial
decisions, actions or orders.
40. Revised Line Extension Tariff and Policy. The Parties agree that
GasCo's revised gas facilities service line and main extension tariff of the
Arizona gas utility, incorporated herein as Appendix D, may be amended and
implemented upon Commission approval of this Agreement.
41. Approval Limitation. UniSource must re-apply with the Commission for
approval of this Agreement and the Joint Application if the deal is not
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consummated within six months of Commission approval of this Agreement.
UniSource may apply for an extension of six-month time limitation where it will
be the burden of UniSource to demonstrate why the merger agreement was not
consummated and why approval of the extension is in the public interest.
42. Tariff Filings. UniSource will file, within thirty (30) days of
Commission approval of this Agreement, tariffs reflecting all
Commission-approved changes contained in the gas rate case filing. Tariffs will
be effective from the date of closing of the purchase of Citizens' electric
utility and gas utility assets. Within sixty (60) days of Commission approval of
this Agreement, UniSource shall file an application for Commission approval of
tariffs specifically regarding the negotiated sales program and gas
transportation issues.
43. Notice to Customers. Following Commission approval of this Agreement
and consummation of the transactions set forth in the Joint Application,
UniSource will provide in bills sent to applicable customers of the New
Companies a notice regarding the revised rates, terms and conditions or service
as set forth in this Agreement. UniSource shall provide such notification to the
New Companies' customers within sixty (60) days of approval of this Agreement of
the rates and charges authorized by this Agreement and the effective date of
same. The xxxx inserts shall also inform consumers that the Commission remains
the regulatory agency responsible for overseeing the terms, conditions, rates
and quality of service provided by the New Companies. Finally, the xxxx inserts
shall inform consumers that any complaints regarding any of the New Companies
regulated services that cannot be resolved by the New Companies may be directed
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to the Commission's Consumer Services Section.
44. Limitations. This Agreement represents the Parties' mutual desire to
compromise and settle disputed claims and issues regarding the issues set forth
in the Consolidated Cases in a manner consistent with the public interest and
based upon the pre-filed testimony, exhibits and evidentiary record developed in
the Consolidated Cases and represents a compromise of the positions of the
Parties. The terms and provisions of this Agreement apply solely to and are
binding only in the context of the provisions and results of this Agreement and
none of the positions taken in this Agreement by any of the Parties may be
referred to, cited to, or relied upon by any other Party in any fashion as
precedent or otherwise in any proceeding before the Commission or any other
regulatory agency or before any court of law for any purpose except in
furtherance of the purpose and results of this Agreement.
45. Privileged and Confidential Communications. All negotiations relating
to or leading to this Agreement are privileged and confidential and no Party is
bound by any position asserted in negotiations, except to the extent expressly
stated in this Agreement. Evidence of conduct or statements made in the course
of negotiation of this Agreement are not admissible as evidence in any
proceeding before the Commission, any other regulatory agency or any court.
46. Force Majeure. Parties to this Agreement shall be excused for delays or
failure in performance under this Agreement caused by acts of God, war, strike,
labor dispute, work stoppage, fire, act of government, or any other cause,
whether similar or dissimilar, beyond the reasonable control of that Party. The
Parties agree that if any of the above-described conditions occur, such that a
21
Party that is a signatory to this Agreement cannot fulfill its obligations under
this Agreement, that Party shall notify the other Parties and shall pursue an
amendment or modification to this Agreement and/or the Commission order
approving this Agreement in accordance with A.R.S. ss. 40-252.
47. Definitive Text. The "Definitive Text" of this Agreement shall be the
text adopted by the Commission in an order adopting substantially all of the
terms of this Agreement including all modifications made by the Commission in
such order.
48. Severability. Each of the terms of the Definitive Text of this
Agreement is in consideration and support of all other terms. Accordingly, the
terms are not severable.
49. Support and Defend. The Parties pledge to support and defend this
Agreement before the Commission. If this Agreement enters into force the Parties
will support and defend this Agreement before any court or regulatory agency in
which it may be an issue.
