PENNSYLVANIAPUBLIC UTILITY COMMISSION

Harrisburg, PA 17105-3265

Public Meeting held June 11, 2015

Commissioners Present:

Gladys M. Brown, ChairmanJohn F. Coleman, Jr., Vice ChairmanJames H. CawleyPamela A. WitmerRobert F. Powelson

UGI Utilities, Inc.- Gas Division,UGI Utilities, Inc.-Electric Division,UGI Penn Natural Gas, Inc., andUGI Central Penn Gas, Inc.,Universal Service and Energy Conservation Plan for 2014-2017, Submitted in Compliance with 52 Pa. Code §§ 54.74 and 62.4.

M-2013-2371824

OPINION AND ORDER

BY THE COMMISSION:

Before the Pennsylvania Public Utility Commission (Commission) for

consideration and disposition is the Joint Petition for Settlement of All Issues (Joint

Petition) filed on March 27, 2015, by UGI Utilities, Inc. – Gas Division (UGI Gas), UGI

Utilities, Inc. – Electric Division (UGI Electric), UGI Penn Natural Gas, Inc. (UGI PNG),

and UGI Central Penn Gas, Inc. (UGI CPG) (collectively the UGI Distribution

Companies or UGI), the Office of Consumer Advocate (OCA) and the Pennsylvania

Utility Law Project (PULP) (collectively, the Joint Petitioners). Each of the Joint

Petitioners has also filed a Statement in Support of the Joint Petition (Statements in

Support).

I. Background

The Electricity Generation Customer Choice and Competition Act (Electric

Competition Act), 66 Pa. C.S. §§ 2801-2812, became effective on January 1, 1997. The

Natural Gas Choice and Competition Act (Gas Competition Act), 66 Pa. C.S. §§ 2201-

2212, became effective on July 1, 1999. The primary purpose of these Competition Acts

was to introduce competition into the retail electric and natural gas generation markets.

These two Competition Acts established standards and procedures for the restructuring of

the electric and natural gas utility industries. While opening the markets to competition,

the Acts also include several provisions relating to universal service to ensure that

electric and natural gas service remains available to all customers in the Commonwealth.

The universal service provisions of the Competition Acts, inter alia, tie the

affordability of electric and natural gas service to a customer’s ability to maintain utility

service. The Competition Acts define “universal service and energy conservation” as the

policies, practices and services that help low income customers maintain utility service.

The term includes customer assistance programs (CAPs), usage reduction programs,

service termination protections and consumer education. 66 Pa. C.S. §§ 2202 and 2803.

The Competition Acts commit the Commission to continuing, at a minimum, the policies,

practices and services that were in existence as of the effective date of the laws.

66 Pa. C.S. §§ 2203(7) and 2802(10). Finally, the Competition Acts require the

Commission to ensure that universal service and energy conservation services are

appropriately funded and available in each utility distribution territory. 66 Pa. C.S.

§§ 2203(8) and 2804(9).

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The General Assembly has acknowledged the importance of helping low-

income customers maintain utility service. Under the Competition Acts, universal

service programs are subject to the administrative oversight of the Commission, which

must ensure that the utilities run the programs in a cost-effective manner. 66 Pa. C.S.

§§ 2203(8) and 2804(9). Although the Competition Acts do not define “affordability,”

the Commission’s Policy Statement provides guidance on affordable payments. 52 Pa.

Code §§ 69.261-69.267. The Commission balances the interests of customers who

benefit from the programs with the interests of the customers who pay for the programs.

See Final Investigatory Order on CAPs: Funding Levels and Cost Recovery

Mechanisms, Docket No. M-00051923 (Dec. 18, 2006), (Final CAP Investigatory

Order), at 6-7.

To help meet these requirements, the Commission promulgated the

Universal Service and Energy Conservation Reporting Requirements Regulations

(Reporting Requirements). 52 Pa. Code §§ 54.71- 54.78 (electric) and §§ 62.1 - 62.8

(gas). These Reporting Requirements require each natural gas distribution company

(NGDC) serving more than 100,000 residential accounts and each electric distribution

company (EDC) serving more than 60,000 residential accounts to submit an updated

Universal Service and Energy Conservation Plan (USECP) every three years to the

Commission for approval. 52 Pa. Code §§ 54.74 and 62.4.1 UGI Gas, UGI PNG, and

UGI CPG are jurisdictional NGDCs; UGI Electric is a jurisdictional EDC.

