OFFICIAL EXHIBITS FILED...Mar 18, 2010 · petition: Johns S. Browner, Cynthia S. Hughes, Nichole M. Clement, John T. Stenger and Michael J. Martin. The same testimony was also filed

OFFICIAL EXHIBITS

STATE OF INDIANA

FILED

INDIANA UTILITY REGULATORY COMMISSION

April 17, 2018

INDIANA UTILITY

PETITION OF SYCAMORE GAS COMP ANY FOR APPROVAL TO INCREASE ITS RATES AND CHARGES FOR GAS SERVICE AND FOR AUTHORIZATION TO TRACK ADDITIONS OF CUSTOMER SERVICE LINES

) ) ) ) )

REGULATORY COMMISSION

CAUSE NO. 45072

Sycamore Gas Company, Inc. ("Sycamore Gas"), by counsel, hereby submits the

attached direct testimony and replacement exhibits of its five witnesses in support of this rate

petition: Johns S. Browner, Cynthia S. Hughes, Nichole M. Clement, John T. Stenger and

Michael J. Martin. The same testimony was also filed in this cause on April 12, 2018. And

with a single exception, the attached exhibits are also identical to what Sycamore Gas filed

on April 12, 2018. The sole exception is Exhibit MJM-1. As originally filed, that exhibit

contained two pages. The Exhibit MJM-1 included with today's filing is a single page and

contains data which on the public version has been redacted.

Clayton C. Miller, Att'y No. 17466-49 STOLL KEENON OGDEN PLLC 201 N Illinois Street, Suite 1225 Indianapolis, IN 46204-4219 Telephone: (317) 464-1591 Facsimile: (317) 464-1592 Clayton.Miller@skofirm com

Respectfully submitted,

SYCAMORE GAS COMPANY, INC.

STAIB OF INDIANA


PETITION OF SYCAMORE GAS COMPANY FOR APPROVAL TO INCREASE ITS RATES AND CHARGES FOR GAS SERVICE AND FOR AUTHORIZATION TO TRACK ADDITIONS OF CUSTOMER SERVICE LINES

) ) ) ) )

CAUSE NO. 45072

SUBMISSION OF REPLACEMENT CASE-IN-CHIEF

Sycamore Gas Company, Inc. ("Sycamore Gas"), by counsel, hereby submits the

attached direct testimony and replacement exhibits of its five witnesses in support of this rate

petition: Johns S. Browner, Cynthia S. Hughes, Nichole M. Clement, John T. Stenger and

Michael J. Martin. The same testimony was also filed in this cause on April 12, 2018. And

with a single exception, the attached exhibits are also identical to what Sycamore Gas filed

on April 12, 2018. The sole exception is Exhibit MJM-1. As originally filed, that exhibit

contained two pages. The Exhibit MJM-1 included with today's filing is a single page and

contains data which on the public version has been redacted.

Clayton C. Miller, Att'y No. 17466-49 STOLL KEENON OGDEN PLLC 201 N Illinois Street, Suite 1225 Indianapolis, IN 46204-4219 Telephone: (317) 464-1591 Facsimile: (317) 464-1592 Clayton.Miller@skofirm com



CERTIFICATE OF SERVICE

The undersigned certifies that he has served a copy of the attached testimony and

replacement exhibits upon the Office of the Utility Consumer Counselor by electronic mail at:

[email protected]

Dated this 17th day of April 2018.

514652.160046/7684496.1

DIRECT TESTIMONY OF JOHN S. BROWNER

ON BEHALF OF SYCAMORE GAS COMP ANY

IURC CAUSE NO. 45072

1 Ql. Please state your name.

2 Al. John S. Browner

3 Q2. Please state your business address and occupation.

IURC Cause No. 45072 Exhibit JSB Page 1 of7

4 A2. My business address is 370 Industrial Drive, Suite 200, Lawrenceburg, Indiana, 47025. I

5 am the President of the petitioner Sycamore Gas Company ("Sycamore" or "Petitioner").

6 Q3. Please describe your education and work experience.

7 A3. I received a Bachelor of Arts degree in English Literature from Denison University in

8 1992 and a Master of Business Administration degree from Indiana University Kelley School of

9 Business in 2000. I have been the president of Sycamore since August 2004 when, then known

10 as Lawrenceburg Gas Company, it was acquired by INOH Gas Corporation from Cinergy

11 Corporation ("Cinergy"). INOH, of which I am a part owner, subsequently changed its name to

12 Sycamore Gas, Inc. d/b/a Sycamore Energy. From June, 1999 until August, 2002, I worked for

13 Cinergy in various management capacities, most recently as manager in Cinergy's Commercial

14 Business Unit. Prior to my employment with Cinergy I worked for General Electric Capital

15 Service and the Bemis Corporation.

16 Q4. Have you previously testified before the Indiana Utility Regulatory Commission

17 ("IURC")?


1 A4. My experience testifying before the IURC has been limited to a case in which Sycamore

2 sought to expand its service territory, Cause No. 42819.

3 QS. What is the purpose of your testimony in this rate case?

4 A5. I describe Sycamore's business and explain, together with other witnesses, the need for

5 rate relief. I also describe Sycamore's settlement with the Indiana Office of Utility Consumer

6 Counselor ("OUCC") as to a reasonable rate of return to be incorporated into Sycamore's new

7 rates, and explain various administrative details relating to Sycamore's petition.

8 Q6. What is Sycamore and where is it located?

9 A6. Sycamore is a local gas distribution company organized in the State of Indiana and

10 authorized by the IURC to render such service to the public. Its principal place of business is the

11 same as my business address listed above: 370 Industrial Drive, Suite 200, Lawrenceburg,

12 Indiana, 47025. 2018 marks the 150th anniversary of Sycamore's founding as the Lawrenceburg

13 Gas Company in 1868. Our service territory includes parts of Dearborn, Franklin and Ohio

14 Counties in southeastern Indiana and includes the towns of Brookville, Greendale,

15 Lawrenceburg, Rising Sun and West Harrison.

16 Q7. How many customers does Sycamore serve?

17 A7. Sycamore provides gas service to 5,502 residential customers as well as 868 commercial

18 and 25 industrial customers. Sycamore also provides transportation-only service to 3

19 commercial and 5 industrial customers. Finally, Sycamore provides wholesale gas service to the

20 City of Aurora, Indiana and that municipal utility has approximately 2,500 customers.

21


1 Q8. Are Sycamore's current rates sufficient for it to recover its costs to provide safe,

2 reliable gas distribution service to its customers and earn a reasonable return on its

3 investment in the plant and equipment used to provide such service?