[SIGNATURES APPEAR ON NEXT PAGE]
22
STAFF OF THE UTILITIES DIVISION OF THE
ARIZONA CORPORATION COMMISSION
By: Xxxxxx X. Xxxxxxx
Title: Utilities Director
Signature: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Date: 4/1/03
--------------------------------------------
UNISOURCE ENERGY CORPORATION
By: Xxxxx X. Xxxxxxxxxx
Title: CEO
Signature: /s/ Xxxxx X. Xxxxxxxxxx
-------------------------------------------
Date: March 31, 2003
--------------------------------------------
TUCSON ELECTRIC POWER
By: Xxxxx X. Xxxxxxxxxx
Title: CEO
Signature: /s/ Xxxxx X. Xxxxxxxxxx
-------------------------------------------
Date: March 31, 2003
--------------------------------------------
CITIZENS COMMUNICATIONS COMPANY
By: Xxxxxx XxXxxxxx
Title: President & CEO Public Services
Signature: /s/ Xxxxxx XxXxxxxx
--------------------------------------------
Date: 3/31/03
--------------------------------------------
23
APPENDIX A
FINANCING PLAN
A. DEBT ISSUANCE BY NEW COMPANIES
------------------------------
1. Bridge Financing. Depending on market conditions, it may be necessary or
desirable for either HoldCo or the New Companies to initially issue or guarantee
Debt Securities to fund the purchase price on an interim basis and, following
the closing of the purchase, to refinance such bridge financing on a more
permanent basis. If such bridge financing is utilized, it is anticipated that
either HoldCo or the New Companies would enter into a credit or other financing
agreement with commercial banks or other institutional lenders for this purpose.
The aggregate amount of Debt Securities to be issued under the bridge financing
would not exceed $250 million.
Interest. Variable rates based on rates prevailing in the market.
Maturity Date. Not to exceed three years.
Security. In the event that security for the loans is necessary or
desirable, each of the New Companies may secure its obligations with a mortgage
lien on some or all of the properties acquired from Citizens and other
properties of the New Companies.
2. Bond Financing. In order to fund the acquisition, or to refinance any
bridge financing described above, the New Companies may issue or guarantee
long-term Debt Securities in the capital markets ("Bonds"). The aggregate
principal amount of Bonds issued to fund the acquisition or refinance a bridge
facility would not exceed $175 million.
Interest. Fixed interest rate based on rates prevailing in the market
at the time of issuance.
Maturity Date. Not to exceed thirty years.
Security. In the event that security for the Bonds is necessary or
desirable, each of the New Companies may secure its Bonds with a mortgage lien
on some or all of the properties acquired from Citizens and other properties of
the New Companies.
Collateral Trust Bonds. Should the Bonds be issued by HoldCo on a
secured basis, the Bonds may be issued as collateral trust bonds secured by
mortgage bonds to be issued by either or both of the New Companies. The New
Company mortgage bonds would have the same principal amount, stated rate of
interest and maturity date as the HoldCo bonds, and would be held in trust as
collateral for the HoldCo bonds. If the Bonds are issued on an unsecured basis,
covenants may be required that would restrict or prohibit the issuance of
secured debt so long as any unsecured bonds remain outstanding.
B. REVOLVING CREDIT FINANCING. For the purpose of obtaining short-term
liquidity support, each or both of the New Companies may enter into a revolving
credit agreement with commercial banks and other institutional lenders. Under
such agreement, or one entered into by HoldCo on behalf of the operating
companies, the New Companies may issue up to $50 million of Debt Securities at
any given time as evidence of loans under the agreement.
Interest. Variable rates based on rates prevailing in the market.
Maturity Date. Not to exceed fives years.
Security. In the event that security for the loans is necessary or
desirable, each of the New Companies may secure the loans with a mortgage lien
on some or all of the properties acquired from Citizens and other properties of
the New Companies.
2
C. UNISOURCE EQUITY INVESTMENT
---------------------------
UniSource shall be authorized to make an equity investment in the New
Companies in the range of $75 million-$125 million. As described in Settlement
Agreement, up to $50 million of this equity investment may be financed through a
TEP loan to UniSource. The balance of the equity investment would come from
general corporate funds available to UniSource. UniSource may issue new common
stock to help fund the acquisition and/or to pay off interim financing or other
contributions by UniSource. Upon receipt of this equity investment, the New
Companies would issue common stock to UniSource or HoldCo to evidence their
ownership interest.