The number of residential customers served and the number of customers

enrolled into CAP by the UGI Distribution Companies were as follows:

1 UGI CPG has less than 100,000 residential accounts and UGI Electric has less than 60,000 residential accounts. Both utilities have voluntarily filed a USECP in conjunction with UGI Gas and UGI PNG.

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Residential Class Size and CAP Enrollment

UGI CompaniesResidential Customers

as of December 31, 20142

CAP Enrollmentas of June 30, 20143

UGI Gas 335,801 7,193

UGI PNG 151,874 5,756

UGI CPG 69,693 2,156

UGI Electric 55,828 2,121

Totals 613,196 17,226

II. History of the Proceeding

On August 1, 2014, the UGI Distribution Companies jointly filed an

updated USECP for the period of January 1, 2014 through December 31, 2017 (August

2014 USECP). The UGI Distribution Companies’ August 2014 USECP included a needs

assessment for UGI Gas and UGI PNG, as required under the Commission’s Regulations

for NGDCs serving over 100,000 residential accounts. See, 52 Pa. Code §§ 62.4 and

62.7. Pursuant to the Commission’s Regulations, the needs assessment for each program

component included: the number of identified low-income customers and an estimate of

low-income customers, the number of identified payment troubled, low-income

customers, an estimate of payment troubled, low-income customers, the number of

customers who still need Low Income Usage Reduction Program (LIURP) services and

the cost to serve that number, and the enrollment size of CAP to serve all eligible

customers. 52 Pa. Code § 62.4(b)(3). The August 2014 USECP also included a program

budget for each program component making up the USECP in accordance with the

Commission’s Regulations at 52 Pa. Code § 62.4(b)(5).

2 Joint Petition at 2. 3 As reported to the Commission’s Bureau of Consumer Services.

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By Tentative Order entered on October 2, 2014, at the above docket

(Tentative Order), the Commission conditionally approved the August 2014 USECP,

finding, inter alia, that:

The Plan contains all of the components cited in the definition of universal service at 66 Pa. C.S. §§ 2202. The Plan also meets the requirements at 66 Pa. C.S. §§ 2203(8), which mandate that universal service programs be available in each large NGDC service territory and that the programs be appropriately funded. Finally, the Plan, in part, meets the submission and content obligations of the Universal Service Reporting Requirements at 52 Pa. Code §§ 54.74 and 62.4, the Low Income Usage Reduction Program (LIURP) regulations at 52 Pa. Code §§ 58.1-58.18 and the CAP Policy Statement at 52 Pa. Code §§ 69.261-69.267.

Tentative Order at 5.

The Tentative Order also sought further clarification and/or modification of

the August 2014 USECP components and solicited public comment from interested

parties. Tentative Order at 49-51. The UGI Distribution Companies, PULP, and the

OCA were the only active parties to this proceeding; each filing comments and reply

comments with respect to the August 2014 USECP.

On January 15, 2015, after close of comments, the Commission entered a

Final Order at the above docket (Final Order) approving the August 2014 Plan in part,

with prescribed modifications, and requiring an updated Plan to be filed within thirty

days of the Final Order. The Commission ordered two issues reserved for thirty days to

allow the Parties the opportunity to reach a consensus. The two issues reserved were:

(1) the calculation of the UGI PNG and UGI Gas projected needs assessment; and (2) the

UGI Gas program budget for its Low Income Usage Reduction Program (LIURP). Joint

Petition at 4; Final Order at 70-71.

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Representatives from the Parties, and the Commission’s Bureau of

Consumer Services (BCS) and Law Bureau met and conferred on January 28, 2015, and

February 10, 2015. The Parties achieved consensus on revisions to the first reserved

issue, the USECP projected needs assessment. A Revised Plan was timely filed at the

above-referenced docket on February 17, 2015, in accordance with the Final Order. This

Revised Plan incorporated the changes prescribed by the Final Order and the Parties’

agreed-upon changes to the needs assessment. Joint Petition at 4.

