McFadden Consulting Group, Inc.
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Management and Strategic Planning






Rate & Regulatory Analysis Projects


Following are descriptions of a selection of projects that demonstrate our capabilities in the area of Rates and Regulatory Analysis.

Click on a Project below:

 

Competitive Market-Based Rates, Market Power Analysis, and Tariffs for an Independent Storage Project
Totem Gas Storage Company, LLC retained McFadden Consulting to assist it in obtaining a certificate of public convenience and necessity authorizing it to develop, construct, operate, and maintain underground natural gas storage facilities using the Totem Field located in Adams County, Colorado.  McFadden Consulting developed a unique, market-based rate structure, which was approved by the Commission.  The market-based rates were the first competitive rates approved by the Public Utilities Commission of Colorado for a natural gas company in the state.  Mr. McFadden developed Totem’s tariff that contained the company’s rates, terms and conditions for service and was instrumental in facilitating a settlement agreement with the only party opposing the CPCN.  As part of this engagement, McFadden Consulting conducted a Market Power Analysis that assessed the potential market power of the gas storage project.  Mr. McFadden testified at a hearing on these matters before the Commission.
Public Service Company of New Hampshire Performance Review, Rate Case Analysis and Restructuring Proposal
McFadden Consulting, as part of a team led by The Liberty Consulting Group, conducted a financial and management audit of Public Service Company of New Hampshire on behalf of the Public Utilities Commission of New Hampshire.  A significant portion of this project focused on PSNH’s rate case.  The rate case was the first filed by PSNH since emerging from bankruptcy seven years earlier.  In addition, the rate case was the precursor to the unbundling of rates that was expected to occur resulting from the New Hampshire Legislatures passage of RSA 674-F which requires each electric utility to file a restructuring plan. 
Retail Pricing for Russian Electric Power Sector
Acted as the project manager for the retail pricing portion of the privatization project for the electric power sector in Russia. The objective of this assignment, which was conducted on behalf of U.S. AID in concert with Ministry of Fuels and Energy of the Russian Government, and RAO ESS Rossii, the Russian privatized electric power sector joint-stock company, was to develop the framework for retail electric pricing which considers the county's social, political and economic needs and realities. This project was part of the overall privatization of the electric power sector of Russia, which is restructuring the entire industry to increase its economic efficiency by injecting elements of competition and diversity.
Review of Questar Gas Company’s Cost of Service and Rate Design
McFadden Consulting was retained by the Utah Committee of Consumer Services to review Questar Gas Company cost of service and rate design issues in connection with its request for a revenue increase of $22.2 million.  A significant issues was the recovery of $7.0 million revenue requirements associated with the company’s construction of a CO2 extraction facility that the Commission had previously ruled should be considered in a general rate case filing.  Mr. McFadden testified at hearings on this matter.  The Commission approved a settlement agreement, which permitted recovery of a portion of the costs associated with the plant.
Review of Cost Allocation Rules between Regulated and Unregulated Services
The Colorado Business Alliance retained McFadden Consulting to review rules proposed by the Public Utilities Commission of Colorado relating to cost allocation between regulated and unregulated services.  The rules prescribed cost allocation methodologies for the segregation of investments, revenues, and expenses for electric and gas utilities that engage in both regulated and unregulated services to ensure that the unregulated operations are not subsidized by regulated ones.  Mr. McFadden testified at a hearing before the Colorado Commission on these matters.

Review of Transmission Tariff, Cost of Service, and Rate Design for Restructured California Power Markets
McFadden Consulting, in conjunction with MarketPower, Inc., was retained by Southern California Gas Company to review the transmission cost of service and rate design proposals of Southern California Edison Company, Pacific Gas and Electric Company, and San Diego Gas and Electric Company.  The proposals, filed with the Federal Energy Regulatory Commission and collectively known as the WEPEX filings, are part of the comprehensive restructuring of the electric utility industry in California.  The major issue is the proposal to charge one transmission access fee to all end-use customers for both regional and local transmission service.  The alternative promulgated by SoCalGas is to require generators to pay for utilization of the regional transmission system designed to import power into the state. 