3
APPENDIX B - SCHEDULE 1
------------------------------------------------------------------------------------------------------------------------------------
UNISOURCE ACQUISITION OF CITIZENS UTILITY
2001 TEST YEAR
------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
CITIZENS UNISOURCE UNISOURCE
LINE DESCRIPTION ORIGINAL AS FILED SETTLEMENT UniSource's Cost of Capital-Settlement
--------------------------------------
NO. COST RATE
BASE
--------------------------------------------------------------------------------------
Cost Weight WACC
----------------------------------------
1 Gross Utility Plant in Service $219,383,559 $219,383,559 $219,383,559 Debt 7.75% 60.00% 4.65%
(w/CIAC)
Equity 11.00% 40.00% 4.40%
---------
2 Accumulated Depreciation ($53,751,970) ($53,751,970) ($53,751,970) 9.05%
=========
3 Adjustment for Purchase ($30,709,737) ($30,709,737)
4 Adjustment to the Build Out Program ($10,000,000)
Citizen's Cost of Capital
-------------------------
----------------------------------------------
5 Net Utility Plant in Service $165,631,589 $134,921,852 $124,921,852 Cost Weight WACC
----------------------------------------
Debt 6.70% 50.00% 3.35%
6 Accumulated Deferred Income Taxes ($5,713,762) Equity 11.00% 50.00% 5.50%
---------
8.85%
=========
7 Advances for Construction ($6,395,371) ($6,395,371) ($6,395,371)
8 Customer Deposits ($1,812,850) ($1,812,850) ($1,812,850)
9 Materials and Supplies $968,581 $968,581 $968,581
10 Warm Spirit ($40,001) ($40,001) ($40,001)
11 Cares ($364,946) ($364,946) ($364,946)
12 Sale of Office Buildings ($104,431)
13 Y2K Costs $383,765 $383,765 $383,765
14 Allowance for Working Capital ($2,924,219)
----------------------------------------------
15 Total Rate Base $149,628,355 $127,661,030 $117,661,030 UNS Filed Settlement
============================================== Equity Equity
Return Return
---------- ----------
16 Total Return $13,242,109 $11,553,323 $10,648,323 $5,617,085 %5,177,085
17 Operating Expenses $29,859,583 $$28,883,183 $28,883,183
18 Income Taxes $5,426,078 $3,703,569 $3,413,459
19 Proposed Revenue $48,531,496 $44,140,075 $42,944,966
20 Proposed (Required) Operating $13,245,835 $11,553,323 $10,648,323
Income
20 Current Operating Income $554,855 $1,499,758 $1,499,758
21 Proposed Increase in Operating $12,687,254 $10,053,565 $9,148,565
Income
22 Gross Revenue Conversion Factor 1.656 1.656 1.656
23 Increase in Gross Revenue $21,005,521 $16,645,370 $15,146,990
24 Depreciation Adjustment ($272,000)
for Build Out Reduction
25 Reversal of Taxes on Debt $304,886
for Build Out Reduction
26 Adjustment for Difference Regarding $11,400
Debt for Build Out Reduction
27 Increase in Gross Revenue with all $21,005,521 $16,645,370 $15,191,276
Build Out Adjustments
28 Test Year Gross Revenue $72,610,605 $72,610,605 $72,610,605
---------------------------------------------
29 Percent Increase over Present Rates 28.93% 22.92% 20.92%
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Xxxxxxxx X - Schedule 1
APPENDIX B -SCHEDULE 2
UNISOURCE ENERGY SERVICES
SETTLEMENT AGREEMENT
GAS RATE CASE - 2001
LINE NO. DESCRIPTION
ORIGINAL COST FAIR VALUE
------------------------------------------------------------------------------- -----------------
1 Adjusted Rate Base $117,661,030 142,132,013
2 Adjusted Operating Income $1,499,758 $1,499,758
3 Current Rate of Return 1.27% 1.06%
4 Required Operating Income $10,648,323 $10,648,323
5 Required Rate of Return 9.05% 7.49%
Appendix B - Schedule 2
APPENDIX B - SCHEDULE 3
CITIZENS COMMUNICATIONS COMPANY
ARIZONA GAS DIVISION
-----------------------------------------------------------------------------------------------------------------------------
NATURAL GAS RATES
SUMMARY OF FILED TARIFFS
PROPOSED RATES
-----------------------------------------------------------------------------------------------------------------------------
Rate Customer Gas Basic Cost of
Designation Rate Description Charge Margin Cost Service Rate
----------- ------------------ ------ ------ ---- ------------
