HOLMES & GRAVEN CHARTERED. 470 Pllbbury Center, Minneapolis, Minnemta (612) Facsimile (612) WRITER'S DIRECT DIAL

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1 Attorneys at Law ROBERT A. ALSOP RONALD H. BATTY STEPHEN J. BUBUL JOHN B. DEAN MARY 6. DOBBINS STEFANIE N. GALEY CORRINE A. HEINE JAMES S. HOLMES DAVID J. KENNEDY JOHN R. LARSON WELLINGTON H. LAW CHARLES L. LEFEVERE JOHN M. LEFEVRE, JR. ROBERT J. LINDALL July 27, 1994 HOLMES & GRAVEN CHARTERED 470 Pllbbury Center, Minneapolis, Minneta (612) Facsiile (612) WRITER'S DIRECT DIAL ROBERT C. LONG LAURA K. MOLLET BARBARA L. PORTWOOD JAMES M. STROMMEN JAMES J. THOMSON, JR. LARRY M. WERTHEIM BONNIE L. WILKINS GARY P. WINTER DAVID L. GRAVEN ( ) OF COUNSEL ROBERT C. CARLSON ROBERT L. DAVIDSON T.JAY SALMEN The Honorable Richard C. Luis Adinistrative Law Judge Office of Adinistrative Hearings 100 Washington Square Suite 1700 Minneapolis, Minnesota Re: Application of OAH Docket No. PUC Docket No. Minnegasco for Authority to Increase G-008/GR x> c* rn&i s c^> rn Rates LO l\> PO cn 33 PI D < o Dear Judge Luis: Enclosed and filed on this day please find the original and one copy of the Suburban Rate Authority's Reply Brief and Proposed Findings in the above referenced atter. By this letter the attached service list is being served in accordance with your prehearing order. Very truly yours, IS^T GRAVEN, CHARTERED Jaes M. Stroe JMS: nac Enclosures cc: All Parties of Record

2 AFFIDAVIT OF SERVICE STATE OF MINNESOTA ) ) COUNTY OF HENNEPIN ) ss. Maria McTighe, being first duly sworn on oath, deposes and says she served the attached by having the docuents delivered by hand at the respective addresses on the list or by placing in the U.S. Mail at the City of Minneapolis, a true and correct copy thereof, properly enveloped with postage prepaid, to all persons at the addresses indicated below or on the attached list: See attached list. Subscribed and sworn to before e this July 27, 1994 Maria McfTighe a Wotary Publi GRACE A. KOEBNICK NOTARY PUBUC - WNNMOTA DAKOTA COUNTY yo j is # os *5 GO-j =K ro cn 3) rn < o JMS73784 SU160-15

3 RicliaTd i^^c C. Luis Adinistrative Law Judge Office of Adinistrative Hearings 100 Washington Square, Suite 1700 ineapolis, MN Edward J. Schwartzbauer Adinistrative Law Judge Office of Adinistrative Hearings 5200 Lincoln Drive, #211 Edina, MN Douglas W. Peterson Miggie E. Crablit Minnegasco Law Dept. 201 South Seventh Street Minneapolis, MN Paul T. Ruxin Jones, Day, Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, OH Gary R. Cunningha Asst. Attorney General Office of Attorney General Suite 12 00, NCL Tower 445 Minnesota Street St. Paul, MN Scott Wilensky Joshua Wirtschafter Mark A. R. Chalfant Asst. Attorneys General Office of Attorney General Suite 1200, NCL Tower 445 Minnesota Street St. Paul, MN Burl Haar, Executive Secretary MN Public Utilities Coission 121 7th Place East, #350 St. Paul, MN Roxanne Colby MN Dept. of Public Service 121 7th Place East, #200 St. Paul, MN Robert G. Towers Chesapeake Regulatory Consultants 184 Duke of Gloucester Street Annapolis, MD Jaes D. Larson Wurst, Pearson, Larson, Underwood & Mertz One Financial Plaza, # South Sixth Street Minneapolis, MN

4 1. earned J. Bertrand Leonard, Street & Deinard 150 S. Fifth Street, #2300 Minneapolis, MN Peter H. Grills O'Neill, Burke, O'Neill, Leonard & O'Brien 800 Norwest Center 55 East Fifth Street St. Paul, MN Stephen R. Yurek Dahlen, Berg & Co Dain Bosworth Plaza 60 South Sixth Street Minneapolis, MN Joshua Wirtschafter Office of the Attorney General NCL Tower 445 Minnesota Stree St. Paul, MN Marya White Minnesota Departent of Public Service Suite Seventh Place East St. Paul, MN Tracy Bridge Minnegasco 2 01 South Seventh Street Minneapolis, MN 55402