4 A8. No. Sycamore's current rates were established by the IURC in 2007, some eleven years

5 ago in Cause No. 43090. Over the course of the ensuing years, our costs have increased but our

6 customer base has not grown sufficiently as to provide additional revenue to meet our increased

7 costs. In addition to facing higher employee wage and benefit costs and higher field construction

8 and maintenance costs, Sycamore has also continued to invest in its system at an average rate

9 which exceeds the amount of annual depreciation of that system. I am attaching as Exhibit JSB-

10 I the petition filed to initiate this cause which also generally describes these conditions.

11 Q9. Who are the other witnesses joining you in supporting Sycamore's petition to

12 increase its rates?

13 A9. Sycamore's principle accounting witness is our Chief Financial Officer, Cynthia S.

14 Hughes, who explains in her testimony the current state of Sycamore's finances and why a rate

15 increase is warranted at this time. She includes exhibits covering some of the categories of

16 expenses during the test year for this rate case, the twelve months ending September 30, 2017, as

17 well as necessary adjustments to those figures. She also describes Sycamore's capital structure,

18 rate base valuation and depreciation, as well as tax issues.

19 Sycamore has retained the services of certified public accountant Nichole Clement from the firm

20 Gilmore Jasion Mahler Ltd. to address tax deferral issues in light of the recently-lowered federal

21 income tax rates and also calculate a gross revenue conversion factor to be applied when

22 establishing Sycamore's new rates.

IURC Cause No. 45072 ExhibitJSB Page 4 of7

1 Sycamore's consultant John Stenger from Superior Utility Operations testifies about the extent

2 and condition of Sycamore's utility infrastructure, maintenance and other operational issues, the

3 need for recent as well as proposed infrastructure replacement and expansion projects, ongoing

4 regulatory compliance efforts and how Sycamore's previously-approved weather normalization

5 adjustment operates, among other subjects.

6 Sycamore has also retained the services of Michael J. Martin to explain adjustments to

7 Sycamore's test year income and expenses, how Sycamore's costs are allocated and translate the

8 details of Sycamore's current operations into a new revenue requirement and ultimately, new

9 rates.

10 QlO. Is Sycamore sponsoring testimony from a cost-of-capital expert?

11 Al 0. No. Prior to filing its petition, Sycamore reached an agreement with the OUCC to settle

12 the issue of what rate of return is reasonable for purposes of calculating the cost of capital

13 component of Sycamore's base rates. Exhibit JSB-2 to my testimony is a signed agreement

14 reflecting the parties' compromise proposal to accept 10.05% as the rate of return on Sycamore's

15 common equity capital. Not only does this settlement remove from this cause at the outset any

16 dispute over this often-contested aspect of rate case litigation, but doing so is also expected to

17 lower Sycamore's rate case expense as compared to if it had pursued a contested course of action

18 as to this issue. The decision to settle on 10.05% was informed by the parties' understanding of

19 recent IURC orders in other small gas utilities' rate cases setting the rate ofreturn on common

20 equity at either 10.1 % or 10.0%. While each utility has its own unique characteristics and

21 circumstances, and Sycamore feels it would be justified in seeking a higher rate ofreturn, the

22 parties agreed to compromise and, at least for purposes of settlement, that Sycamore shares


1 sufficiently common size and risk attributes with Midwest Natural Gas (10.1 % ) and Ohio Valley

2 Gas (settled for 10.0%) as to justify a finding of I 0.05% for Sycamore in this case.

3 Qll. From where does Sycamore get the gas that it sells to its customers?

4 A 11. Sycamore has gas supply contracts with producers providing gas via one of the two

5 interstate gas pipelines to which Sycamore is connected, Texas Gas Transmission and Texas

6 Eastern Transmission.

7 Q12. Do Sycamore's current or proposed base rates include recovery of any portion of

8 the cost of the gas it sells to its customers?

9 Al2. No. Sycamore utilizes the quarterly gas cost adjustment (GCA) mechanism to determine

10 an appropriate rate factor designed for it to recover 100% of the cost of the gas commodity.

11 Q13. What do Sycamore's quarterly GCA filings suggest about its need for rate relief?

12 Al3. The evidence in each quarterly GCA filing includes an exhibit showing quarterly totals

13 for a statutorily-prescribed earnings bank. While these filings take a much less comprehensive

14 view of the utility's financial position than a general rate case, they nevertheless provide a

15 barometer as to whether it appears to be over-earning or under-earning based on the amount of

16 earnings approved by the IURC in the utility's most recent general rate case. As shown in

17 Sycamore's most recent GCA filing, IURC Cause No. 37368 GCA-138, in only two of the last

18 34 quarters has Sycamore shown positive earnings. Over the more than a decade since its last

19 rate order, Sycamore's accumulated under-earnings exceed $7 million, which is a significant sum

20 for a utility of Sycamore's relatively small size. Exhibit JSB-3 is an excerpt from Schedule 18

21 (page 2of2) filed in the above-referenced GCA proceeding.


1 Q14. Does Sycamore provide gas to any customers pursuant to a special, off-tariff

2 contract?

3 Al4. Yes. In Cause No. 44193 the IURC approved Sycamore's only active special contract

4 pursuant to which it supplies gas to MGPI of Indiana, LLC at its manufacturing facility in

5 Lawrenceburg, IN. That contract was executed in March of2012 and has a term of 10 years.

6 Ql5. Does Sycamore own and maintain the portion of the customer service line between

7 the property line and Sycamore's meter?

8 Al 5. Historically, Sycamore's customers have owned, and been responsible for maintaining or

9 replacing, the gas service line on their property from the curb valve, or at the curb or apparent

10 curb when the shut off valve is not located near the curb, to Sycamore's meter. Over the past

11 several years, however, as issues have arisen requiring the repair or replacement of the customer-

12 owned portion of the service line, Sycamore's contractor, after coordinating with the customer,

13 has performed the necessary work. Most if not all of Sycamore's gas meters are located at the

14 structure receiving the gas service. As explained more fully in Mr. Stenger's testimony,

15 Sycamore is seeking in this rate case approval for a process to track the costs associated with

16 both the work required to address issues with the service line, but also for Sycamore to acquire

17 and accept responsibility for the customer-owned portion of the service line.

18 Ql6. What was Sycamore's rationale for moving its headquarters to a new location in

19 2017?

20 Al 6. Sycamore outgrew its previous facilities. Our new location provides adequate, secure

21 yard and covered storage for our equipment and material. Sycamore's move to the new location


1 has allowed it to better organize its field operations, to better maintain its materials inventory,

2 and to improve its recordkeeping operations. The new office is better designed than Sycamore's

3 former location to support communications between customer service staff and field operations.

4 It also provides for a more efficient experience for our walk-in- customers. Finally, the former

5 facility had no garage. The new location has garage space, allowing Sycamore to store

6 equipment inside during extreme weather, thereby enhancing its readiness for emergency

7 response.

8 Ql 7. Has Sycamore's Board of Directors authorized you to pursue this petition for rate

9 relief?

10 Al 7. Yes. Attached as Exhibit JSB-4 to my testimony is a copy of the resolution authorizing

11 this petition that was adopted by Sycamore's Board of Directors on March 20, 2018.