Consideration of Various Gas Price Hedging Proposals
As part of an integrated resource planning proceeding, McFadden Consulting assisted the Utah Committee of Consumer Services in considering various natural gas price-hedging alternatives designed to stabilize gas prices to consumers.  In response to the volatile natural gas prices experienced in 2000 and 2001, the company considered various alternatives for stabilizing prices, including financial instruments and longer-term pricing provision in gas supply contracts.  A significant factor in Questar’s pricing decisions is that more than 50% of Questar gas supplies are obtained from company-owned production, which is priced on a cost of service basis.  A settlement agreement was reached that would permit recovery of various price stabilization mechanisms through gas cost recovery mechanisms. 
Review of Competing Pipeline Alternatives
McFadden Consulting was retained by the Colorado Office of Consumer Counsel to review a proposed expansion of transmission facilities by a local distribution company.  A significant issue in the expansion was a competing pipeline proposed by an interstate pipeline company.  McFadden Consulting identified a concern related to potential bypass that might adversely affect the LDC and its customers.  The LDC expansion was approved with several contingencies and the facilities have been constructed.
Analysis of Interstate Gas Pipeline Rate Case Filing
Citizens Utilities Company retained Mr. McFadden to review and analyze Colorado Interstate Gas Company’s rate case filing in Docket No. RP96-190.  CIG’s proposed an increase of approximately $30 million or 19.5 percent.  In addition, it proposed restructuring several of its various transportation, storage, and no-notice services.  These changes raised the increase to Citizens significantly higher than 19.5 percent.  The analysis focused on cost allocation and rate design issues.  Mr. McFadden recommended a sculpted MDQ to mitigate the increase on Citizens.  CIG agreed to the sculpted MDQ in a settlement agreement that was approved by the FERC.
Hedging Alternatives and Natural Gas Price Stabilization Mechanisms
The Colorado Office of Consumer Counsel retained McFadden Consulting to assist it in a proceeding established by the Public Utilities Commission of Colorado to determine whether price stability is an appropriate goal for local distribution companies in their gas procurement practices and to examine options for achieving more stable gas prices.  Mr. McFadden prepared a paper on various hedging alternatives and price stabilization mechanisms and assisted in the preparing the OCC’s comments in response to the Commission order.  Comments of other parties have been reviewed and various options for stabilizing prices have been discussed with other parties to the proceeding.  The Commission held a roundtable discussion on this matter at which Mr. McFadden testified on behalf of the OCC.
Implementation of Gas Distribution Restructuring in Georgia
The Georgia Public Service Commission retained McFadden Consulting in connection with Atlanta Gas Light Company’s filing under the Natural Gas Competition and Deregulation Act passed by the Georgia legislature.  The act provided for deregulation of components of the gas distribution business in Georgia.  Mr. McFadden provided testimony before the Commission addressing several issues related to the impact of the Company’s filing on rates and adjustment clauses. 
Electric Revenue Requirements, Cost of Service and Rate Design
McFadden Consulting prepared a revenue requirements, cost of service, and rate design analysis for the City of Fort Morgan, Colorado electric department. A key issue was the impact restructuring of the electric utility industry will have on the electric department’s operations, costs, and rates. The analysis considered the possibility of wholesale and retail wheeling being implemented in the foreseeable future, and incorporated flexible rate designs intended to allow the City to react quickly to possible changes in the electric utility industry.
Market-Based Pricing Guidebook
McFadden Consulting, in conjunction with MarketPower, Inc., is currently preparing a pricing guidebook to assist utility managers in pricing products and services in a competitive marketplace. The Market-Based Pricing Guidebook is being developed for more than 3,000 electric utilities across the United States for the National Rural Electric Cooperative Association. It will provide practical approaches and methods as well as the decision analysis process for U.S. utilities to design and implement open market pricing.
Review of Price Volatility and Gas Cost Adjustment Mechanisms
The Colorado Office of Consumer Counsel retained McFadden Consulting to assist it in a proceeding established by the Public Utilities Commission of Colorado to determine whether price stability is an appropriate goal for local distribution companies in their gas procurement practices and to examine options for achieving more stable gas prices.  Mr. McFadden prepared a paper on various hedging alternatives and price stabilization mechanisms and assisted in the preparing the OCC’s comments in response to the Commission order.  Comments of other parties have been reviewed and various options for stabilizing prices have been discussed with other parties to the proceeding.  The Commission held a roundtable discussion on this matter at which Mr. McFadden testified on behalf of the OCC.

