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SETTLEMENT AGREEMENT | Document Parties: Fitchburg Gas and Electric Light Company You are currently viewing:
This Settlement Agreement involves

Fitchburg Gas and Electric Light Company

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Title: SETTLEMENT AGREEMENT
Date: 12/4/2006
Industry: Electric Utilities     Sector: Utilities

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Exhibit 99.2

Commonwealth of Massachusetts

Department of Telecommunications and Energy

 

 

 

 

 

 

 

  

 

 

  

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Fitchburg Gas and Electric Light Company

  

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D.T.E 06-         

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SETTLEMENT AGREEMENT

WHEREAS , this Settlement Agreement is entered into by Fitchburg Gas and Electric Light Company d/b/a Unitil (“Unitil” or “Company”) and the Attorney General of Massachusetts (the “Attorney General”) (collectively, the “Settling Parties”) with regard to the distribution base rate case that the Company proposes to file for its Gas Division pursuant to G. L. c. 194, §94;

WHEREAS , the Settling Parties have engaged in informal discovery and negotiations with regard to the matters specified in the articles of this Settlement Agreement;

WHEREAS , the Settling Parties have raised competing and disputed claims with regard to the various issues contained in the proposed base rate case and other related matters for Unitil’s Gas Division, including, but not limited to, (1) the level of the proposed revenue deficiency; (2) the treatment of gas transportation revenues under a special contract with a large customer; (3) quality of service issues; and (4) gas supply procurement practices, but wish to resolve those matters on mutually agreeable terms, and without establishing any new precedent or principle applicable to any other proceedings;


Settlement Agreement

November 29, 2006

Page 2 of 10

WHEREAS , the Settling Parties intend that customers receive the full value of the settled issues, and not some substitute regulatory treatment of lesser value either now or in the future, and agree that no terms of this Settlement Agreement or supporting schedules and calculations will be used or interpreted to diminish, in any way, the intended customer benefit related to this Settlement Agreement; and,

WHEREAS , this Settlement Agreement is offered with the intent of resolving the distribution base rate case that the Company has proposed to file for its Gas Division at a substantially reduced amount, and also avoid an unnecessary, time consuming and costly proceeding.

NOW THEREFORE , in consideration of the exchange of promises and covenants contained in this Agreement, the legal sufficiency of which the Settling Parties acknowledge, the Settling Parties agree, subject to approval by the Department of Telecommunication and Energy (“Department”), as follows:

ARTICLE 1: INTRODUCTION

 

1.1

On November 7, 2006, pursuant to G.L. c. 164, §94, Unitil filed its Notice of Intent to File Rate Schedule Changes, signifying its intent to file proposed rate schedule changes for its Gas Division. Unitil was planning to file an application for a general increase in rates designed to increase the distribution base rates for its Gas Division by $3.961 million for firm customers. The Company’s calculation of its increase in base rates used a test year ending December 31, 2005.


Settlement Agreement

November 29, 2006

Page 3 of 10

 

1.2

In support of the terms of this Settlement Agreement, the Company files Exhibit FGE-1 (tariffs), Exhibit FGE-2 (redline tariffs), Exhibit FGE-3 (rate design),Exhibit FGE-4 (average bill impacts by class), and Exhibit FGE-5 (bill impacts by class at various usage levels).

 

1.3

In further support of this Settlement Agreement, the Company submits a copy of the exhibits and schedules prepared in support of its proposed rate case as Exhibit FGE-6.

 

1.4

This Settlement Agreement is intended to resolve only those issues as specified in Article 2 and Article 3.

ARTICLE 2: TERMS OF AGREEMENT

 

 

 

Distribution Base Rate Increase for Unitil’s Gas Division

 

 

2.1.

The Settling Parties agree that on January 1, 2007, Unitil shall increase its Gas Division’s distribution base rates on an annual basis by $1.2 million. The Settling Parties also agree that on November 1, 2007, Unitil shall increase its Gas Division’s distribution base rates on an annual basis by an additional $1 million. Distribution rates shall only increase in the manner specified in Article 2 until November 1 2007. Thereafter, Unitil’s Gas Division’s ddistribution rates will remain at the level set on November 1, 2007, as though set by order of the Department under G. L. c. 164, § 94.

 

 

2.2.

The Settling Parties agree that the increase in gas distribution base rates on January 1, 2007 and November 1, 2007 set forth above in article 2.1 shall be applied on an equal cents per therm basis to each rate class using 2005 test year


Settlement Agreement

November 29, 2006

Page 4 of 10

 

 

    

weather normalized therms, except that the increase for the R-2 and R-4 rate classes shall reflect a 40% discount. The Gas Division’s distribution rates will include these increases, as well as the transfer of recovery of all subsidies relating to the low income discount from the Gas Division’s base rates to its Residential Assistance Adjustment Factor pursuant to Article 2.4. The Company will file compliance tariffs for the $1 million increase no later than 30 days prior to the effective date of November 1, 2007.

 

 

2.3.

The Settling Parties agree that as of January 1, 2007, until set again by the Department in a proceeding under G. L. c 164, §§ 93 or 94, that a return on equity (“ROE”) of 10.0 percent will be used for Unitil’s Gas Division and this ROE will be used for purposes of determining the Allowance for Funds Used During Construction (“AFUDC”), carrying costs, and the pension and PBOP reconciling mechanism.

 

 

2.4.

The Settling Parties agree that on January 1, 2007, Unitil shall transfer recovery of all subsidies relating to the low income discount from its Gas Division’s base rates to its Residential Assistance Adjustment Factor.

 

 

2.5.

For 2007 and 2008 the Settling Parties agree that Unitil’s Gas Division’s distribution rates shall be subject to adjustment for Exogenous Costs with identical regulatory requirements and formula as those ordered for Boston Gas


Settlement Agreement

November 29, 2006

Page 5 of 10

 

 

    

Company in D.T.E. 03-40. Recovery of prudently incurred exogenous costs incurred on or before December 31, 2008 may continue after this date.

 

 

 

Newark Special Contract

 

 

2.6.

The Settling Parties agree that all transportation revenues Unitil received under the Special Contract for Firm Transportation of Gas between Unitil and Newark America, filed with the Department on July&


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