R-10 Residential $ 7.00 $ 0.3004 $ 0.4000 $ 0.7004
R-12 CARES - $0.15 Discount (Nov - Apr) $ 7.00 $ 0.1504 $ 0.4000 $ 0.5504
C-20 Small Volume Commercial $ 11.00 $ 0.2420 $ 0.4000 $ 0.6420
C-22 Large Vol. Commerical $ 85.00 $ 0.1551 $ 0.4000 $ 0.5551
I-30 Small Volume Industrial $ 11.00 $ 0.2122 $ 0.4000 $ 0.6122
I-32 Large Vol. Industrial $ 85.00 $ 0.0864 $ 0.4000 $ 0.4864
PA-40 Small Vol. Public Authority $ 11.00 $ 0.2354 $ 0.4000 $ 0.6354
PA-42 Lg. Vol. Public Authority $ 85.00 $ 0.1084 $ 0.4000 $ 0.5084
PA-44 Special Gas Light Service various
IR-60 Irrigation Service $ 11.00 $ 0.2876 $ 0.4000 $ 0.6876
T-1 Transportation Otherwise applicable base rates less embedded gas costs
T-2 Dedicated Transportation Cost to service + subsidies (Including $95 Customer Charge)
CNG-1 Compressed Natural Gas various
EC-1 Electric Cogeneration $ 85.00 $ 0.0488 $ 0.4000 $ 0.4488
CGS-1 Competitive Gas negotiated
NSP-1 Negotiated Sales Program negotiated
MISC-1 Miscellaneous Tariffs various
NOTES:
1 Only primary rates are shown when multiple blocks are present.
-----------------------------------------------------------------------------------------------------------------------------
Appendix B - Schedule 3
APPENDIX B - SCHEDULE 4
UNISOURCE ACQUISITION OF CITIZENS UTILITY
NET ELECTRIC UTILITY PLANT IN SERVICE
AT 10/29/02
-----------------------------------------------------------------------------------------------------------------
CITIZENS UNISOURCE
LINE NO. DESCRIPTION ORIGINAL COST RATE BASE SETTLEMENT
-----------------------------------------------------------------------------------------------------------------
1 Gross Utility Plant in Service (incl. CIAC) $299,425,000 $299,425,000
2 Accumulated Depreciation ($112,001,000) ($112,001,000)
3 Adjustment for Purchase ($93,624,000)
4 Net Utility Plant in Service $187,424,000 $93,800,000
Appendix B - Schedule 4
APPENDIX C
UNISOURCE ENERGY CORPORATION
SETTLEMENT AGREEMENT
PURCHASED POWER AND FUEL ADJUSTMENT CLAUSE
RATE COMPONENTS
$/KWH
-------------------
CURRENT PPFAC BASE RATE
-----------------------
Cost of Electric Generation $0.04802 \1
Cost of WAPA Transmission $0.00392 \1
-------------------
Total Current Rate $0.05194
===================
INCREASE IN COST OF GENERATION
------------------------------
APS contract cost of generation (a) (a) $0.05879 \1
Loss Factor (b) (b) 10.69% \1, \2
Cost of Electric Generation at Meter a/ (1 - b) $0.06583
-------------------
Increase in Cost of Generation $0.01781
===================
INCREASE IN WAPA TRANSMISSION
-----------------------------
Increase in WAPA Transmission $0.00044 \1
Current Cost of WAPA Transmission $0.00436 \1
-----------------------------------------------------------------------------------
PPFAC ADJUSTOR RATE $0.01825
===================================================================================
-----------------------------------------------------------------------------------
===================================================================================
\1 Citizens' Amended Application for the Purchased Power and Fuel Adjustment
Clause dated September 19, 2001.
\2 Approved Losses Rate from Citizens' last rate
case.
UNISOURCE ENERGY CORPORATION APPENDIX D
CITIZENS UTILITY GAS RATE CASE FILING
PROPOSED SECTION NO. 7
----------------------
EXTENSION OF LINES
Extensions of gas distribution services and mains necessary to furnish permanent
service to applicants will be made in accordance with this rule.
A. GENERAL
The Utility will construct, own, operate and maintain service and main line
extensions.
1. Gas service lines will be of suitable capacity from the Utility's gas
main to a meter location on the property of the applicant that is
satisfactory to the Utility
2. Gas distribution main extensions will be only along public streets,
roads, and highways, which the Utility has legal right to occupy, and
on public lands and private property across which rights-of-way,
satisfactory to the Utility, may be obtained.
