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Nashville Gas Review of Asset Management Fees, #05-00165

Nashville Gas Company Review of Asset Management Fees, #05-00165

On June 13, 2005, the Tennessee Regulatory Authority (TRA) opened a contested case proceeding to determine whether Nashville Gas Company (NGC), a Division of Piedmont Natural Gas Company, Inc., could keep a portion of the fee that NGC received from its contract with a management company giving the management company the right to sell the excess capacity that was originally purchased for delivery of natural gas to NGC’s customers but that was not needed for that purpose as determined on a daily basis.

NGC purchases pipeline capacity from the interstate pipelines, but it is not possible to know in advance how much natural gas consumers will use on a given day. Therefore, NGC purchases more pipeline capacity than it is likely to need in order to avoid the risk of shutting off service on those days that the consumption of natural gas is heavy. The excess capacity that is not needed on a given day has a market value that the management company pays to NGC for the right to sell. NGC argued that this fee from the management company qualified as savings that NGC is allowed to share on a roughly 50/50 basis with consumers when NGC saves money compared to market-based index prices on the purchase and sale of natural gas. The Consumer Advocate argued that the fee paid for the excess capacity did not qualify as savings under the sharing plan.

During the course of discovery and the exchange of a considerable amount of information, the Consumer Advocate and NGC agreed to a settlement that allows NGC to include in the sharing plan the fee from the management company and that reduces NGC’s sharing percentage from roughly 50% to 25%. NGC’s customers will now receive, in the form of lower gas bills, 75% of the savings that are included in the sharing plan. For the reporting period ending June 30, 2007, NGC’s customers will receive an additional $643,000 of the savings included in the sharing plan due to the increase in the customers’ share to 75%.

The Consumer Advocate’s involvement in this matter possibly will save Nashville consumers significant amounts of money per year in the future as well. The agreement also simplifies the sharing plan, improves the bidding process in acquiring the right to manage NGC’s assets, and requires a review of the program by an independent firm every three years. NGC has 161,000 customers in the Nashville area.

Tennessee Regulatory Authority Filings


This list includes only significant filings and is not intended to be a complete record of the matter.