199—19.10 (476) Purchased gas adjustment (PGA).
	 19.10(1) Purchased gas adjustment clause. Purchased gas adjustments shall be computed separately for each customer classification or grouping previously approved by the board. Purchased gas adjustments shall use the same unit of measure as the utility’s tariffed rates. Purchased gas adjustments shall be calculated using factors filed in annual or periodic filings according to the following formula:
PGA = (C × Rc) + (D × Rd) + (Z × Rz) + Rb + E
S
PGA is the purchased gas adjustment per unit.
S is the anticipated yearly gas commodity sales volume for each customer classification or grouping.
C is the volume of applicable commodity purchased or transported for each customer classification or grouping required to meet sales, S, plus the expected lost and unaccounted for volumes.
Rc is the weighted average of applicable commodity prices or rates, including appropriate hedging tools costs, to be in effect September 1 corresponding to purchases C.
D is the total volume of applicable entitlement reservation purchases required to meet sales, S, for each customer classification or grouping.
Rd is the weighted average of applicable entitlement reservation charges to be in effect September 1 corresponding to purchases D.
Z is the total quantity of applicable storage service purchases required to meet sales, S, for each customer classification or grouping.
Rz is the weighted average of applicable storage service rates to be in effect September 1 corresponding to purchases Z.
Rb is the adjusted amount necessary to obtain the anticipated balance for the remaining PGA year calculated by taking the anticipated PGA balance divided by the forecasted volumes, including storage, for one or more months of the remaining PGA year.
E is the per unit overcollection or undercollection adjustment as calculated under subrule 19.10(7).
The components of the formula shall be determined as follows for each customer classification or grouping:
	  a.   	 The actual sales volumes S for the prior 12-month period ending May 31, with the necessary degree-day adjustments, and further adjustments approved by the board.
Unless a utility receives prior board approval to use another methodology, a utility shall use the same weather normalization methodology used in prior approved PGA and rate case.
	  b.   	 The annual expected lost and unaccounted for factors shall be calculated by determining the actual difference between sales and purchase volumes for the 12 months ending May 31 or from the current annual IG-1 filing, but in no case will this factor be less than 0.
	  c.   	 The purchases C, D, and Z which will be necessary to meet requirements as determined in 19.10(1).
	  d.   	 The purchased gas adjustments shall be adjusted prospectively to reflect the final decision issued by the board in a periodic review proceeding.
	 19.10(2) Annual purchased gas adjustment filing. Each rate-regulated utility shall file on or before August 1 of each year, for the board’s approval, a purchased gas adjustment for the 12-month period beginning September 1 of that year.
The annual filing shall restate each factor of the formula stated in subrule 19.10(1).
The annual filing shall be based on customer classifications and groupings previously approved by the board unless new classifications or groupings are proposed.
The annual filing shall include all worksheets and detailed supporting data used to determine the purchased gas adjustment volumes and factors. The utility shall provide an explanation of the calculations of each factor. Information already on file with the board may be incorporated by reference in the filing.
	 19.10(3) Periodic changes to purchased gas adjustment clause. Periodic purchased gas adjustment filings shall be based on the purchased gas adjustment customer classifications and groupings previously approved by the board. Changes in the customer classification and grouping on file are not automatic and require prior approval by the board.
Periodic filings shall include all worksheets and detailed supporting data used to determine the amount of the adjustment.
Changes in factors S or C may not be made in periodic purchased gas filings. A change in factor D or Z may be made in periodic filings and will be deemed approved if it conforms to the annual purchased gas filing or if it conforms to the principles set out in 19.10(6).
The utility shall implement automatically all purchased gas adjustment changes which result from changes in Rc, Rd, or Rz with concurrent board notification with adequate information to calculate and support the change. The purchased gas adjustment shall be calculated separately for each customer classification or grouping.
Unless otherwise ordered by the board, a rate-regulated utility’s purchased gas adjustment rate factors shall be adjusted as purchased gas costs change and shall recover from the customers only the actual costs of purchased gas and other currently incurred charges associated with the delivery, inventory, or reservation of natural gas. Such periodic changes shall become effective with usage on or after the date of change.