12 Q18. Has Sycamore notified its customers that it has filed this petition for rate relief?

13 A18. Notice to Sycamore's residential customers of its petition to increase its base rates has not

14 been sent by the time this testimony was prefiled, but Sycamore intends to comply with this

15 Commission's customer notice requirements set forth in 170 Ind. Admin. Code 5-1-18. I expect

16 to include a copy of that notice, in the form of a bill insert, as Exhibit JSB-5 to my testimony

17 when it is offered into the record at the evidentiary hearing in this cause, and I intend to pre-file

18 that Exhibit within a week of its mailing to customers.

19 Q19. Does this conclude your direct testimony?

20 Al9. Yes.

Exhibit JSB-1

FILED STATE OF INDIANA MAR 2 9 znw

INDIANA UTILITY REGULATORY COMMISSION !Mi"'iANA UflUfY f-{~GULATORV COMMISSION

PETITION OF SYCAMORE GAS COMPANY ) FOR APPROVAL TO INCREASE ITS RATES ) AND CHARGES FOR GAS SERVICE AND FOR ) AUTHORIZATION TO TRACK ADDITIONS OF) CUSTOMER SERVICE LINES )

PETITION

CAUSE NO. Lf5Q]:_L_

Sycamore Gas Company, Inc. ("Sycamore Gas" or "Company"), hereby applies to the

Indiana Utility Regulatory Commission for authority to a) increase its rates and charges, and b)

track and recover its costs to replace as needed and then maintain the portion of its customers'

service lines between the curb and the Company's gas meter. In support of its application,

Sycamore Gas states that:

1. The Company is an Indiana public utility corporation having its principal office at

3 70 Industrial Drive, Suite 200, Lawrenceburg, Indiana, 47025. It is a "public utility" as well as a

"gas utility" as those terms are defined in the Public Service Commission Act, Ind. Code 8-1-2.

The Company is a wholly-owned subsidiary of Sycamore Gas, Inc. d/b/a Sycamore Energy.

2. Sycamore Gas provides gas utility service pursuant to Necessity Certificates to

parts of Dearborn, Franklin and Ohio Counties in southeastern Indiana. In addition to serving

rural areas in these counties, the Company provides gas utility service within the towns of

Brookville, Greendale, Lawrenceburg, Rising Sun and West Harrison. The Company also

provides gas on a wholesale basis to the Town of Aurora.

3. The Company's current base rates and charges were determined by order of this

Commission in Cause No. 43090 on June 20, 2007. These rates and charges no longer produce

revenue sufficient to meet the Company's ongoing financial obligations associated with its

continued provision of safe, reliable gas service to its customers. The Company believes that

Indiana Code §8-1-2-61 is applicable to this matter.

4. The Company requests that the twelve-month period ending September 30, 2017,

be used as the test year in this cause, with adjustments permitted for changes that are known,

fixed and measurable and in effect within 12 months after the end of the test year. The Company

is in the process of determining its revenue requirement and the amount by which its rates need

to be increased in order to enable it to achieve that requirement. The Company is also studying

the appropriate allocation of revenue to be obtained from among its different classes of

customers.

5. Sycamore Gas also seeks authorization to implement a tracking mechanism, and

approval of an associated tariff, to recover the additional expenses associated with its

replacement and maintenance of the curb-to-meter portion of customers' service lines.

6. The name and address of the Company's attorney in this matter is Clayton C.

Miller, of Stoll Keenan Ogden PLLC, 201 N. Illinois Street, Suite 1225, Indianapolis, Indiana

46204-4219. Mr. Miller is duly authorized to accept service of papers in this cause on behalf of

Sycamore Gas.

7. The Company requests that copies of all correspondence and filings in this cause

also be sent to:

John S. Browner Sycamore Gas Company, Inc. 370 Industrial Drive, Suite 200 Lawrenceburg, Indiana 47025

WHEREFORE, Sycamore Gas respectfully requests that the Commission hold a hearing

and enter an Order approving an increase is the Company's rates and charges and authorizing a

mechanism for the Company to track and recover on an annual basis its additional costs

2

associated with its anticipated acquisition and maintenance or replacement of that portion of its

customers' service lines between Sycamore Gas' main and the gas meter.

Clayton C. Miller, Att'y No. 17466-49 STOLL KEENON OGDEN PLLC 201 N. Illinois Street, Suite 1225 Indianapolis, IN 46204-4219 Telephone: (317) 464-15 91 Facsimile: (317)464-1592 Clayton. Miller@sko firm. com


SYCAMORE GAS COMPANY, lNC.

By:

CERTIFICATE OF SERVICE

The undersigned certifies that he has served a copy of the foregoing Petition upon the

following entity by hand delivery this 29th day of March 2018.

Office of the Utility Consumer Counselor Indiana Govermnent Center North 100 North Senate Avenue, Room N501 Indianapolis, Indiana 46204-2215

514652.45644617663482.1

3

STA TE OF INDIANA


PETITION OF SYCAMORE GAS COMPANY FOR APPROVAL TO INCREASE ITS RA TES ) AND CHARGES FOR GAS SERVICE AND FOR) AUTHORIZATION TO TRACK ADDITIONS OF) CUSTOMER SERVICE LINES )

CAUSE NO. 45072

STIPULATION AND SETTLEMENT AS TO PETITIONER'S COST OF EQUITY CAPITAL

Exhibit JSB-2

This stipulation and settlement agreement ("Settlement Agreement") is entered into by

the Indiana Office of Utility Consumer Counselor ("OUCC") and the petitioner in this cause,

Sycamore Gas Company, Inc. ("Sycamore"). Each is considered to be a "Party" to this cause

and Sycamore and the OUCC are collectively referred to herein as the "Parties."

To promote efficiency and economy, the Parties stipulate and agree 10.05% will be

Sycamore's cost of shareholders' equity capital rate. This figure will be used in this cause to

determine the overall rate of return to which Sycamore is entitled and on which its new base

rates will be based. The Parties agree 10.05% cost of equity rate is consistent with orders from

the Indiana Utility Regulatory Commission ("Commission" or "IURC") in other relatively small

gas utilities' rate cases during the last half of 2017. See, for example, this Commission's rate

orders for Midwest Natural Gas (IURC Cause No. 44880, order of August 16, 2017 setting rate

at 10.10%) and Ohio Valley Gas (IURC Cause No. 44891, order of October 17, 2017 accepting

settled rate of 10.00%).

The Parties anticipate engaging in further settlement negotiations concerning the many

other issues in this case. They have entered into this Settlement Agreement in order to obviate

any need for Sycamore to retain the services of a cost-of-equity expert witness to develop and

present testimony in this cause. Given that rate case expenses are recoverable from a utility's

customers, by reaching agreement on this issue at the outset of Sycamore's rate case the Parties

are saving customers' money with respect to this cost.