B. SERVICE AND MAIN EXTENSIONS TO APPLICANTS FOR SERVICE
1. General Policy - All service line and main line extensions are made on
the basis of economic feasibility except those for master-metered
mobile home parks (MMP), whose extensions shall be made in accordance
with the provisions in Section B.3 hereof. The economic feasibility
will be calculated by the Incremental Contribution Method as described
in Section B.4 hereof. However, at a minimum, the Utility will extend
30 feet of main for each applicant who connects a functioning water
heater or furnace within 4 months of the completion of the main.
2. Facility Charge - If any applicant fails to use natural gas for
equipment stated in the application and used as the basis for
estimating the allowable investment within 4 months of the completion
of the main, the Utility may calculate and xxxx the applicant and the
applicant shall pay within 45 days a nonrefundable Facilities Charge
according to the Utility's extension rule in effect at the time the
extension was made as though service had been requested on the basis
of the actual equipment installed and utilized. At its option, the
Utility may require a performance bond or other surety guaranteeing
bona fide operation of the facility for which the extension is
requested in accordance with applicant's representation in the
contract.
3. If the residential customers are tenants in a fully improved MMP and
the MMP is currently or was formerly served as a master-metered mobile
home park, the allowable investment for the MMP will be determined by
the following formula:
AI = (FR - CR) x 5
where:
AI = Allowable Investment
FR = The MMP's estimated future total annual revenue, assuming
conversion to individual residential service, using the
MMP's average park occupancy for the past two years, less
the Utility's current average cost of purchased gas.
CR = The MMP's current total annual revenue, under the
applicable schedule, averaged for the past two years, less
the Utility's current average cost of purchased gas. If the
MMP is not a current customer of the Utility, the CR will be
determined on the basis of engineering estimates of
occupancy and usage.
The Utility will install that portion of each service in excess of the
allowance subject to a nonrefundable contribution to be paid prior to
construction by the applicant MMP. In no event shall costs above the
allowable investment be borne by the Utility.
4. Incremental Contribution Method - Gas service line and main line
extensions will be made by the Utility at its expense for the
allowable investment as calculated by an Incremental Contribution
Study (ICS).
a. Allowable investment shall mean a determination by the Utility
that the revenues less the incremental gas cost to serve the
applicant customer provides a rate of return on the Utility's
investment no greater than the most recent overall rate of return
authorized by the Commission in a general rate case for the
Utility.
b. All applicants will pay for the entire length of their service
lines on their property. If the ICS has an allowable investment
that is more than the cost of the main extension, then the excess
will be applied evenly to all applicants to reduce their cost of
service line installation.
c. The Utility, after conducting an ICS, may at its option, extend
its facilities to Customers whose usage does not satisfy the
definition of Economic Feasibility but who otherwise are
Permanent Customers provided such Customer signs an extension
agreement and advances as much of the cost, and/or agrees to pay
a nonrefundable Facility Charge necessary to make the extension
economically feasible.
d. Applicants may provide trench for service lines and/or mains to
the Utility's specifications and the Utility costs will be
reduced by an amount equal to this avoided cost in the ICS.
e. Customers provided with line extensions using the Incremental
Contribution Method shall be reviewed annually for a period of
five years to determine the amount of any refund as described in
Section B5.
5. Method of Refund
Amounts advanced by the customer(s) in accordance with this rule, less
any unpaid Facility Charges, shall be refunded, without interest, in
the following manner.
a. Refunds of an advance shall be made for each additional
separately metered permanent service connected to the main
extension for which an advance was collected when an excess
allowable investment is calculated by an ICS that includes the
additional customers(s). The calculation will use actual usage
for existing customers. Future years usage will be estimated on
actual usage adjusted for normal weather.
b. Customers adding on to an existing main covered by an extension
agreement, still subject to refund, will pay the entire cost of
their service line, will contribute an advance equal to the
average advance, minus any refunds, provided by the existing
contributors, and will be eligible for refunds of advances in
subsequent annual reviews.
c. No refunds will be made for additional customers connecting to a
further extension or series of extensions constructed beyond the
original extension.
d. Refunds will be made annually or intermittently within the annual
period at the option of the Utility. Amounts to be refunded may
be accumulated by the Utility to a maximum of $50 per customer,
or the total refundable balance if less than $50 per customer.