	 19.10(4) Factor Rb. Each utility has the option of filing an Rb calculation with its October-January PGA filings but shall file an Rb calculation with its February filing and subsequent monthly filings in the PGA year. If the anticipated PGA balance represents costs in excess of revenues, factor Rb shall be assigned a positive value; if the anticipated balance represents revenues in excess of costs, factor Rb shall be assigned a negative value.
	 19.10(5) Take-or-pay adjustment. Rescinded IAB 11/12/03, effective 12/17/03.
	 19.10(6) Allocations of changes in contract pipeline transportation capacity obligations. Any change in contractual pipeline transportation capacity obligations to transportation or storage service providers serving Iowa must be reported to the board within 30 days of receipt. The change must be applied on a pro-rata basis to all customer classifications or groupings, unless another method has been approved by the board. Where a change has been granted as a result of the utility’s request based on the needs of specified customers, that change may be allocated to the specified customers. Where the board has approved anticipated sales levels for one or more customer classifications or groupings, those levels may limit the pro-rata reduction for those classifications or groupings.
	 19.10(7) Reconciliation of underbillings and overbillings. The utility shall file with the board on or before October 1 of each year a purchased gas adjustment reconciliation for the 12-month period which began on September 1 of the previous year. This reconciliation shall be the actual net invoiced costs of purchased gas and appropriate financial hedging tools costs less the actual revenue billed through its purchased gas adjustment clause net of the prior year’s reconciliation dollars for each customer classification or grouping. Actual net costs for purchased gas shall be the applicable invoice costs from all appropriate sources associated with the time period of usage.
Negative differences in the reconciliation shall be considered overbilling by the utility and positive differences shall be considered underbilling. This reconciliation shall be filed with all worksheets and detailed supporting data for each particular purchased gas adjustment clause. Penalty purchases shall only be includable where the utility clearly demonstrates a net savings.
	  a.   	 The annual reconciliation filing shall include the following information concerning the hedging tools used by the utility:
	 (1) 	 The type and volume of physical gas being hedged.
	 (2) 	 The reason the hedge was undertaken (e.g., to hedge storage gas, a floating price contract).
	 (3) 	 A detailed explanation of the hedging strategy (e.g., costless collar, straddled costless collar, purchasing or selling options).
	 (4) 	 The date the futures contract or option was purchased or the date the swap was entered into.
	 (5) 	 The spot price of gas at the time the hedge was made, including an explanation of how the spot price was determined including the index or indices used.
	 (6) 	 The amount of all commissions paid and to whom those payments were made.
	 (7) 	 All administrative costs associated with the hedge.
	 (8) 	 The name(s) of all marketers used and the amount of money paid to each marketer.
	 (9) 	 The amount of savings or costs resulting from the hedge.
	 (10) 	 The amount of money tied up in margin accounts for futures trading and the cost of that money.
	 (11) 	 The premium paid for each option.
	 (12) 	 The strike price of each option.
	 (13) 	 The contracting costs for each swap transaction.
	 (14) 	 The name of the fixed-price payer in a swap transaction.
	 (15) 	 A statement as to how the hedge is consistent with the LDC’s natural gas procurement plan.
	 (16) 	 An explanation as to why the LDC believes the hedge was in the best interest of general system customers.
	 (17) 	 All invoices, work papers, and internal reports associated with the hedge.
	  b.   	 Any underbilling determined from the reconciliation shall be collected through ten-month adjustments to the appropriate purchased gas adjustment. The underbilling generated from each purchased gas adjustment clause shall be divided by the anticipated sales volumes for the prospective ten-month period beginning November 1 (based upon the sales determination in subrule 19.10(1)).
The quotient, determined on the same basis as the utility’s tariff rates, shall be added to the purchased gas adjustment for the prospective ten-month period beginning November 1.
	  c.   	 Any overbilling determined from the reconciliation shall be refunded to the customer classification or grouping from which it was generated. The overbilling shall be divided by the annual cost of purchased gas subject to recovery for the 12-month period which began the prior September 1 for each purchased gas adjustment clause and applied as follows:
	 (1) 	 If the net overbilling from the purchased gas adjustment reconciliation exceeds 3 percent of the annual cost of purchased gas subject to recovery for a specific customer classification or grouping, the utility shall refund the overbilling by bill credit or check starting on the first day of billing in the November billing cycle of the current year. The minimum amount to be refunded by check shall be $10. Interest shall be calculated on amounts exceeding 3 percent from the PGA year midpoint to the date of refunding. The interest rate shall be the dealer commercial paper rate (90-day, high-grade unsecured notes) quoted in the “Money Rates” section of the Wall Street Journal on the last working day of August of the current year.