This Settlement Agreement reflects each Party's compromise as its preferred resolution;

Sycamore wanted a higher cost-of-equity and the OUCC wanted a lower number than 10.05%.

But each agrees that in the specific circumstances of this case, and solely for purposes of

settlement, 10.05% is not only within the range ofreasonable outcomes available to this

Commission, but is the appropriate rate to be incorporated into the calculation of Sycamore's

new base rates in this case. The Parties anticipate that their respective cases-in-chief will further

support their settlement of this term. The Parties agree this Settlement Agreement is conditioned

upon and subject to the Commission's acceptance and approval of the 10.05% cost of equity

capital rate as specified herein without condition that is unacceptable to either Party. This

stipulation is reached for purposes of the immediate proceeding only, and neither Party will

recommend this Settlement Agreement as precedent by the Commission in any other proceeding.

The undersigned represent and agree that each is fully authorized to execute this

Settlement Agreement on behalf of the designated Party, which will be bound thereby.

ACCEPTED AND AGREED this 6th day of April, 2018.


2

INDIANA OFFICE OF UTILITY

CONSUMER COUNSELOR

Exhibit JSB-3

Schedule 18 Page 2 of2

SYCAMORE GAS C01'rf PANY

Operating Income Earnings Test For Period Ended December 31, 2017

Line GCA Determined Authorized No. GCA Period Ended No. Return Return Differential

(A) (B) (C) (D) (E)

December, 2017 138 1,010,929 1,345.858 (334,929)

2 September, 2017 137 970,923 1.345,858 (374.935)

3 June, 2017 136 965,870 1,345,858 (379,988) 4 March, 2017 135 L032,655 1,345,858 (313,203)

5 December, 2016 134 989,539 1,345,858 (356,319)

6 September, 2016 133 1,072,238 1,345,858 (273,620)

7 June,2016 132 1,030,966 1,345,858 (314,892)

8 March,2016 131 785.316 1,345,858 (560,542)

9 December. 2015 130 842, 119 1,345,858 (503,739)

10 September, 2015 129 1,003,590 1,345,858 (342,268)

11 June, 2015 128 968,336 1,345.858 (377,522)

12 March,2015 127 1.026,412 1,345,858 (319,446)

13 December, 2014 126 1,225.065 1.345.858 (120,793)

14 September, 2014 125 1,144.010 1,345,858 (201,848)

15 June, 2014 124 1,267,581 1,345,858 (78.277)

16 March,2014 123 1,306,770 1,345,858 (39,088)

17 December, 2013 122 1.147,677 J .345.858 (198,181)

18 September. 2013 121 1.110.668 1.345,858 (235, 190)

19 June, 2013 120 978,744 1,345,858 (367,114)

20 March, 2013 119 1,262,912 L345,858 (82,946)

21 December, 2012 118 1,288,935 1,345,858 (56,923)

22 September, 2012 117 1.219.467 1,345,858 (126,391)

23 June, 2012 116 1,294,299 1,345,858 (51,559)

24 March, 2012 115 1,360,560 l,345.858 14,702

25 December. 2011 114 1,237.427 1.345,858 (I 08.431)

26 September, 20 I l 113 1,285,342 1.345.858 (60,516)

27 June, 2011 112 IJ20,337 1,345.858 (25,521)

28 iv!arch, 2011 111 1,130,519 l,345,858 (215,339)

29 December, 2010 110 1,381,593 1,345,858 35,735

30 September, 2010 109 1,270,130 1,345,858 (75,728)

31 June, 2010 108 1,010,566 1.345.858 (335,292)

32 March, 2010 107 902,568 1,345,858 (443,290)

33 December, 2009 106 748,826 l.345,858 (597,032)

34 September, 2009 105 924,747 1,345,858 (421,111)

35 June, 2009 104 1,355.413 l,345.858 9,555

36 March, 2009 103 1,769.531 1,345,858 423,673

37 December, 2008 102 1,746,543 1,345,858 400,685

38 September, 2008 101 1,769.080 1.345,858 423,222

39 June, 2008 100 1,878,074 1,345,858 532,216

40 March, 2008 99 1,435.855 1,345,858 89,997

41 December, 2007 98 1.023,562 1,345,858 (322,296)

42 September, 2007 97 936,127 l,345.858 (409,73 l)

Total _flj)94.2 l 5)

DIRECT TESTIMONY OF CYNTHIA S. HUGHES

IURC Cause No. 45072

Exhibit CSH Page 1of4

ON BEHALF OF SYCAMORE GAS COMPANY, INC.



2 Al. Cynthia S. Hughes


4 A2. My business address is 370 Industrial Rd., Suite 200, Lawrenceburg, Indiana 47025. I

5 am the Chief Financial Officer (CFO) for Sycamore Gas Company, Inc. ("Sycamore" or

6 "Petitioner").


8 A3. I received a Bachelor of Science degree in industrial management from Purdue

9 University 1975 and a Master of Business Administration degree from the University of Chicago

10 in 1983. I am a certified public accountant in the State of Illinois. I have been Sycamore's CFO

11 since May, 2015. Prior to that I was a CFO for private and public companies in the

12 manufacturing and distribution industries.


14 ("IURC")?

15 A4. Yes, I regularly file testimony in support of Sycamore's quarterly gas cost adjustment

16 petitions in the GCA subdockets ofIURC Cause No. 37368.



Exhibit CSH Page 2 of 4

2 A5. As Sycamore's CFO, I am familiar with the company's financial records. I am

3 sponsoring financial exhibits, including the Petitioner's income statement and balance sheet as

4 well as schedules showing its rate base, amortization and cost of capital calculations. I also

5 support various adjustments made to the Petitioner's test year operating expenses to derive pro

6 forma operating expenses and, ultimately, the revenue required for Sycamore to be able to

7 continue providing safe and reliable utility service and earn a fair return on its investments which

8 enable it to provide such service.

9 Q6. Please describe Exhibit CSH-1.

10 A6. Exhibit CSH-1 is the Petitioner's Balance Sheet. Sycamore is proposing a cut-off date of

11 March 31, 2018 for determining the fair value of its rate base, which I determined based on the

12 depreciated original cost of those assets.

13 Q7. Please describe Exhibits CSH-2 and CH-3.

14 A7. Exhibit CSH-2 is the Petitioner's Income Statement as of the end of the test year utilized

15 in this case, the twelve months ending September 30, 2017. I then incorporated the adjustments

16 developed by Sycamore witness Michael Martin shown in his Exhibit MJM-2 to develop my

17 Exhibit CSH-3, Sycamore's Adjusted Income Statement reflecting adjustments for fixed, known

18 and measurable changes during the twelve-month period October 1, 2017 through September 30,

19 2018. The unadjusted Income Statement includes a more detailed version on pages 2 and 3 of

20 Exhibit CSH-2 organized by FERC account, and it is the Adjusted Income Statement which

21 shows the revenue requirement Sycamore is requesting in this case.


