Mobile Gas Service Corporation Rate Plans

Rate Stabilization and Equalization Plan

Each month the Natural Gas Section examines the books and records of Mobile Gas Service Corporation (Mobile Gas), determines the return on average common equity for the preceding 12-month period and reports the financial and operational results of the previous month, including the return on average common equity, to the Commission. It also graphically summarizes the historical capital structure and returns.
Under the Rate Stabilization and Equalization (RSE) plan, the only time Mobile Gas can receive an increase in base rates is December 1. If the projected return, based on the budget approved by the Mobile Gas board of directors, is less than the approved range, base rates are increased December 1 to bring the projected return at the end of the fiscal year to the midpoint of the range. If the projected return is more than the approved range, base rates are decreased to bring the return to the midpoint of the range. If the projected return is within the approved range, no adjustment is made.
Subsequent points of test, based on the projected return at September 30, the end of the fiscal year, can yield only decreases effective April 1, July 1, and October 1, or no change.

Cost Control Measure

RSE includes an incentive program, the Cost Control Measure, under which the utility must keep growth in operation and maintenance expenses below a specified range or face penalties.

Purchased Gas Adjustment

The wholesale price of natural gas is set by the market. Neither Mobile Gas nor this Commission has any control over the wholesale price of natural gas. The transportation rates paid to have the gas transported from the producer to Mobile Gas are set by the Federal Energy Regulatory Commission.
Because the wholesale price of natural gas is subject to wide swings both up and down, Mobile Gas sought and got approval many decades ago to adjust effective rates up or down to recover these costs and no more. The utility is authorized to make such adjustments as needed, according to an approved tariff. Mobile Gas is not allowed to earn a return on the Purchased Gas Adjustment (PGA). That is, the recoveries through the PGA are dollar-for-dollar, and no more.
The section monitors all three of these programs to ensure they are conducted in accordance with the approved tariff.