Faced with rising distribution costs and declining throughput on its gas distribution system in Arkansas, CenterPoint Energy Inc. has proposed two alternative mechanisms to state regulators that would allow it to recover more of its fixed costs through fixed charges to customers, partially decoupling revenue from volumetric charges.

The company filed its proposed alternatives last week with the Arkansas Public Service Commission (APSC). CenterPoint is asking for a roughly $50 million increase in its revenue requirement.

Its first proposal would raise the revenue requirement by $50.9 million by raising the residential customer fixed charge from $9.75 to $19.50 per month during the winter months only. The increase is proposed only for winter months because the company does not want to create an incentive for low-income customers to leave its system during the summer when they don’t rely as much on gas for heating, explained Paul Gastineau, director, rates and regulatory research, CenterPoint Energy.

“Our alternative to that [proposal] is what many call a revenue stabilization plan,” he said. “We’ve called it a trial billing determinant adjustment clause (TBDAC).”

Gastineau said under the TBDAC proposal CenterPoint is asking commissioners to raise its revenue requirement by $49.9 million, one million less than the other proposal because the TBDAC mechanism provides lower risk to CenterPoint.

“The trial billing determinant adjustment clause would allow us to come in at the end of the year and we’d get to check our billing determinants for both the residential class and the small commercial class,” Gastineau said. “Billing determinants are both the number of customers and the volume that’s used, the number of CCf that’s used. And if any of those actual billing determinants fell below what was projected we would then get to go in and do a revenue by class test. And if the revenue by class fell below what was expected, we would get to adjust our rates to bring the residential and small commercial classes back to the expected revenue level.”

Raising the fixed charge would set the utility up to recover about 51% of its revenue requirement though the fixed charge to customers, Gastineau said. Under the TBDAC, about 34% of the revenue requirement would be recovered through the fixed charge. He said the company would prefer the TBDAC because it provides more revenue stability in the long run.

“Your ideal decoupling method is to take all of your distribution charges, which are almost all fixed, and turn around and put them in the customer charge. And then your only risk is loss of customers. We’re experiencing some loss of customers, but we’re actually experiencing more loss of load,” he said. “The thing that the alternative two [TBDAC] does is basically allow us to true back up to our authorized return. It’s a little more complicated, a little less straightforward but it’s much more, from a company standpoint, a true decoupler.”

Gastineau pointed out that unlike in the electric industry — where new computers, appliances and other electronic gadgets ensure growing electricity demand among consumers — the gas industry can’t count on new gas-fired appliances to create new demand. Further, high gas prices have inspired greater conservation among consumers while gas-burning appliances are more efficient.

If the filing is approved by the APSC, CenterPoint Energy expects the new rates would go into effect later this year. The effect on individual monthly bills will vary depending on gas use and customer class.

CenterPoint, headquartered in Houston, is a domestic energy delivery company that includes electric transmission and distribution, natural gas distribution, competitive natural gas sales and services, and pipeline and field services operations. The company serves more than five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas.

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