The Parties subsequently achieved consensus on the UGI Gas LIURP

budget. Joint Petition at 4. The Joint Petition was filed on March 27, 2017. Attached to

the Joint Petition was, inter alia, the Second Revised USECP dated March 17, 2015

(Second Revised USECP). The terms of the Joint Petition regarding the revised projected

needs assessment and LIURP budget are described, supra.

III. Discussion

Pursuant to our Regulations at 52 Pa. Code § 5.231(a), it is the

Commission’s policy to promote settlements. However, the Commission must review

proposed settlements to determine whether the terms are in the public interest. Pa.

PUC v. Philadelphia Gas Works, Docket No. M-00031768 (Order entered January 7,

2004).

A. UGI Gas and UGI PNG Projected Needs Assessment

1. Terms of the Joint Petition

In the Final Order, the Commission addressed a number of issues

pertaining to the UGI Gas and UGI PNG projected needs assessment, including: (1) the

methodology for calculating “identified” and “estimated” payment-troubled low-income

customers; and (2) the methodology for determining the number of customers in need of

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LIURP. Accordingly, the Commission deferred these issues for thirty days to afford the

Parties an opportunity to reach consensus and present it to the Commission. Final Order

at 58-59. The Joint Petitioners report that, in consultation with BCS and the Law Bureau,

they have agreed to the following changes to the revised projected needs assessment:

a. Strike the figure for “Estimated Number of Payment-Troubled, Low-Income Customers” as a separate line item, since, due to the methodology employed by the UGI Distribution Companies, this figure equals the “Identified Payment- Troubled Low-Income Customers” set forth in the needs assessment;

b. Refine LIURP eligibility criteria to include in the LIURP-eligible pool of customers, those who had not received weatherization services within the past seven (7) years - resulting in a net increase of LIURP-eligible customers; and

c. Restate in the Plan the policy of the UGI Distribution Companies to grant exceptions, where warranted, on a case-by-case basis to customers who do not meet the Plan’s LIURP eligibility criteria and report such exceptions annually to the Commission.

Joint Petition at 5.4

The Joint Petitioners additionally agreed to add a reference to the category

“Enrollment Size of CAP” to indicate that the Final Order directs the UGI Distribution

Companies to petition to eliminate CAP enrollment limits within ninety days of the Final

Order and that, pending such change, the current ceilings will remain in

effect.5  Joint Petition at 5.

4 The changes to the revised projected needs assessment are reflected in Appendix B to the (black-line) Second Revised USECP, submitted as Exhibit C to the Joint Petition.

5 We note that UGI Distribution Companies filed a Petition for the Elimination of Customer Assistance Program Enrollment Limits on April 15, 2015, at this docket.

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2. Positions of the Joint Petitioners

The OCA states that since UGI’s methodology for calculating “identified”

and “estimated” customers is identical, there is no need to include the “estimated”

number in the Projected Needs Assessment. OCA Statement in Support at 3. The OCA

submits that deleting the “estimated” number clarifies UGI’s process for identifying

eligible CAP customers. Id.

PULP points out that the modification of the criteria for the LIURP pool of

eligible customers, from those customers who had not received weatherization services in

the past ten years to the past seven years, will result in a net increase in LIURP-eligible

customers. PULP reports that the number of UGI Gas customers determined to be in

need of LIURP increased from 4,158 to 7,449 customers, or 3,291 additional customers.

Similarly, the number of UGI PNG customers in need of LIURP increased from 5,365 to

7,238, or an increase of 1,873. PULP Statement in Support at 3.

PULP avers that the ten-year requirement unreasonably reduced the

numbers of customers who were in need of, and would benefit from LIURP services.

PULP submits that UGI’s modification of its projected needs assessment will result in

long-term savings for all residential customers. PULP explains that the eligibility

modification will reduce the energy burdens of CAP customers, and therefore, the CAP

costs paid by other residential customers. PULP concludes that this modification will

enable UGI to better fulfill its universal service obligations in a cost-effective manner.

