Ending an almost two-year-old argument over $6.8 million in levied penalties stemming from the winter of 2000-2001, the Virginia State Corporation Commission (VSCC) on Monday accepted a settlement between Columbia Gas of Virginia and its transportation customers, stating that the matter can now be part of the commission’s file for “ended causes.”

Because of the colder than normal winter of 2000-2001, Columbia implemented an operational flow order in December 2000 placing restrictions on its banking and balancing customers served under rate schedules TS-1 and TS-2 and the company’s banking and balancing service. Under these flow orders, transportation customers were required to purchase and deliver to the company’s citygate an amount of gas that, when combined with gas available from Columbia’s standby service, was to equal the customer’s usage on that day. Transportation customers were restricted from using their banked gas and had to purchase gas on the spot market often at higher prices than those paid for their banked gas.

The colder than normal temperatures led to transportation customers collectively consuming more gas from their banks than they were delivering to the system. By early December, hearing examiner Howard P. Anderson Jr. said the company concluded that if the use of storage supplies continued at the current rate, the company would have insufficient storage gas to supply its customers through the winter. The effect of the flow orders was to improve the gas supply situation by requiring the transportation customers to increase their banks during the critical months of December 2000 and January 2001.

In addition, Columbia assessed a penalty of $10/Mcf on transportation customers whose daily consumption exceeded their daily nominated supplies. The commission’s hearing examiner found that “because these customers were denied access to their banked gas, customers whose daily deliveries fell short of their required gas quantities were deemed to have consumed gas from the company at the tariffed rate.” In addition, Columbia imposed $0.35/Mcf excess bank penalties on customers who maintained bank balances in excess of their prescribed bank tolerance levels.

The hearing examiner found that the penalties unfairly impacted transportation customers because it is difficult for a gas transportation customer to schedule the exact amount of gas for delivery that it will use on any given day. Because of this, many transportation customers purchased gas in excess of their daily requirements to avoid the $10/Mcf penalty.

“Customers without daily meters were confronted with a more serious dilemma because they were required to deliver gas equal to their maximum daily usage regardless of how much gas they actually used,” the hearing examiner’s report stated. “The overall effect of these practices was to increase the gas supplies on the Columbia system. Further, while Columbia imposed penalties on its transportation customers, Columbia itself incurred no penalties or charges from any of its upstream transporters or suppliers during this time period.”

Under the accepted settlement, Columbia agreed to refund all $10/Mcf excess usage charges and all $0.35/Mcf excess bank penalties incurred during winter 2000-2001.

“I find that the terms of the Offer of Settlement constitute a reasonable compromise in this case,” Anderson said. “The offer of settlement restores the transportation customers to their previous positions and the company has suffered no harm. The final determination of Rate Schedule TS-1/TS-2 will be made in Case No. PUE-2001-00587, scheduled to be heard in September.”

He also noted that the offer of settlement provides that no interest is to be paid on the monies collected pursuant to the penalties imposed by Columbia. Anderson added that less than half of the $6.8 million in charges has actually been paid by customers.

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