The Natural Gas Section is responsible for the regulation of all publicly-owned natural gas distribution, transportation, storage, and intrastate natural gas and oil pipelines in Alabama, and the monitoring of the RSE and related programs for Alabama Gas Corp.

Rate Stabilization and Equalization (RSE)
Each month this section examines the books and records of 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. It also graphically summarizes the recent history of capital structure, returns and residential bills.

Under the RSE plan, the only time the company can receive an increase is December 1. If the projected return, based on the budget approved by the utility's board of directors, is less than 13.15 percent, rates are increased December 1 to bring the return at the end of the fiscal year to 13.4 percent. If the projected return is more than 13.65 percent, rates are decreased to bring the return to 13.4 percent. If the projected return is between 13.15 and 13.65 percent, inclusive, no adjustment is made. Subsequent points of test, based on the projected return at September 30, the end of Alagasco's fiscal year, can yield only decreases or no change, effective April 1, July 1, and October 1.

The Natural Gas Section evaluated four RSE filings by Alagasco during FY-00.

Effective Date Increase (Decrease)
December 1, 1999 $6,581,737
April 1, 2000 0
July 1, 2000 0
October 1, 2000 0
Alagasco also has an incentive program, the Cost Control Measure, which requires that the company keep growth in operation and maintenance expenses below a specified range or face penalties. The utility 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. The section monitors both of these programs to ensure compliance with the approved tariff.

Local Distribution Companies
Another function of the Natural Gas Section is to maintain statistical data and keep the Commission informed on all facets of the gas utilities' operations.Under that function, the following reports are prepared regularly: During FY-00, the Natural Gas Section evaluated and made recommendations to the Commission on all matters pertaining to the following local distribution companies: The section conducts investigations requiring examination of work papers, financial reports and other records. The findings are documented and evaluated in written reports, and, when appropriate, meetings with officials of the respective gas companies are held to discuss the results.

Wheeler Basin Natural Gas Co. required additional regulatory activity during FY-00. The section met with interested parties in an attempt to resolve issues relating to allocations between Wheeler Basin and its parent, Joe Wheeler Electric Membership Corp., arising from a lawsuit settlement. These efforts required numerous meetings and were still ongoing at the end of the fiscal year. The section also attended court hearings concerning the parties' adherence to the terms of the settlement. Additionally, significant personnel turnover left the company in some disarray and unable to adequately meet its reporting requirements.

The section assisted Wheeler Basin in many of its duties relating to accounting, the Purchased Gas Adjustment, recordkeeping, and other matters. At the section's request, the Commission held a hearing to evaluate Wheeler Basin's compliance with Commission orders. The section worked closely with the Attorney General's office to prepare for the hearing and participated in the hearing. As a result of the hearing, the utility, the Attorney General, and the Commission jointly adopted a regulatory agreement specifying actions to be taken to ensure ongoing compliance with the rulings of the Commission. The matter carried over into the new year.

Intrastate Pipeline and Storage Companies
During FY-00, the Natural Gas Section evaluated and made recommendations to the Commission on all matters pertaining to the following intrastate pipeline and storage companies: Two companies, BAMAGAS Co. and Pine Energies, Inc., applied to the Commission for Certificates of Public Convenience and Necessity. The section made data requests and held discussions with each company. The applications are still pending and carried over into the new fiscal year.

Pinnacle Gas Co. indicated an interest in being certificated to provide service to a customer in Morgan County. Pinnacle Gas decided not to pursue the contemplated project.

Swift Energy approached the Commission concerning its plans to develop a storage field in Lamar County. Subsequent discussions revealed the field would be owned by Northwest Alabama Gas District and would be operated by Swift Energy and therefore would not be subject to the jurisdiction of the Commission. The section requested written confirmation of the ownership structure. The matter is still pending.

The section investigated, analyzed, and reported on approximately 70 separate additional matters, including special contracts, tariff changes, gas supply adjustment filings, purchased gas adjustment filings, new rates, certificates, municipal acquisition audits, and related matters. The section also investigated requests for gas service and responded to a large number of requests by the general public for rate information, financial data, tariff sheets, and other information.

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