Dispute Regarding Physical Bypass
McFadden Consulting assisted the City of Fort Morgan, Colorado in a dispute regarding the construction of a gas pipeline to the City’s two largest gas transportation customers.  In response to an increase in gas transportation rates, Excel Corporation and Leprino Foods Corporation entered into an agreement with KN Wattenburg Transmission Limited Liability Company (KNW), a subsidiary of Kinder Morgan, Inc., formerly known as KN Energy, Inc., in which KNW agreed to construct a line from Colorado Interstate Gas Company’s transmission facilities to Excel and Leprino plants located in Fort Morgan.  KNW originally applied for authorization to construct the facilities with the Federal Energy Regulatory Commission (FERC).  The City opposed KNW in their application to the FERC.  The FERC initially approved the application, and KNW constructed the facilities and is currently providing service to Excel and Leprino.  The City appealed the FERC’s decision to the U. S. Court of Appeals for the 10th Circuit, which remanded it back to the FERC after agreeing with the City’s argument that the facilities were not subject to FERC jurisdiction because qualified as “Hinshaw” exempt facilities under the Natural Gas Act.  The FERC on remand ordered that KNW’s facilities qualified under the “Hinshaw” exemption and therefore were not subject to its jurisdiction.  KNW then filed an application with the Public Utilities Commission of Colorado seeking a certificate to construct the facilities, which the City has opposed.  A hearing was held in this matter in June 2001, at which Mr. McFadden testified on the City’s behalf.

Review of Questar Gas Company Response to Declining BTU Content of Gas Supplies
McFadden Consulting was retained by the Utah Committee of Consumer Services to review Questar Gas Company’s response to the declining BTU content of gas supplies in its service territory.  As part of its response to the problem, Questar constructed a CO2 extraction plant costing approximately $20 million, with a revenue requirement impact of approximately $7.5 million and requested that the costs be included in their gas cost recovery mechanism.  The coal seam gas processed by the plant was not purchased by Questar, but rather was contractually transported by Questar Pipeline to markets outside of Utah.  Mr. McFadden testified on behalf of the Committee at a hearing held in June 1999.  The Commission decided the costs associated with the CO2 plant should not be recovered through the Company’s gas cost adjustment, but that they could be considered in a general rate case filing. 
Transmission Wheeling Rate and Tariffs Pursuant to FERC Order 888
Mr. McFadden provided strategic oversight and technical assistance for the development of a wheeling rate and the preparation of a transmission wheeling tariff filed with the Federal Energy Regulatory Commission on behalf of Intermountain Rural Electric Association, in conjunction with Applied Energy Concepts.  A cost of service model based upon the methodology for point-to-point transmission service as well as network transmission service was developed to analyze various scenarios.  In addition, terms and conditions for the two types of transmission service were also reviewed.  Rates were developed based upon Order 888 and cost of service calculations for the system.
Acquisition of Gathering and Transmission Facilities and Development of Gathering and Transmission Rates
Mr. McFadden was retained by UMC Petroleum Corporation, now known as Ocean Energy to provide rate and regulatory assistance in its acquisition of certain gathering and transmission facilities located in Montana from Northern Natural Gas Company.  The facilities were purchased by Havre Pipeline Company, LLC, which is a joint venture with UMC and other producers in the Bearpaw area. Historically, the facilities were included in Northern’s integrated pipeline system and, therefore, subject to the jurisdiction of the Federal Energy Regulatory Commission.  The main scope of the project was to develop rates for both the gathering system and the transmission system that would be appropriate under either FERC or Montana Public Service Commission regulations.  The rates developed by Mr. McFadden were ultimately filed with and accepted by the Montana Commission.  Assistance was also provided in structuring the acquisition to insure the most favorable regulatory treatment for ratemaking purposes.  Mr. McFadden also assisted Havre in preparing their annual report to the Montana Commission for 1996, 1997, and 1998.  Most recently, he provided assistance in developing new rates that were filed in with the Montana Commission in the fall of 1998.  Mr. McFadden filed direct testimony in support of the company’s filing.  A hearing was scheduled for mid-June 1999.  However, the Company decided to withdraw its application.
Analysis of Cost of Service and Rate Design
McFadden Consulting assisted a group of transportation intervenors in a natural gas distribution company’s rate case. The cost of service and rate design filing was the first rate design filing proceeding for the company since the Federal Energy Regulatory Commission completed implementation of its Order 636. Thus, the case had far-reaching cost of service and rate design implications. The areas reviewed include cost allocation methodologies, unbundling, balancing services, allocation of storage costs, combining transmission and distribution systems, combining rate areas, treatment of gathering services, and interdepartmental transportation rates.
Review Financial Performance and Determine Appropriate Rate Levels
We conducted a revenue requirements, cost of service, and rate design analysis for the City of Fort Morgan, Colorado’s gas department. New rates designed to improve the gas department’s financial results were implemented. A more accurate gas cost tracking mechanism was also implemented. In addition, the gas department’s extension policy was reviewed and a construction allowance based on its gross imbedded plant was developed.
 

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