IURC Cause No. 45072 , Exhibit CSH Page 3 of 4

2 A8. Exhibit CSH-4 I show amounts added to Sycamore's test year depreciation expense. I

3 made two adjustments to the test year figure. The first adjustment is to reflect the difference

4 between the depreciation expense included in the test year on plant that had been added during

5 the test year, and the annual depreciation on such plant. The second adjustment adds the

6 annualized depreciation on plant added between the end of the test year and the cutoff date for

7 Sycamore's rate base.


9 A9. My Exhibits CSH-5 and CSH-6 show the basis for Sycamore's adjustment to its test year

10 income tax expenses for Indiana. Taxable income is computed by adding the utily receipts tax

11 and deducting interest expense from Total Operating Revenue less Operating Expenses before

12 Income Tax. I used an income tax rate of 5.75% to determine the state income tax, which is

13 subtracted from the tax expense per the books for the proforma adjustment.

14 QlO. Please describe Exhibit CSH-6.

15 Al 0. Exhibit CSH-6 calculates the federal income tax on the adjustments. Taxable income is

16 calculated by subtracting Operating Expenses before Income Tax, Indiana income tax and

17 interest expense from Total Operating Revenue. Income tax expense is reduced by $297,538.

18 Qll. What is Sycamore's cost of capital?

19 Al 1. Exhibit CSH-7 presents Sycamore's Cost of Capital as of the date of the rate base cutoff

20 in this case, March 31, 2018. As described in Sycamore witness John Browner's direct

21 testimony, Sycamore has reached an agreement with the Indiana Office of Utility Consumer


Exhibit CSH Page 4 of 4

1 Counselor (OUCC) that, for purposes of this rate case, Sycamore's cost of equity capital is

2 10.05%. Neither Sycamore nor its parent company, Sycamore Gas Corporation d/b/a Sycamore

3 Energy, has any long-term debt as of March 31, 2018. The other two components of Sycamore's

4 capital structure are customer deposits, with a cost of 6% based on the Commission's rule for

5 such deposits, 170 IAC 5-1-15(±)(1), and the balance of deferred income taxes. For Sycamore's

6 deferred income taxes, the balance shown on Exhibit CSH-7 reflects the reduction resulting from

7 lower federal income tax rates that went into effect on January 1, 2018, as calculated by

8 Sycamore witness Nichole Clement.

9 Q12. Have you calculated how much additional revenue Sycamore requires?

10 A12. Yes. Sycamore's rate base is $16,115,658. When multiplied by the 8.91 % proposed~rate

11 of return, that yields $1,962,411 after grossing up for taxes. This will require an additional

12 $773,651 above operating revenue at current rates. Exhibit CSH-8 shows that this additional

13 non-gas revenue required represents an increase of 65% over the adjusted operating revenue at

14 current rates.

15 Q13. Have you prepared a proposed statement of income?

16 A13. Yes. Exhibit CSH-9 calculates the adjustments for the needed additional revenue using

17 the effective rates from Nichole Clement's Exhibit NMC-2 Gross Revenue Conversion Factor.

18 The additional revenue and operating expenses are combined with the Adjusted Income

19 Statement, Exhibit CSH-3, for the Proposed Statement oflncome, Exhibit CSH-10.


21 A14. Yes.

SYCAMORE GAS COMPANY INC.

Balance Sheet for the Twelve Months Ended March 31, 2018

ASSETS

UTILITY PLANT Utility Plant in Service $ 31,105,858 Less Accumulated Depreciation $ (15,598,077l Net Utility Plant in Service 15,507,781

Construction Work in Progress 365 Total Utility Plant 15,508,146

OTHER INVESTMENTS lntercompany Receivable 13,817,087

CURRENT ASSETS Accounts Receivable (3,393,425) Materials and Supplies 278,304 Prepaid Expenses 322,508 Recoverable Gas Costs 227,740 Deferred Income Tax 20,250 Total Current Assets (2,544,623)1

TOTAL ASSETS $ 26,780,609

SH ARE H 0 L DER S' EQUITY AND LI ABILITIES

SHAREHOLDERS' EQUITY Retained Earnings Total Shareholders' Equity

CURRENT LIABILITIES Accounts Payable Bank Overdraft Other Accrued Liabilities and Expenses Customer Deposits Income Taxes Payable Current Portion of Long Term Debt Total Current Liabilities

LONG TERM LIABILITIES Long Term Debt Regulatory Liability Deferred Income Tax Total Long Term Liabilities Less: current portion of long term debt Net long term liabilities

TOTAL LIABILITIES

$ 24,563,469 24,563,469

(3,175,554) 141,660 808,921 217,690

(351,963)

(2,359,247)

1,512,701 3,063,687 4,576,387

4,576,387

2,217,141

TOTAL SHAREHOLDERS EQUITY AND LIABILITIES $ 26,780,609 ======

IURC Cause No. 45072 Exhibit CSH-1

SYCAMORE GAS COMPANY INC. Income Statement

for the Twelve Months Ended September 30, 2017

OPERATING REVENUE Gas Sales Service Revenue $ 7,553,912 Transportation Revenue 813,749 Other Operating Revenue 97,564 Total Operating Revenue 8,465,225

OPERATING EXPENSES Natural Gas Purchases 3,560,327 Operations and Maintenance 985,623 Administration 1,207,755 Bad Debt Expense (176) Depreciation 901,745 Taxes - Other Than Income Taxes 240,052 Federal Income Taxes 497,590 Indiana Income Taxes 101,386 Total Operating Expenses 7,494,302

OPERATING INCOME 970,923

NON-OPERATING EXPENSE Interest Expense 11,959 Total Non Operating Expense 11,959

NET INCOME $ 958,964


1 of 3

SYCAMORE GAS COMP ANY INC. Income Statement


OPERATING REVENUE Gas Residential Sales NTARevenue Commercial Gas Sales Sales for Resale Industrial Gas Sales IT Sales Revenue Total Gas Revenue

Transportation Revenue Residendial Penalty Revenue Miscellaneous Revenue Total Miscellaneout Revenue

Total Operating Revenue

PURCHASED GAS 804 Purchased Gas 805 Amortization of Variances

Total Purchased Gas

DISTRIBUTION 872 Compressor Station Labor 874 Main and Services Expenses 875 Measuring and Regulating Equipment 87 6 Measuring and Regulating - Station City Gate 877 Measuring and Regulating - Industrial 880 Other Expense

Total Distribution Operating Expense

887 Maintenance of Mains 889 Maintenance Measuring and Regulating Equipment 890 Maintenance Measuring and Regulating Equipment-Industrial 892 Maintenance Services 893 Maintenance Meters and Regulators 894 Maintenance Other Equipment

