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Arkansas AG Opposes SourceGas $9M Rate Hike

December 16, 2015 By Cheryl Kaften

Arkansas State Attorney General (AG) Leslie Rutledge(R) filed a statement of opposition (Docket No. 15-011-U) late last month with the Arkansas Public Service Commission (PSC) to provisions of a settlement agreement with SourceGas Arkansas that granted the utility a $9 million rate increase for retail electric service that will affect its 160,000 customers in the northern part of the Natural State.

The rate hike– which is less than the $12.6 million annual boost originally sought by SourceGas Arkansas – will cost the residential customers about $7.44 a month over their current $100 natural-gas bill.

In her filing with the commission, the AG said she opposed the agreement because it:

  • Violates provisions of a settlement agreement approved in 2007 by the commission in Docket No. 07-160-U;
  • Abandons commission precedent;
  • Fails to properly apply legislative directives;
  • Otherwise allows too great an increase to the company;
  • Overcharges residential and small commercial customers; and
  • Allows a rate design for residential and B-1 customers that is not based on the evidence and is not good public policy.

The agreement allows a return on equity (ROE) of 9.4 percent, the AG said, rather than her office’s recommended 9.2 percent, which “more appropriately reflects SGA’s risk profile relative to comparison utilities and recognizes SGA’s failure to take bonus depreciation available to it ….”

In addition, among other factors to which the AG objected, “The agreement violates commission precedent and guidelines set forth in Order No. 21 in Docket No. 13-028-U by allowing SGA to recover $1[.2 million] for Short Term Incentive Plan and $74,832 in Long Term Incentive Plan, rather than follow the AG’s recommendation to disallow recovery.”

What’s more, “The agreement violates commission precedent by allowing SGA to recover in rates a portion of American Gas Association dues that pays for public relations, advertising, and a portion of policy planning and regulatory affairs costs which supports legislative and regulatory advocacy. It is not appropriate to include these items in rates. The agreement [also] inappropriately allows SGA to recover a so-called Management Fee of $302,897.”

The Attorney General previously had recommended freezing residential and B-1 customer rates. She is now asking the commission to “accordingly reject or modify the non-unanimous Stipulation and Settlement Agreement filed by the other parties in this docket on November 20 … and grant all appropriate relief.”

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