Refunds will only be made to customers, the assignees of
customers, or developers.
e. When two or more parties make a joint advance on the same
extension, refundable amounts will be distributed to these
parties in the same proportion as their individual percentages of
the total joint advance.
f. The refund period shall be five years from the date of the
completion of the extension. No refunds will be made by the
Utility after the termination of the refund period. Any portion
of the advance that remains unrefunded at the end of the refund
period shall remain the property of the Utility.
g. Any assignment by a customer of their interest in any part of an
advance, which at the time remains unrefunded, must be made in
writing and approved by the Utility.
h. Amounts advanced under a gas main extension rule previously in
effect will be refunded in accordance with the provisions of such
rule.
C. SERVICE AND MAIN EXTENSIONS TO SERVE INDIVIDUALLY-METERED SUBDIVISIONS,
TRACTS, HOUSING PROJECTS, MULTI-FAMILY DWELLINGS AND MOBILE HOME PARKS OR
ESTATES
1. Advances
a. Gas distribution service and main extensions to and within
individually metered subdivisions, housing projects, multi-family
dwellings and mobile home parks or estates will be constructed,
owned and maintained by the Utility in advance of applications
for service by bona fide customers only when the entire estimated
cost of such extensions as determined by the Utility is advanced
to the Utility, and a main extension contract is executed. This
advance may include the cost of any gas facilities installed at
the Utility's expense in conjunction with a previous service or
main extension in anticipation of the current extension.
b. When a subdivider/builder/developer is building a project in
consecutive phases such that each phase is constructed separately
and requires separate advances, unused allowances from one phase
may be applied to an outstanding advance in any other phase so
long as such outstanding advance is still eligible for refund.
c. For developers who have entered into a line extension agreement
and facilities have been installed and then they or some other
party request subsequent reconfiguring of facilities or other
changes requiring additional expenditures by the Utility, these
new costs will be entirely paid for with a non-refundable advance
and any refunds will be made in accordance with the original
agreement. No additional agreement or extension of the time for
refunds will be made to cover the area piped under the original
extension agreement.
d. See, Section B3 for governing requests to serve MMP through
individual residential meters if the MMP is currently or was
formerly served under a MMP schedule.
e. Refunds will be made to developers as described in Section B5.
D. GENERAL CONDITIONS
1. Postponement of Advance
The Utility, at its option, may postpone, for a period not to exceed
five years, that portion of an advance which it estimates would be
refunded under the provisions of this rule. At the end of such refund
period, the Utility shall collect all such amounts not previously
advanced which were not then refundable. When advances are postponed,
the applicant may be required to furnish to the Utility evidence of
the necessary approvals to commence construction and of adequate
financing. A surety bond satisfactory to the Company, or other
Utility-approved surety, may be required to assure payment of any
postponed amounts at the end of the postponement period.
2. The applicants or developer will provide property location,
tax-identification numbers and other property information helpful to
planning an extension.
3. Contracts
a. Each applicant requesting an extension in advance of applications
for service will be required to execute a contract covering the
terms under which the Utility will install main lines in
accordance with the provisions of the tariff schedules.
b. At the time service is requested, the applicant will submit a
list of natural gas equipment to be used including the Btu input.
4. One Service for a Single Premise
a. The Utility will not install more than one service line to supply
a single premise, unless it is for the convenience of the Utility
or an applicant requests an additional service, and in the
opinion of the Utility, an unreasonable burden would be placed on
the applicant if the additional service were denied. When an
additional service is installed at the applicant's request, the
applicant shall make a nonrefundable contribution for the
additional service based on the Utility's estimated cost.
b. When a service extension is made to a meter location upon private
property which is subsequently subdivided into separate premises,
with the ownership portions thereof divested to other than the
applicant or the customers, the Utility shall have the right,
upon written notice, to discontinue service without obligation or
liability. Gas service, as required by said applicant or
customer, will be reestablished in accordance with the applicable
provisions of the Utility's rules.
5. Branch Services
The Utility, at its option, may install a branch service for units on
adjoining premises.
6. Main Extension Agreement Requirements
a. Upon request by an applicant for a main extension, the Utility
shall prepare, without charge, a preliminary sketch and rough
estimate of the cost of the installation to be advanced by the
applicant.
b. Any applicant for a main extension requesting the Utility to
prepare detailed plans, specifications, or cost estimates may be
required to deposit with the Utility an amount equal to the
estimated cost of preparation. The Utility shall, upon request,
make available within 90 days after receipt of the deposit
referred to above, such plans, specifications, or cost estimates
of the proposed main extension. Where the applicant authorizes
the Utility to proceed with the construction of the extension,
the deposit shall be credited to the cost of construction;
otherwise, the deposit shall be nonrefundable. If the extension
is to include oversizing of facilities to be done at the
Utility's expense, appropriate details shall be set forth in the
plans, specifications and cost estimates. Subdividers providing
the Utility with approved plans shall be provided with plans,
specifications or cost estimates within 45 days after receipt of
the deposit referred to above.
c. Where the Utility requires an applicant to advance funds for a
main extension, the Utility shall furnish the applicant with a
copy of this rule prior to the applicant's acceptance of the
Utility's extension agreement.
d. All main extension agreements requiring payment by the applicant
shall be in writing, signed by each party and shall include the
following.
