April 15,2011. Peoples Natural Gas Purchased Gas Cost Section 1307(f) Filing

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1 COMMONWEALTH OF PENNSYLVANIA PENNSYLVANIA PUBLIC UTILITY COMMISSION P.O. BOX 3265, HARRISBURG, PA IN REPLY PLEASE REFER TO OUR FILE Secretary Rosemary Chiavetta Pennsylvania Public Utility Commission P.O. Box 3265 Harrisburg, PA April 15,2011 Re: Peoples Natural Gas Purchased Gas Cost Section 1307(f) Filing Docket No. R Dear Secretary Chiavetta: Enclosed please find a copy ofthe Prehearing Memorandum of the Office of Trial Staff (OTS). As evidenced by the enclosed Certificate of Service, copies have been served on all active parties. If you have any questions, please contact me at (717) Sincerely Enclosure RAK/edc Prosecutor Office of Trial Staff PA Attorney LD. # cc: Parties of Record Hon. Mary D. Long 03 M3

2 BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PENNSYLVANIA PUBLIC UTILITY COMMISSION v. DOCKET NO. R THE PEOPLES NATURAL GAS COMPANY LLC PREHEARING MEMORANDUM OF THE OFFICE OF TRIAL STAFF TO THE HONORABLE MARY D. LONG: In response to the Prehearing Conference Order issued by Your Honor on April 6, 2011 and in accordance with 66 Pa. C.S. 1307(f) and 52 Pa. Code 5.224, the Office of Trial Staff ("OTS") hereby submits this Prehearing Memorandum. The OTS prosecutor assigned to this proceeding is Richard A. Kanaskie. Contact information is as follows: By Mail: By Senior Prosecutor Pennsylvania Public Utility Commission P.O. Box 3265 Harrisburg, PA rkanaskie(aistate.pa.us By Telephone: (717) By FAX: (717)

3 I. BACKGROUND On April 1, 2010, The Peoples Natural Gas Company LLC ("Peoples" or "Company") filed Supplement No. 130 to Tariff Gas - Pa. P.U.C. No. 43 with the Pennsylvania Public Utility Commission ("Commission"). This filing was made pursuant to Title 66 Pa. C.S. 1307(f) which establishes a procedure for recovery of prudently incurred purchased gas costs ("PGC") by certain public utilities. The Company's proposed rates are offered to produce sufficient revenue to recover gas costs based on its projections through September 30 ; The proposed rates impact the Capacity Charge, the Gas Cost Adjustment Charge and the Commodity Charge. Also included are any reconciliation costs or credits from the prior period. The filing was assigned to the Office of Administrative Law Judge ("OALJ") for investigation and scheduling of Evidentiary Hearings to consider the lawfulness, justness and reasonableness of the PGC the Company seeks to recover from its customers. OTS filed its Notice of Appearance on March 24, This Notice was preceded by the Formal Complaint, Public Statement and Notice of Appearance of the Office of Small Business Advocate ("OSBA") dated March 22, In addition, the Office of Consumer Advocate ("OCA") filed a Formal Complaint and Public Statement on April 5, A Prehearing Conference has been scheduled for April 18, 2011 at 10:00 a.m. in Hearing Room Number 2 in the Commonwealth Keystone Building with

4 the presiding Administrative Law Judge ("ALJ") participating telephonically from a 2 nd Floor Hearing Room in the Commission offices at Piatt Place, 301 Fifth Avenue, Pittsburgh, PA II. ISSUES Based upon a preliminary view of the filing, OTS has identified certain areas of inquiry. The following statement of these areas of inquiry represents the potential issues OTS has identified in this proceeding at this time. However, as discovery progresses, OTS specifically reserves the right to address additional issues as they arise. Issues preliminarily identified include: 1. Waived Retainage and associated Retainage Rates, 2. Local Production Volumes and Costs, 3. Projected Design Peak Day, 4. Lost and Unaccounted For Gas and Company Use Gas, 5. Off-System Sales and Capacity Releases, 6. Exchange Gas, 7. Storage, 8 Pipeline Credits and Refunds Storage, 9. Analysis and Determination of the C-Factor and E-factor. Most of the issues raised by OTS will be supported by direct testimony of an OTS witness in his or her area of responsibility. However, there may be issues of Commission policy or legal interpretation that are not properly the subject of testimony; or there may be factual issues that are clear on the record and need not

5 be supported by testimony. OTS reserves the right to dispense with testimony when, in its opinion, an issue can be adequately addressed in brief. HI. WITNESSES It is currently expected that OTS may call any or all of the following witnesses without being limited thereto: Joseph Kubas, Rate Case Review Specialist Mr. Kubas will analyze the Company's filing from an engineering perspective. His analysis will include a review of the Company's claimed Lost and Unaccounted for Gas ("LUFG") and Company Use Gas ("CU"). In addition, Mr. Kubas will evaluate the preliminary issues identified as one (1) through seven (7) as listed above. Christine S. Wilson, Fixed Utility Financial Analyst 1 Ms. Wilson will examine the accounting issues associated with the Company's filing. Included in her analysis will be an evaluation ofthe Company's claimed C-Factor as well as the determination ofthe appropriate E- Factor. In addition, Ms. Wilson will review the applicability of any Pipeline Credits or Refunds. Ms. Wilson's areas of inquiry are identified as numbers eight (8) and nine (9) above. The above listing of witnesses and potential issues is provided without an analysis of the positions of all parties to this proceeding and without the benefit of 1 The OTS witnesses may be reached at the same mailing and telephone locations as those provided earlier in this Prehearing Memorandum for Mr. Kanaskie.

6 complete discovery. As such, OTS reserves the right to call additional witnesses and/or delete witnesses listed above as circumstances dictate. IV. SCHEDULE OTS will work with the other parties to attain a mutually agreeable schedule. Respectfully submitted, Senior Prosecutor Office of Trial Staff Pennsylvania Public Utility Commission Dated: April 15,2011

7 BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION Peoples Natural Gas Purchased Gas Cost Section 1307(f) Filing Docket No. R CERTIFICATE OF SERVICE I hereby certify that I am serving the foregoing Prehearing Memorandum dated April 15, 2011, either personally, by first class mail, electronic mail, express mail and/or by fax upon the persons listed below, in accordance with the requirements of 1.54 (relating to service by a party): David P. Zambito, Esquire Post & Schell P.C. 17 North Second Street 12* Floor Harrisburg, PA Daniel G. Asmus, Esquire Office of Small Business Advocate 300 North Second Street Commerce Building, Suite 1102 Harrisburg, PA Shaun A. Sparks, Esquire James A. Mullins, Esquire Office of Consumer Advocate 555 Walnut Street, 5th Floor Forum Place Harrisburg, PA OOci 0*1 : Hd SIMMIR Senior Prosecutor Office of Trial Staff PA Attorney LD. #80409 a3ai3oay.

Enclosed please find for filing the Prehearing Memorandum of Columbia Gas of Pennsylvania, Inc. to be filed in the referenced proceeding.

Enclosed please find for filing the Prehearing Memorandum of Columbia Gas of Pennsylvania, Inc. to be filed in the referenced proceeding. Theodore J. Gallagher Senior Counsel Legal Department Office: 724.416.6355 Fax: 724.416.6384 tjgallagher@nisource.com Via E-filing August 29, 2012 Rosemary Chiavetta, Secretary Pennsylvania Public Utility