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ORS Study of the Natural Gas Stabilization Act of 2005

natural gas
Tue, 02/05/2019

On June 27, 2018, the Aiken County Legislative Delegation requested the South Carolina Office of Regulatory Staff (ORS) review the Natural Gas Rate Stabilization Act of 2005 and make recommendations to the General Assembly. Specifically, the requested examination was outlined in the following language contained in the request from the Aiken County Legislative Delegation:

“From the funds appropriated and authorized in the current fiscal year, the Office of Regulatory Staff shall study the Natural Gas Rate Stabilization Act of 2005 and make recommendations to the General Assembly by February 5, 2019. The study shall include, but is not limited to, determining if the provisions of the Act are in the best interests of the ratepayers. The study will include a comparison of states that use innovative rates and tracking mechanisms to bill natural gas customers. Such comparison shall include, but is not limited to, the application and process, the usage of the Weather Normalization Adjustment, the benefits to the customer, and the approved rate of return.”

The ORS completed a study of the impacts of the Natural Gas Rate Stabilization Act of 2005 (RSA) mechanism on natural gas customers. The provisions of S.C. Code Ann. §58-5-410 have been elected by both natural gas investor-owned natural gas utilities: South Carolina Electric & Gas Company (SCE&G), and Piedmont Natural Gas Company (Piedmont).

The ORS reviewed the three alternative rate mechanisms utilized in South Carolina and compared South Carolina’s practices to the use of innovative rates and tracking mechanisms by other states. While other alternative rate mechanisms exist, South Carolina’s use of the RSA accomplishes many of the goals embedded in other alternative rate mechanisms. The ORS determined the mechanisms used to set rates for investor-owned natural gas utilities in South Carolina which include the RSA, Purchased Gas Adjustment (PGA), and gas Weather Normalization Adjustment (gWNA), subject to the recommendations herein, are in the best interest of customers and preserve continued investment in and maintenance of utility facilities so as to provide reliable and high-quality utility services.

The ORS determined the RSA could be improved to enhance transparency and accuracy and recommends the General Assembly consider the following modifications:

  1. A more frequent review of the cost of service study for natural gas utilities;
  2. A change to the RSA statutory language to allow greater flexibility in rate design; and,
  3. A limitation on the term of RSA election to no more than five years.

Study of the Natural Gas Rate Stabilization Act of 2005 (PDF)