PULP Statement in Support at 4.

UGI states that the clear expression of its ability to grant exceptions, where

warranted, to LIURP eligibility criteria, is intended to encourage greater participation in

LIURP. UGI adds that the associated reporting of exceptions to the Commission will

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strengthen the Commission’s oversight of the employment of these exceptions. UGI

Statement in Support at 5.

3. Disposition

We concur that since UGI’s methodology for calculating “identified” and

“estimated” customers is identical, there is no need to include the “estimated” number in

the Projected Needs Assessment. Therefore, we find that the elimination of the “Estimate

of Number of Payment-Troubled, Low-Income Customers” entry on the Companies’

Revised Projected Needs Assessment removes the redundant entries and avoids potential

confusion.

We find that expanding the pool of LIURP-eligible customers to those that

have not received weatherization services in the past seven years is in the public interest.

Expanding the number of customers eligible for LIURP should reduce the overall energy

consumption of CAP customers and thereby reduce the CAP costs recovered from other

residential customers.

We also concur that UGI Distribution Companies’ policy to grant

exceptions to customers that do not meet the Plan’s LIURP eligibility criteria should be

delineated in the Second Revised USECP. This will clarify that the UGI Distribution

Companies have the flexibility to make exceptions where appropriate. The UGI

Distribution Companies’ commitment to submit annual reports of the exceptions will

facilitate the Commission’s review of those circumstances where deviations from the

eligibility criteria may have been warranted.

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B. UGI Gas LIURP Budget

1. Terms of the Joint Petition

In the Final Order, the Commission found that since the Needs

Assessments for UGI Gas and UGI PNG were not accurate, the Commission could not

accept the proposed LIURP budgets. The Commission recognized that while UGI PNG’s

budget has been set as part of the settlement of a prior proceeding, a revised Needs

Assessment might illustrate the need for a revision to the LIURP budget. The

Commission also found that these companies should provide the method they use to

establish their “jurisdictional revenues” and provide supporting documents and/or

spreadsheets. Final Order at 70. Therefore, in addition to the issues related to the

Projected Needs Assessment, supra, the Commission also deferred the issue of UGI Gas’

LIURP budget for thirty days to afford the Parties an opportunity to reach consensus and

present it to the Commission. The Commission also stated that the Parties may confer

with BCS and/or the Law Bureau during this period. Id. at 71.

As noted by the Commission at page 64 of the Final Order, Section 58.4 of

the Commission’s LIURP Regulations provide in pertinent part that:

(a) General guidelines for gas utilities. Annual funding for a covered natural gas utility’s usage reduction program shall be at least .2% of a covered utility’s jurisdictional revenues. Covered gas utilities shall submit annual program budgets to the Commission. A covered gas utility will continue to fund its usage reduction program at this level until the Commission acts upon a petition from the utility for a different funding level, or until the Commission reviews the need for program services and revises the funding level through a Commission order that addresses the recovery of program costs in utility rates.

52 Pa. Code § 58.4(a).

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In the Joint Petition, the Joint Petitioners explain that UGI Gas’ current

funding level and recovery mechanism for its LIURP program was established in the

Application Proceeding of UGI Utilities, Inc. to Acquire the Natural Gas Distribution

Assets of the PG Energy Division of Southern Union, at Docket Nos. A-120011F2000,

A-1215146F5000, and A-125146 (Order entered August 17, 2006) (Acquisition Order).

The Joint Petitioners note that in the Acquisition Order, the Commission approved the

following settlement term, set forth in paragraph E(5) of the Parties’ Joint Exceptions in

Settlement of the Acquisition Proceeding, dated August 4, 2006:

UGI will increase LIURP spending to 0.2 percent of jurisdictional revenues for its gas division and will be permitted to recover 50% of the incremental amount in its CAP Rider through the completion of UGI’s next base rate proceeding. Funding of LIURP may be addressed and modified in UGI’s next base rate proceeding.6

Joint Petition at 6 (footnote added).

