Maverick EnergyNatural gas bills may be jumping for some customers if the Illinois Commerce Commission (“ICC”) approves changes that NICOR recently proposed to its transportation storage tariffs. NICOR’s proposed changes would significantly change the way customers manage their daily and monthly nominations and storage balances. Under NICOR’s proposal, there would be monthly mandated minimum and maximum storage level requirements, and all out-of-tolerance storage volumes would be cashed-out at a minimum 15% price premium.
The ICC has suspended those tariffs and initiated a proceeding (ICC Docket No. 20-0606) to determine whether NICOR’s proposal is just and reasonable but there is not yet a schedule for parties to present testimony and arguments regarding the proposal. While we are still analyzing the proposed changes to determine the full cost impact, it is clear that there would be substantial cost impacts for customers whose daily or monthly usage fluctuates significantly.
Study Background
This issue was initially raised in NICOR’s 2017 rate case (ICC Docket No. 17-0124). In response to a request that NICOR more accurately allocate its “customer care costs” to those customers who do not purchase the natural gas commodity from the utility, NICOR said the bigger issue was whether the storage costs were accurately allocated, given the way in which those customers use the storage system. The ICC agreed with NICOR; not only did the ICC refuse to allocate “customer care costs,” it ordered NICOR to prepare a storage study assessing the implications of how transportation customers and Customer Select suppliers use storage.
The storage study, which was presented for informational purposes in NICOR’s 2018 rate case (ICC Docket No. 18-1775), concluded that transportation customers and Customer Select suppliers use NICOR’s eight aquifer storage facilities in a manner that negatively impacts the short and long-term reliability of those facilities. This conclusion was made even though these customers and suppliers comply with NICOR’s current ICC-approved tariffs and practices. The study reported that transportation customers’ current patterns of storage utilization conflict with optimal storage cycling needed to sustain the operational integrity of the aquifer fields.
NICOR did not recommend any changes to its transportation service or storage services in the 2018 rate case, but instead suggested that it would file a separate proceeding to address this issue. In its Final Order, the ICC ordered NICOR to propose revenue-neutral tariff changes to address the problems NICOR claimed to identify in its study.
OVERVIEW OF NICOR’S PROPOSED CHANGES
Significant changes proposed by NICOR are:
- Rider 25, under which NICOR provides 100% standby service would be eliminated. These customers would need to switch to either sales service or another transportation service tariff.
- All transportation customers would be allocated 30 days of Storage Banking Service. There would be no option to select less than 30 days or purchase additional storage.
- There would be new daily storage minimum and maximum storage limits for each customer. Volumes outside the daily limits would be cashed-out. This means that every day, the customer would either buy additional gas or sell the excess volumes.
- There would be new monthly storage minimum and maximum storage limits for each customer. The limits proposed by NICOR would require customers to recycle their storage every year within a 90% to 10% monthly range. For example, NICOR is proposing that end-of-month storage for March and April not to exceed 10% of total storage volume; the maximum amount in storage at the end of January would be 45%.
Volumes in storage outside the monthly limits would be cashed-out. This means the customer would either buy additional gas or sell the excess volumes.
- Cash-out volumes (buy or sell), would be priced under a tiered level. For example, under Tier 1, the cash-out price would be adjusted by 15%; that is, the price would be15% higher if buying, and 15% lower if selling. The larger the out-of-tolerance percentage, the greater the price penalty. NICOR’s proposed tiers and cash-out prices are:
| Tier Level | Tolerance Level | Cash-Out Price per Therm |
| Tier 1: | -10% and +5 | 85% or 115% in index price |
| Tier 2: | <-20% to <-10% and >+5%to +10% | 60% or 140% of index price |
| Tier 3: | <-20% and >+10 | Index minus $6 or index +$6 |
The index price would be either the lower (sell) or higher (buy) of NICOR’s gas charge and Gas Daily’s daily Chicago city-gate price.
The proposed Tier 3 tolerance level of <-20% and >+10 would be a very expensive cash-out if the ICC adopts the additional $6.00 per therm penalty. Even if a customer were to pay the $6 per tolerance penalty, likely NICOR would not incur a $6 per therm charge from its pipeline suppliers.
- It does not appear that NICOR would be making any significant changes to Critical Day withdrawal or injection rules. However, it is uncertain how these rules would interact with the new daily and monthly storage restrictions.
- NICOR has proposed a new System Balancing Charge (“SBC”) for all transportation customers. It is unclear how much this charge would be.
NEXT STEPS
We are continuing to analyze the filing and determine what the cost impact would be for commercial and industrial customers, but it is clear that the daily usage and storage management would hinder a customer’s ability to effectively manage its monthly storage, especially if they have usage that can fluctuate significantly.
We will provide another update shortly, along with a notice of another NEU webinar, during which we will provide an update on this issue and other regulatory topics that could be impacting your bottom line. In the meantime, please feel free to email or call us if you may be interested in getting involved in this proceeding.
Thanks,
| Brad Fults/Chuck Drake Progressive Energy Solutions (763) 424-2377 | Russ Paluch Maverick Energy Consulting (630) 470-9176 | Chris Townsend CJT Energy Law, LLC (312) 286-0311 |