30013-415-GR-24

Key events and submissions in this proceeding include:

- November 19, 2024: The Wyoming Public Service Commission issued a notice of application for Montana-Dakota Utilities Co.'s request for a general rate increase of $2,587,652 (14.29%), and set December 19, 2024 as the deadline for interventions and protests 1, 2.
- December 2, 2024: The Wyoming Office of Consumer Advocate (OCA) filed notice to participate as a party 2, 1, 3.
- February 6, 2025: The Commission issued a scheduling order establishing procedural deadlines, a final prehearing conference for June 4, 2025, and a public hearing for June 24, 2025 2, 1, 3.
- March 28, 2025: The OCA filed pre-filed direct testimony and exhibits recommending adjustments to revenues, expenses, and rates 2, 1, 3.
- April 16, 2025: Montana-Dakota Utilities Co. (MDU) and the OCA notified the Commission they had reached a settlement in principle 1.
- May 9, 2025: The parties filed the stipulation and agreement resolving outstanding issues 4, 2, 1.
- May 28, 2025: Stipulation testimony in support of the settlement was scheduled to be filed 3.
- June 4, 2025: Final prehearing conference scheduled (as set in the scheduling order) 2.
- June 24, 2025: Public hearing scheduled on the application and stipulation 2, 3.
- August 1, 2025 (or as soon thereafter as approved): Effective date for new rates, per the stipulation 3.

Docket No. 30013-415-GR-24 concerns Montana-Dakota Utilities Co. (MDU)'s application for a general rate increase in its Wyoming retail natural gas service rates. MDU initially requested a $2,588,516 increase (about 14.3% annually) with an overall rate of return of 7.823%, based on a capital structure of 44.735% long-term debt, 5.088% short-term debt, and 50.177% equity, and a proposed return on equity (ROE) of 10.8% 1.

Following intervention and negotiations with the Wyoming Office of Consumer Advocate (OCA), the parties settled on:
- An overall rate of return of 7.246% and an authorized ROE of 9.65% (within the fair market range and in line with recent utility decisions).
- Adoption of the OCA’s recommended depreciation rates for certain plant accounts (2.13% for FERC 376 – mains and 2.70% for FERC 380 – services), while all other rates remained as proposed by MDU.
- Adjustments to include growth-related capital additions and associated revenues in the rate base and cost of service.
- Reduction of recoverable rate case expenses from $78,106 to $12,476 annually.
- Commitments to update miscellaneous charges and improve transparency for certain cost items in future cases.

The settlement aims to balance MDU's ability to attract capital and maintain system reliability with fair rates and consumer protections for Wyoming customers. The OCA requests commission approval of the settlement, with new rates effective August 1, 2025 2, 2, 2.

The docket identifies the following key areas of growth:

1. Customer Growth in Sheridan and Other Service Territories:
- Sheridan experienced a 12.2% increase in residential customers and a 10.8% increase in commercial customers between November 2017 and July 2024.
- This growth has contributed to increased system demand, resulting in the primary town border station (TBS) in Sheridan operating with a negative reserve margin and being unable to meet projected design day demand without additional capacity.
- The customer growth is no longer considered minimal or unpredictable; it is now measurable and directly affecting system planning and investment decisions 1, 1.

Key Considerations:
- Infrastructure investments are needed to maintain reliability and meet increased demand (e.g., constructing a new TBS in Sheridan).
- Growth-related plant additions (mains, regulator stations, service lines, meters, and regulators) are necessary to serve the expanding customer base.
- Regulatory principles support aligning cost recovery with assets that are used and useful during the test period, so these growth-related items should be included in the rate base and cost of service 1, 1.

2. Growth-Related Capital Investments:
- The Office of Consumer Advocate (OCA) and company reached a stipulation to include $665,843 in growth-related capital investments in the rate base.
- These investments reflect the infrastructure required to serve projected customer increases during the test year 2, 1.

Key Considerations:
- Accurate reflection of current system conditions and alignment of costs and revenues.
- Settlement parties agreed to use actual 2024 customer growth data rather than forecasts to ensure precision in revenue requirement calculations.
- The inclusion of growth-related capital projects is considered essential for system reliability, safety, and service continuity 2, 1.

Summary:
The main areas of growth are customer additions (especially in Sheridan) and the associated need for capital investment in distribution infrastructure. Key considerations include system reliability, regulatory alignment of costs/revenues, and ensuring rates reflect actual conditions.

The primary stakeholders in this Wyoming Public Service Commission docket (Docket No. 30013-415-GR-24) are:

- Montana-Dakota Utilities Co. (MDU, or "the Company")
- Wyoming Office of Consumer Advocate (OCA)
- Wyoming Public Service Commission (as regulator, not an advocate for a particular position)

MDU and the OCA are the main active parties. MDU initially proposed a general rate increase of $2,587,652 (14.29%) in its retail natural gas service utility rates in Wyoming 1, 2.

Positions:
- MDU advocated for the full requested rate increase and associated cost recovery proposals, including a 10.8% return on equity and revised depreciation factors 2.
- OCA initially raised several issues, including objections to the size of the rate increase, certain cost recovery items (like corporate aircraft expenses), and advocated for adjustments to benefit ratepayers 2.

Resolution:
- After settlement negotiations, MDU and the OCA reached a stipulation (agreement) resolving all disputed issues. The stipulated agreement recommends an overall rate increase of approximately $2.12 million (11.68%), which is about 18% less than MDU’s original proposal, and includes a return on equity of 9.65% (lower than MDU’s request) 3, 3.
- Both MDU and the OCA now support the stipulated agreement and jointly recommend its approval by the Commission 1.

There is no indication in the provided excerpts of other intervening or opposing parties. The OCA represents the interests of all Wyoming citizens and utility ratepayers 2.

Summary:
- MDU: Initially for a higher rate increase and return on equity; now supports the stipulated, lower increase.
- OCA: Initially against the full MDU proposal; negotiated for reductions and consumer protections; now supports the settlement.
- No other stakeholder positions are identified in the provided material.

The financial and timeline risks and concerns discussed in this docket include:

Financial risks:
- The company’s small size increases its risk profile, as smaller utilities face additional obstacles such as a smaller customer base, limited financial resources, and a lack of diversification, which can affect their cost of equity and return expectations 1.
- The proposed rate increase is driven by higher operating and maintenance costs, increased infrastructure investments, and financial adjustments. Rising labor and benefit expenses, and greater costs for software maintenance and equipment, are significant contributors. Capital investments for system safety and reliability improvements also impact financial requirements 2.
- There is a need to ensure that the company can recover prudently incurred costs and earn a reasonable return on investment, balanced against the need for just and reasonable rates for customers. The settlement includes consumer protections such as adjustments to operating/maintenance expenses and exclusion or reduction of costs not adequately justified (e.g., certain corporate aircraft expenses) 3.

Timeline risks and concerns:
- The rate case uses a 12-month base year ending December 31, 2023, and a pro forma test year covering January 1, 2024, through December 31, 2024. The company proposes that new rates become effective upon the commission’s final disposition, with no specific effective date requested initially 2.
- There were procedural deadlines established by the commission, with a public hearing scheduled for June 24, 2025. The parties reached a settlement in principle on April 16, 2025, filed the stipulation on May 9, 2025, and filed supportive testimony by May 28, 2025 4, 4.
- The stipulation process involved extensive negotiations and required timely agreement to resolve all outstanding issues, with the effectiveness of the settlement and implementation of new rates dependent on commission approval and the outlined procedural timeline 3, 4.