(1) Name and address of applicant(s).
(2) Proposed service address(es) or location(s).
(3) Description and sketch of the requested main extension.
(4) Description of requested service.
(5) A cost estimate to include materials, labor, and other costs
as necessary.
(6) Payment terms.
(7) A concise explanation of any refunding provisions, if
applicable.
(8) The Utility's estimated start date and completion date for
construction of the main extension.
(9) A summary of the results of the Incremental Contribution
analysis performed by the Utility to determine the amount of
advance required from the applicant for the proposed main
extensions.
(10) Each applicant shall be provided a copy of the approved main
extension agreements.
7. Relocation of Services and Mains
a. When, in the judgment of the Utility, the relocation of a main or
service is necessary and is due either to maintenance of adequate
service or the operating convenience of the Utility, the Utility
shall perform such work at its own expense.
b. If relocation of a main or service line is due solely to meet the
convenience or the requirements of the applicant or the customer,
such relocation, including metering and regulating facilities,
shall be performed by the Utility at the expense of the applicant
or the customer.
c. Relocation of facilities will be mandatory and at the customer's
expense when actions of the customer restrict the Utility's
access to or the safety of the facility.
8. Standby Service or Residential Pool Heating
No allowance will be made for equipment used for standby or emergency
purposes only.
9. Temporary Service
Extensions for temporary service or for operations, which in the
opinion of the Utility are of a speculative character or of
questionable permanency will will require an advance for the entire
cost of the facilities required, with provision for a refund with the
use of an ICS calculated annually or at the termination of the
temporary service.
10. Length and Location
The length of main or service required for an extension will be
considered as the distance along the shortest practical and available
route, as determined by the Utility, from the Utility's nearest
permanent distribution main.
11. Service Impairment to Other Customers
When, in the judgment of the Utility, providing service to an
applicant would impair service to other customers, the cost of
necessary reinforcement to eliminate such impairment may be included
in the cost calculation for the extension.
12. Service From Transmission Lines
The Utility will not tap a gas transmission main except when
conditions in its sole opinion justify such a tap. Where such taps are
made, the applicant will pay the Utility the cost of such tap, and
extensions therefrom will be made in accordance with the provisions of
this rule.
13. Other Types of Connections
Where an applicant or customer requests a type of service connection
other than standard such as curb meters and vaults, etc., the Utility
will consider each such request and will grant such reasonable
allowance as it may determine. The Utility shall install only those
facilities that it determines are necessary to provide standard
natural gas service in accordance with this tariff. Where the
applicant requests the Utility to install special facilities which are
in addition to, or in substitution for, or which result in higher
costs than the standard facilities which the Utility would normally
install, the extra cost thereof shall be borne by the applicant.
14. Excess Flow Valve Installation Option
In accordance with Title 49, Section 192.383 of the Code of Federal
Regulations, the installation of an excess flow valve, as defined in
Rule No. 1, shall be performed by the Utility on a new or replaced
single residence service line at the request of a customer. The
installation of an excess flow valve is not mandatory; if a customer
elects this installation, the Utility shall perform the installation
subject to the customer assuming responsibility for all costs
associated with installation, maintenance and replacement. Each
customer requesting the installation of an excess flow valve will be
required to execute a written agreement.
15. Exceptional Cases
In unusual circumstances, when the application of this rule appears
impractical or unjust to either party, the Utility or the applicant
may refer the matter to the Commission for special ruling or for the
approval of special conditions which may be mutually agreed upon,
prior to commencing construction.
16. Taxes Associated with Nonrefundable Contributions and Advances
Any federal, state or local income taxes resulting from a
nonrefundable contribution or advance by the customer in compliance
with this rule will be recorded as a deferred tax and appropriately
reflected in the Utility's rate base. These deferred taxes will be
amortized over the remaining tax life of the asset.