Total Distribution Maintenance Expense

Total Distribution Expense

$ 3,720,342 307,438

1,937,631 1,018,969

511,138 324,318

7,819,838

547,823 48,123 49,441

645,387

8,465,225

3,441,312 119,015

3,560,327

60 456,758

73,011 17,674 2,098

99,264 648,865

7,078 19,988 22,469

102,158 11,627 12,046

175,367

824,231


2 of3

SYCAMORE GAS COMP ANY INC. Income Statement


CUSTOMER ACCOUNTING 902 Meter Reading Expense 903 Billing and Collection Expense 904 Uncollectible Accounts 905 NIA Rebates 908 Customer Assistance Expense 909 Informational Advertising Expense

Total Customer Accounting Expense

ADMINISTRATIVE AND GENERAL 920 Administrative and General Salaries 921 Office Expenses 923 Outside Services 924 Property Insurance Expense 926 Employee Benefits 928 Regulatory Commission Expense 930 Miscellaneous General Expense 931 Rents 932 Travel and Entertainment 935 Maintenance General Plant

Total Administrative and General

Total Operation and Maintenance Expense

403 DEPRECIATION EXPENSE

408 TAXES - GENERAL 408. l Taxes Other Thank Income Taxes 408.2 Real Estate Tax 408.3 Utility Receipts Tax

Total Taxes - General

409 TAXES -INCOME 409.1 Federal Income Taxes, Utility Operations 409 .1 Indiana Income Taxes, Utility Operations

Total Taxes - Income

INTEREST EXPENSE 424.0 Interest Expense - Customer Deposits 424.1 Interest Expense - Other

Total Interest Expense

NET INCOME

128,831 44,221

(176) 19,650 14,717 6,251

213,494

464,846 184,880 125,064 215,145

51,466 8,941

13,469 57,339

1,766 32,561

1,155,476

5,753,528

901,745

68,245 105,440 66,367

240,052

497,590 101,386 598,976

8,515 3,444

11,959

$ 958,964


3 of3

SYCAMORE GAS COMPANY INC. Adjusted Income Statement

for the Twelve Months Ended March 31, 2018

Per Books OPERATING REVENUE 09/30/17 Adjustments

Gas Sales Service Revenue $ 7,553,912 $ (3,634, 156) Transportation Revenue 813,749 (901) Other Operating Revenue 97,564 Total Operating Revenue 8,465,225 (3,635,057)

OPERA TING EXPENSES Natural Gas Purchases 3,560,327 (3,546,386) Operations and Maintenance 985,623 221,642 Administration 1,207,755 233,310 Bad Debt Expense (176) 7,213 Depreciation 901,745 39,019 Taxes - Other Than Income Taxes 240,052 (46,715) Amortization of Regulatory Liability (105,537) Federal Income Taxes 497,590 (297,538) Indiana Income Taxes 101,386 {39,2132 Total Operating Expenses 7,494,302 (3,534,206)

OPERATING INCOME 970,923 (100,851)

NON-OPERATING EXPENSE Interest Expense 11,959 Total Non Operating Expense 11,959

NET INCOME $ 958,964 $ {100,8512

$

$

Adjusted at 03/31/18

3,919,756 812,848 97,564

4,830,168

13,941 1,207,265 1,441,065

7,037 940,764 193,337

(105,537) 200,052

62,173 3,960,096

870,072

11,959 11,959

858,113

Cause No. 45072 Exhibit CSH-3

SYCAMORE GAS COMP ANY INC. Depreciation Adjustments


Additional depreciation to annualize depreciation for

assets placed in service in the test year.

Annualized depreciation for assets placed in

service October 1, 2017 to March 31, 2018.

Total Depreciation Adjustments

$ 29,544

9,475

$ 39,019

Cause No. 45072 Exhibit CSH-4

SYCAMORE GAS COMP ANY INC.

Adjustment to Indiana Income Tax Expense

OPERATING REVENUE

Gas Sales Service Revenue Transportation Revenue Other Operating Revenue Total Operating Revenue

OPERATING EXPENSES Natural Gas Purchases Operations and Maintenance Administration Bad Debt Expense Depreciation Taxes - Other Than Income Taxes Operating Expenses before Income Tax

Add Utility Receipts Tax

Less Interest Expense

Taxable Income Tax Rate Indiana Income Tax

Per Books 09/30/17

$ 7,553,912 813,749

97,564 8,465,225

3,560,327 985,623

1,207,755 (176)

901,745 240,052

6,895,326

Less tax expense per books for year ended 9/30/17 Proforma adjustment to Indiana Income Tax

Adjustments

$ (3,634, 156) (901)

(3,635,057)

(3,546,386) 221,642 233,310

7,213 39,019

(46,715) (3,091,917)



$ 3,919,756 812,848 97,564

4,830,168

13,941 1,207,265 1,441,065

7,037 940,764 193,337

3,803,409

66,461

11,959

1,081,261 5.75%

62,173 101,386

$ (39,213)

SYCAMORE GAS COMPANY INC.

Adjustment to Federal Income Tax Expense

Per Books OPERATING REVENUE 09/30/I 7

Gas Sales Service Revenue Transportation Revenue Other Operating Revenue Total Operating Revenue

$7,553,912

OPERA TING EXPENSES Natural Gas Purchases Operations and Maintenance Administration Bad Debt Expense Depreciation Taxes - Other Than Income Taxes Operating Expenses before Income Tax

Less Indiana Income Tax

Less Interest Expense

Taxable Income Tax Rate Federal Income Tax Less FIT per books for year ended 9/30/17 Proforma adjustment to Federal Income Tax

813,749 97,564

8,465,225

3,560,327 985,623

1,207,755 (176)

901,745 240,052

6,895,326

Adjustments

$(3,634,156) (901)

(3,635,057)

(3 ,546,3 86) 221,642 233,310

7,213 39,019

(46,715) (3,091,917)


$ 3,919,756 812,848 97,564

4,830,168

13,941 1,207,265 1,441,065

7,037 940,764 193,337

3,803,409

62,173

11,959

952,627 21%

200,052 497,590

(297,538)


Component

Common Equity

Customer Deposits

Long Term Debt

Deferred Income Tax

Total


Amount

$ 24,563,469

217,690

3,063,686

$ 27,844,844

Cost of Capital at March 31, 2018

Percent of Total - %

88.22%

0.78%

0.00%

11.00%

100.00%

Cost-%

10.05%

6.00%

0.00%

0.00%


Weighted Cost-%

8.87%

0.05%

0.00%

0.00%

8.91%



Total Rate Base

Proposed Rate of Return Proposed Operating Income

Revenue Requirement at March 31, 2018

Proposed Utility Operating Income

Adjusted Utility Operating Income Additional Utility Operating Income Required Revenue Conversion Factor Additional Revenue Required

Operating Income adjusted for Revenue Conversion Factor: Proposed Utility Operating Revenue Adjusted Utility Operating Revenue at Current Rates Additional Utility Operating Revenue Required