The Joint Petitioners, in consultation with BCS and the Law Bureau, have

agreed to the following changes to the LIURP budget:

a. Commencing on January 1, 2016, UGI Gas shall increase its annual LIURP budget to $1.1 million, and the UGI Distribution Companies shall revise Appendix A “Funding Commitments of Each Company for Each Universal Service Program” to reflect the increased UGI Gas LIURP budget.

b. UGI Gas shall be permitted to recover LIURP expenditures greater than $600,000, and up to the $1.1 million LIURP budget, through its LISHP [Low Income Self Help Program] Rider as follows: UGI will be entitled to recover 50% of the difference between $600,000 and an amount equal to 0.2% of UGI Gas’s jurisdictional revenues

6 As reflected in the Final Order, UGI Gas’ proposed $650,000 2015-2017 budget for LIURP is based on two percent of jurisdictional revenues. Final Order at 66-67.

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for the prior calendar year plus the difference between the 0.2% jurisdictional revenue amount and the $1.1 million LIURP budget.

Joint Petition at 7.

The Joint Petitioners also support corresponding modifications to UGI Gas’

LISHP Rider which is attached to the Joint Petition as Exhibit B.7 As proposed, the

revised LISHP Rider would become effective on one day’s notice. Similarly, the revised

LIURP budget resulted in modifications to the Companies’ 2014-2017 USECP attached

to the Joint Petition as Exhibit C to the Second Revised USECP.8

2. Positions of the Joint Petitioners

As discussed, supra, the Commission directed the UGI Distribution

Companies to reconsider UGI Gas’s LIURP funding level in the context of updated needs

assessment figures. Final Order at 70-71. In the Revised Needs Assessment filed

February 17, 2015, and included in the Joint Petition, supra, UGI Gas’ LIURP-eligible

customers increased from 4,158 to 7,449. UGI submits that, as directed by the

Commission, the Companies carefully considered the revised needs assessment and its

impact on UGI Gas’ LIURP funding. Accordingly, UGI and the OCA explain that the

Settlement will provide a significant increase of $450,000 over the proposed $650,000

2015-2017 UGI Gas LIURP budget. UGI and the OCA state that this increased funding

will address the weatherization needs of greater numbers of customers, and will benefit

participating CAP customers by reducing their overall natural gas usage. UGI Statement

in Support at 7; OCA Statement in Support at 5. The OCA points out that the reduced

usage levels will also benefit non-CAP residential customers by decreasing the cost of the

7 A black-line version of the proposed LISHP Rider is attached to the Joint Petition as Exhibit A which reflects the proposed changes to the Rider.

8 These changes to the USECP are reflected on pages A-4 and A-5 of Appendix A to Exhibit C of the Second Revised USECP.

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discount provided to CAP customers and recovered from non-CAP customers. OCA

Statement in Support at 5.

PULP submits that the proposed modification to the UGI Gas LIURP

budget is “reasonable and appropriate.” PULP Statement in Support at 5. PULP explains

that the budgeted increase in LIURP funding is based upon the modified and “rationally

increased needs assessment levels,” the parallel efforts of other utilities, and the

requirement of the Choice Acts that universal service programs, including those for

energy efficiency and conservation, be appropriately funded. PULP Statement in

Support at 5.

The OCA argues that the Joint Petition will also preserve the benefit of the

funding mechanism established in the Acquisition Proceeding. The OCA explains that

this will allow the expansion of LIURP without charging all costs to residential

ratepayers and allows for the further expansion of LIURP. OCA Statement in Support

at 5-6.

3. Disposition

We concur with the Joint Petitioners that the proposed increase of $450,000

in the UGI Gas budget of LIURP funding is reasonable considering, inter alia, the

increased Revised Needs Assessment for LIURP services addressed, supra. Consistent

with our findings on the Revised Needs Assessment, supra, this increased funding will

address the weatherization needs of greater numbers of customers and will benefit

participating CAP customers by reducing their overall natural gas usage. In addition, the

reduced usage levels will also benefit non-CAP residential customers by decreasing the

cost of the CAP discount that is recovered from non-CAP customers.

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We also support the terms of the Joint Petition whereby UGI will be

entitled to recover only fifty percent of the difference between $600,000 and an amount

equal to 0.2 percent of UGI Gas’s jurisdictional revenues. Therefore, UGI Gas’

contribution to LIURP costs will keep pace with any future changes (increases) in its

jurisdictional revenue.