5 RECEIVED % JUL 27 PM l»i 25 ADMWISTRATWfE HEARINGS BEFORE THE MINNESOTA OFFICE OF ADMINISTRATIVE HEARINGS FOR THE PUBLIC UTILITIES COMMISSION OF THE STATE OF MINNESOTA In the Matter of the Application of Minnegasco, Division of Arkla, Inc., for Authority to Increase Its Rates for Natural Gas Service in the State of Minnesota Docket No.: G-008/GR OAH File No.: SUBURBAN RATE AUTHORITY'S REPLY BRIEF AND PROPOSED FINDINGS July 27, 1994

6 BEFORE THE MINNESOTA OFFICE OF ADMINISTRATIVE HEARINGS FOR THE PUBLIC UTILITIES COMMISSION OF THE STATE OF MINNESOTA In the Matter of the Application of Minnegasco, Division of Arkla, Inc., for Authority to Increase Its Rates for Natural Gas Service in the State of Minnesota SUBURBAN RATE AUTHORITY'S REPLY BRIEF AND PROPOSED FINDINGS Docket No.: G-008/GR OAH File No.: REPLY This is the Reply Brief of the Suburban Rate Authority ("SRA"). The SRA supports the arguents of the Office of the Attorney General and the Departent of Public Service regarding Minnegasco's Gas Purchase Incentive Plan ("GPI"), (OAG Br. pp. 3-8; DPS Br. pp. 2-12). Arguents against Minnegasco's ipleentation of the GPI at this tie are nuerous and have erit. The procedural context of the Minnegasco's GPI proposal is of particular concern to the SRA, however. A public utility should be held to strict standards of pre-intervention notice regarding substantive plans that affect rates. See Minn. Stat. 216B.16. As pointed out by the DPS, a uniquely affected interest group ay

7 have passed on its opportunity to intervene in this rate oase after reviewing Minnegasco's initial petition and finding no GPI in the testiony. (DPS Br. pp 8-10). Saller intervenors, like the SRA, areore likely to intervene in oases only if an initial reviewof the Copany's petition reveals an issue of particular concern to the party. If a utility were routinely allowed to introduce substantive new plans after intervention deadlines had passed in general rate cases, an incentive would he createdtoholdhackcertainproposals or siply to "wait and see" heforeunveiling plans. Caution should alsohe exercised where a newrate design is under study in another case, anda less than thoroughly reviewedplan is introduced idway though a proceeding hy the petitioning utility. Regardless of the potential erits of Minnegasco's CPI, i t is preature to adopt i t under these circustances. PROPOSED FINDINGS AND CONCLUSIONS To preface, whether a fixed percentage cap is established or a "close scrutiny" standard of review for any further increases in residential custoer service charges, all parties would benefit fro a stateent of policy by the ALJ and Coission as to long ter residential fixedbusage charge ratios. Sucha stateent would assist Minnegasco in preparation of its rate design structure for future cases and would also allow intervenors to focus on specific points of dispute with the Coission's stated policy or Minnegasco's adherence to the paraeters of such a policy. The proposed Findings and Conclusions attept to reflect this goal. ^ 7 ^ 7 ^^0^5

8 FINDING I. Minnegasco's price signal rationale for increasing the residential custoer service charge at a greater rate than usage charges is outweighed hy the increasing disincentive for custoer conservation that i t creates. A price signal derived fro a single, fixed coponent of a residential custoer hill is less effective than a siilar signal fro usage charges that allow custoer choice and foster statutory conservation goals. CONCLUSIONS 1. Minnegasco's non-usage-sensitive custoer charge for residential custoers should he capped at the higher of (a) the custoer charge established in this case or (h) a level hased on the ratio of (i) the annuaiizedcustoer charge established in this case to (ii) the average annual test year bill at the rates established in this case. 2. Alternatively, future Minnegasco proposals to increase residential custoer service charges toagreater extent thanusage charges will be subject to close scrutiny by the Coission under Minnesota Statutes Section and ust be supported by evidence that such increased custoer service charges do not discourage conservation. ^ 7 ^ 7 ^^0^5

9 Dated: July 27, 1994 HOLMES & GRAVEN, CHARTERED By: Jaes M. Stroiranen Attorney I.D. No.: Pillsbury Center Minneapolis, Minnesota (612) ATTORNEYS FOR THE SUBURBAN RATE AUTHORITY JMS72587 SU160-15