Non Gas Revenue Increase: Percent increase of additional revenue over current rate revenue

$ 16,115,658

8.91% $ 1,436,319

$ 1,436,319

870,072 566,247

1.366279 $ 773,651

$ 1,962,411 1,188,760

$ 773,651

65%

'


SYCAMORE GAS COMP ANY INC. Calculation of Adjustments Due to Proposed Additional Revenue

Uncollectible Accounts Expense: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Uncollectible Expense

Public Utility Fee: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Public Utility Fee

Utility Receipts Tax: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Utility Receipts Tax

Indiana Income Tax: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Indiana Income Tax

Federal Income Tax: Proposed Increase in Revenue Current Effective Rate Proposed Increase in Federal Income Tax

773,651 0.083128%

643

773,651 0.132976%

1,029

773,651 1.398836%

10,822

773,651 5.737574%

44,389

773,651 19.455972%

150,521


SYCAMORE GAS COMP ANY INC. Proposed Statement of Income


Adjusted Proposed Proposed OPERATING REVENUE 09/30/17 Rate Effect 09/30/17

Gas Sales Service Revenue $ 3,919,756 $ 773,651 $ 4,693,407 Transportation Revenue 812,848 812,848 Other Operating Revenue 97,564 97,564 Total Operating Revenue 4,830,168 773,651 5,603,819

OPERATING EXPENSES Natural Gas Purchases 13,941 13,941 Operations and Maintenance 1,207,265 1,207,265 Administration 1,441,065 1,441,065 Bad Debt Expense 7,037 643 7,680 Depreciation 940,764 940,764 Taxes - Other Than Income Taxes 193,337 11,851 205, 188 Amortization of Regulatory Liability (105,537) (105,537) Federal Income Taxes 200,052 150,521 350,573 Indiana Income Taxes 62,173 44,389 106,561 Total Operating Expenses 3,960,096 207,404 4,167,500

OPERATING INCOME 870,072 566,247 1,436,319

NON-OPERATING EXPENSE Interest Expense 11,959 11,959 Total Non Operating Expense 11,959 11,959

NET INCOME $ 858,113 $ 566,247 $ 1,424,360

IURC Cause No. 45072 ExhibitNMC

Page I of 4

DIRECT TESTIMONY OF NICHOLE M. CLEMENT


1 Ql. Please state your name, address and occupation.

2 Al. My name is Nichole M. Clement. I am a partner with the public accounting firm Gilmore

3 JasionMahler, LTD. My business address is 551 Lake Cascades Pkwy., Findlay, OH

4 45839-1106.

5

6 Q2. Please state your educational background and professional qualifications and

7 memberships.

8 A2. I received my bachelor of science degree in Business Administration with a specialization

9 in accounting from Bowling Green State University in 1994. I am a certified public

10 accountant and a member of the Ohio Society of Certified Public Accountants, the

11 American Institute of Certified Public Accountants, the Ohio Gas Association, the Ohio

12 Telecom Association and the Ohio Rural Broadband Association.

13


15 (IURC)?

16 A3. No.

17

18 Q4. What is the purpose of your testimony in this proceeding?

19 A4. I was retained by the petitioner, Sycamore Gas Company, Inc. ("Sycamore") to assist

20 with determining the impact ofrecently lowered federal income tax rates on Sycamore's

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Page 2 of 4

deferred taxes. In December 2017, the U.S. Congress passed the Tax Cut and Jobs Act

(TCJA) which lowered the federal corporate income tax rate from 34% to 21 % beginning

January 1, 2018. Sycamore has deferred tax liability that is the result of tax depreciation

being greater than book depreciation during the early years of the life of most of its

assets. I calculated Sycamore's deferred tax liability as of September 30, 2017, which

was the end of the twelve-month test year it is utilizing in this rate case, using the

subsequently enacted rate of 21 %. I then calculated the remaining useful book life of the

assets creating the deferred tax liability and developed an adjustment to Sycamore's test-

year tax expense to reflect the lower tax rate which took effect on January 1, 2018. I also

provided the gross revenue conversion factor applied to its revenue requirement so that

the new rates to be established by the IURC in this case take into account Sycamore's

revised tax expense.

What is the origin of Sycamore's accumulated deferred taxes?

The deferred tax liability was generated from tax depreciation exceeding the amount of

book depreciation that was able to be deducted on a yearly basis. The current tax laws

allow Sycamore to accelerate its depreciation on property by allowing it to utilize shorter

lives for tax purposes and expense some of their assets in the year purchased under the

provisions of Sections 179 and 168(k) of the federal tax code.

What are some examples of the assets associated with Sycamore's deferred taxes?

Some examples of the assets associated with Sycamore's deferred taxes are mains,

service lines and meters.

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How did lower federal income tax rates impact Sycamore's deferred tax account?

As a result of the TCJA, the deferred tax amount was calculated utilizing the lower rate of

21 % and the deferred tax liability was reduced accordingly to reflect the future tax

liability at known enacted rates. As shown on the attached Exhibit NMC-1, Sycamore

has $12,447,983 less in tax net book value than book net book value. When the federal

income tax rate was 34%, the amount of deferred tax was $4,232,314.22. After the

federal income tax rate was lowered to 21 %, the amount of deferred tax on the same asset

base is $2,614,076.43. Pursuant to Generally Accepted Accounting Principles applicable

to utility ratemaking, the difference of $1,618,237.79 is to be amortized over the

weighted average of the remaining book life of the underlying assets as a reduction in

Sycamore's annual tax expense. I determined the weighted average remaining book life

of Sycamore's underlying assets to be 15 1/3 years. This results in an annual reduction to

Sycamore's tax expense of $105,537.25.

Please describe the gross revenue conversion factor.

A utility's regulated rates are determined according to its proven costs to provide service.

One of these costs is the taxes it has to pay on the income that the rates produce.

Roughly speaking, the gross revenue conversion factor recognizes that the rates need to

be "grossed-up" so that they recover not just the tax on the amount of revenue necessary

to recover non-tax expenses, but also the cost of the tax on the amount ofrevenue

necessary to recover the tax expense. In this case, I determined that the gross revenue

conversion factor applicable to Sycamore's revenue requirement should be 1.366279.

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How did you determine the correct amount for this factor?


Page 4 of 4

As shown on the spreadsheet attached as Exhibit NMC-2 to my testimony, I start with

100% of Sycamore's revenue. I then reduced that by the percentage of Sycamore's

revenue that is uncollectible, and also remove the percentage Sycamore has to pay for

Indiana's Public Utility Fee. This gives me Sycamore's percentage of net revenue before

income taxes. Further reductions are taken for the utility receipts tax, Indiana income tax

and federal income tax. After accounting for all these reductions in Sycamore's revenue,

I calculate the gross revenue conversion factor by dividing 100% by the percentage of

income after income taxes. Here, Sycamore's projected income after income taxes is

73.191513% of 100%, and dividing that percentage into 100 equals 1.366279. That is the

number by which Sycamore's target net income is multiplied to determine its annual

revenue requirement.