C. Other Conditions of Settlement

In addition to the modifications to the Revised Needs Assessments and

LIURP budget addressed, supra, the Joint Petitioners also established seven additional

conditions of the Joint Petition. The first two conditions (Paragraph Nos. 23 and 24)

would be applicable if the Commission acted to modify the terms of the Joint Petition.

Since we are adopting the Joint Petition without modification, we do not need to address

these conditions. The last condition (Paragraph No. 29) incorporates the three Statements

in Support submitted by the Joint Petitioners. Joint Petition at 8-10.

We shall accept the following four remaining conditions (Paragraph Nos.

25-28) to the extent that they place conditions on the Joint Petitioners and do not restrict

any action of the Commission. The remaining four conditions set forth in the Joint

Petition are as follows:

25. This Joint Petition may not be cited as precedent in any future proceeding, except to the extent required to implement the Joint Petition.

26. This Joint Petition is being presented only in the context of this proceeding in an effort to resolve all issues identified in the proceeding in a manner which is fair and reasonable. The Joint Petition is the product of compromise. This Joint Petition is presented without prejudice to any position which any of the Parties may have advanced and without prejudice to the position any of the Parties may advance in the future on the merits of the issues in future proceedings except to the extent

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necessary to effectuate the terms and conditions of this Joint Petition.

27. The Parties acknowledge and agree that this Joint Petition shall have the same force and effects as if the Parties had fully litigated this proceeding.

28. The Parties acknowledge and agree to not challenge the LIURP funding mechanism set forth in this Joint Petition until the next base rate case for UGI Gas.

Joint Petition at 9-10.

IV. Conclusion

Consistent with the foregoing discussion, we shall: (1) adopt the Joint

Petition; (2) allow UGI Distribution Companies to file the proposed revision to Rider

LISHP, as set forth in Appendix B to the Joint Petition, to become effective on one day’s

notice; and (3) adopt the final-form version of the Second Revised USECP, as set forth in

Appendix C to the Joint Petition, THEREFORE,

IT IS ORDERED:

1. That the Joint Petition for Settlement of all Issues filed on March 27,

2015, by UGI Utilities, Inc. – Gas Division , UGI Utilities, Inc. – Electric Division, UGI

Penn Natural Gas, Inc., UGI Central Penn Gas, Inc., the Office of Consumer Advocate

and the Pennsylvania Utility Law Project, is granted consistent with this Opinion and

Order.

2. That UGI Utilities, Inc. is authorized to file a tariff supplement

containing the revision to Rider LISHP – Low Income Self Help Program as set forth in

Appendix B to the Joint Petition for Settlement of all Issues filed by UGI Utilities, Inc. –

Gas Division, UGI Utilities, Inc. – Electric Division, UGI Penn Natural Gas, Inc., UGI

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Central Penn Gas, Inc., the Office of Consumer Advocate and the Pennsylvania Utility

Law Project, to become effective on one (1) day’s notice.

3. That a final form version of the Second Revised Universal Service

and Energy Conservation Plan for the Four-Year Period January1, 2014 to December 31,

2017, filed on March 17, 2015, by UGI Utilities, Inc. – Gas Division , UGI Utilities, Inc.

– Electric Division, UGI Penn Natural Gas, Inc., UGI Central Penn Gas, Inc. as set forth

in Appendix C to the Joint Petition for Settlement of all Issues filed by UGI Utilities, Inc.

– Gas Division, UGI Utilities, Inc. – Electric Division, UGI Penn Natural Gas, Inc., UGI

Central Penn Gas, Inc. the Office of Consumer Advocate and the Pennsylvania Utility

Law Project, is approved

4. That any directive, requirement, disposition, or the like contained in

the body of this Opinion and Order, which is not the subject of an individual Ordering

Paragraph, shall have the full force and effect as if fully contained in this part.

BY THE COMMISSION,

Rosemary ChiavettaSecretary

(SEAL)

ORDER ADOPTED: June 11, 2015

ORDER ENTERED: June 11, 2015

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