	 (2) 	 If the net overbilling from the purchased gas adjustment reconciliation does not exceed 3 percent of the annual cost of purchased gas subject to recovery for a specific customer classification or grouping, the utility may refund the overbilling by bill credit or check starting on the first day of billing in the November billing cycle of the current year, or the utility may refund the overbilling through ten-month adjustments to the particular purchased gas adjustment from which they were generated. The minimum amount to be refunded by check shall be $10. This adjustment shall be determined by dividing the overcollection by the anticipated sales volume for the prospective ten-month period beginning November 1 as determined in subrule 19.10(1) for the applicable purchased gas adjustment clause. The quotient, determined on the same basis as the utility’s tariff rates, shall be a reduction to that particular purchased gas adjustment for the prospective ten-month period beginning November 1.
	  d.   	 When a customer has reduced or terminated system supply service and is receiving transportation service, any liability for overcollections and undercollections shall be determined in accordance with the utility’s gas transportation tariff.
	 19.10(8) Refunds related to gas costs charged through the PGA. The utility shall file a refund plan with the board within 30 days of the receipt of any refund related to gas costs charged through the PGA.
	  a.   	 The utility shall refund to customers by bill credit or check an amount equal to any refund, plus accrued interest, if the refund exceeds $10 per average residential customer under the applicable customer classification or grouping. The utility may refund lesser amounts through the applicable customer classification or grouping or retain undistributed refund amounts in special refund retention accounts for each customer classification or grouping under the applicable PGA clause until such time as additional refund obligations or interest cause the average residential customer refund to exceed $10. Any obligations remaining in the retention accounts on September 1 shall become a part of the annual PGA reconciliation.
	  b.   	 The utility shall file with the refund plan the following information:
	 (1) 	 A statement of reason for the refund.
	 (2) 	 The amount of the refund with support for the amount.
	 (3) 	 The balance of the appropriate refund retention accounts.
	 (4) 	 The amount due under each customer classification or grouping.
	 (5) 	 The intended period of the refund distribution.
	 (6) 	 The estimated interest accrued for each refund through the proposed refund period, with complete interest calculations and supporting data as determined in paragraph 19.10(8)“d.”
	 (7) 	 The total amount to be refunded, the amount to be refunded per customer classification or grouping, and the refund per ccf or therm.
	 (8) 	 The estimated interest accrued for each refund received and for each amount in the refund retention accounts through the date of the filing with the complete interest calculation and support as determined in paragraph 19.10(8)“d.”
	 (9) 	 The total amount to be retained, the amount to be retained per customer classification or grouping, and the level per ccf or therm.
	 (10) 	 The calculations demonstrating that the retained balance is less than $10 per average residential customer with supporting schedules for all factors used.
	  c.   	 The refund to each customer shall be determined by dividing the amount in the appropriate refund retention account, including interest, by the total ccf or therm of system gas consumed by affected customers during the period for which the refundable amounts are applicable and multiplying the quotient by the ccf or therms of system supply gas actually consumed by the customer during the appropriate period. The utility may use the last available 12-month period if the use of the actual period generating the refund is impractical. The utility shall file complete support documentation for all figures used.
	  d.   	 The interest rate on refunds distributed under this subrule, compounded annually, shall be the dealer commercial paper rate (90-day, high-grade unsecured notes) quoted in the “Money Rates” section of the Wall Street Journal on the day the refund obligation vests. Interest shall accrue from the date the rate-regulated utility receives the refund or billing from the supplier or the midpoint of the first month of overcollection to the date the refund is distributed to customers.
	  e.   	 The rate-regulated utility shall make a reasonable effort to forward refunds, by check, to eligible recipients who are no longer customers.
	  f.   	 The minimum amount to be refunded by check shall be $5.
This rule is intended to implement Iowa Code section 476.6(11).