Does this conclude your direct testimony in this case?

16 AlO. Yes.

4

Sycamore Gas Company

Regulatory Liability Calculation

As of Date Certain September 30, 2017

Balance Sheet Book Tax

Federal Deferred Tax

Property, Plant and Equipment Cost $ 31,078,554.00 $ 30,310,190.00 Accumulated Depreciation $ (15,562,962.00) $ (27,242,581.00) Net Book Value $ 15,515,592.00 $ 3,067,609.00

Federal Total $ 15,515,592.00 $ 3,067,609.00

Federal Statutory Tax Rate Prior to January 1, 2018

Federal Deferred Tax Asset (Liability) at 34% Statutory Rate

Federal Statutory Tax Rate on January 1, 2018

Federal Deferred Tax Asset (Liability) at 21% Statutory Rate

Regulatory Liability (Decrease in Deferred Tax due to Rate Change)

Amortization of Regulatory Liability over weighted average life of the plant balances

Months 184.00 Years 15.33

Amortization

10/1/2017-4/30/2018 $ 35,179.08 5/1/2018-4/30/2019 $ 105,537.25 5/1/2019-4/30/2020 $ 105,537.25 5/1/2020-4/30/2021 $ 105,537.25 5/1/2021-4/30/2022 $ 105,537.25 5/1/2022-4/30/2023 $ 105,537.25 5/1/2023-4/30/2024 $ 105,537.25 5/1/2024-4/30/2025 $ 105,537.25 5/1/2025-4/30/2026 $ 105,537.25 5/1/2026-4/30/2027 $ 105,537.25 5/1/2027-4/30/2028 $ 105,537.25 5/1/2028-4/30/2029 $ 105,537.25 5/1/2029-4/30/2030 $ 105,537.25 5/1/2030-4/30/2031 $ 105,537.25 5/1/2031-4/30/2032 $ 105,537.25 5/1/2032-4/30/2033 $ 105,537.25

Total $ 1,618,237.79

Exhibit NMC-1

Type Noncurrent Noncurrent

Asset Liability

$ $ (12,447,983.00)

$ $ (12,447,983.00)

34.00% 34.00%

$ $ (4,232,314.22)

21.00% 21.00%

$ $ (2,614,076.43)

$ $ (1,618,237 .79)

Line No

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Sycamore Gas Company Gross Revenue Conversion Factor

Rate

Revenue

Less: Uncollectible expense 0.083128%

Net Collected Revenues

Less: Public Utility Fee 0.133087%

Net Revenue before Income Taxes

Utility Receipts Tax (Line 3 x rate) 1.400000%

Indiana Income Tax (Line 5 x rate) 5.750000%

Income Before Federal Income Tax

Federal Income Tax (Line 8 x rate) 21.000000%

Income after Income Taxes (Line 8 - Line 9)

Gross Revenue Conversion Factor (1.00/Line 10)

Exhibit NMC-2

Total

100.000000%

0.083128%

99.916872%

0.132976%

99.783896%

1.398836%

5.737574%

92.647485%

19.455972%

73.191513%

1.366279

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IURC Cause No. 45072 ExhibitJTS

Page 1of10

DIRECT TESTIMONY OF JOHN T. STENGER


Please state your name, address and occupation.

My name is John T. Stenger. My business address is 370 Industrial Drive, Suite

200, Lawrenceburg, Indiana, 47025. I am the Consultant to Sycamore Gas

Company, the petitioner in this proceeding ("Petitioner" or "Sycamore").

Please state your educational background.

I received Bachelor of Science Degrees in Civil Engineering and Land Surveying

from Purdue University in 1984. In 2000, I received a Master of Business

Administration degree from Xavier University. I have attended numerous

industry programs and courses, including on Natural Gas Distribution

Engineering; Corrosion and Rectifier courses, and Regulator and Station Design

courses. I am a Professional Engineer registered in both Indiana and Ohio.

Please summarize your business experience.

15 A3. I have worked in the natural gas utility industry since 1988. From 1988 to 2001, I

16 was employed by Cinergy and the Cincinnati Gas & Electric Company, holding

1 7 engineering and managerial positions in its Gas Operations department. I left

18 Cinergy in September, 2001 to become part-owner and President of the Oxford

19 Natural Gas Company in Oxford, Ohio, where my responsibilities included

20 overall system management, gas procurement and calculation of the Gas Cost

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IURC Cause No. 45072 ExhibitJTS Page 2 oflO

Recovery mechanisms for Oxford Natural Gas and Verona Natural Gas. I served

as the Vice President, Operations for Sycamore from the time it was purchased by

INOH Gas from Cinergy on August 30, 2004 until October 1, 2007. I am an

owner of Premier Energy Services ("Premier"), a natural gas construction and

maintenance contractor. I am also the owner of Superior Utility Operations, Inc.

("Superior"). Effective October 1, 2007, Superior serves as a Consultant to

Sycamore and I provide operational and managerial services to Sycamore

pursuant to its contract with Superior. Also, I represent Sycamore as a member of

the Board of Directors of the Indiana Energy Association (IEA), where I serve as

the Chairman of the IEA Gas Executive Committee and also serve on that

association's Pipeline Safety and Gas Rates I Regulatory Committees.

Please describe the operational and managerial services you provide to

Sycamore.

My company, Superior, provides field construction, maintenance and pipeline

safety compliance services to Sycamore. Superior charges a monthly fee based

upon Superior's employees actual wage rates and normal expenses, such as

general !ability insurance and worker's compensation costs, etc., plus a negotiated

adder. Overtime charges are billed on a monthly basis for work performed, at the

rates Superior pays its employees, plus the negotiated adder. Services for

specialty work, such as welding and tapping, are provided as needed and are

based on local market rates. These services are typically provided by Premier,

which has welders on staff. Premier also provides additional construction

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IURC Cause No. 45072 Exhibit JTS

Page 3of10

resources when Sycamore's work load dictates. This allows Sycamore to better

control the cost for using those types of services, and allows Sycamore to

minimize the staff regularly assigned to its field work. My personal services

include supplying various engineering, pipeline safety compliance, gas supply and

managerial functions. These services are compensated on an annual fee basis.

All charges are negotiated, reviewed and approved by Sycamore's President, John

Browner and CFO, Cindy Hughes.

What is the purpose of your testimony in this proceeding?

I am testifying in support of Sycamore's request for rate relief. I summarize

Sycamore's operating characteristics and describe on-going efforts to provide

reliable service to gas distribution customers in an efficient manner.

Are you familiar with Sycamore's property that is used and useful in

rendering gas utility service to the public?

Yes. Among my functions is to keep abreast of federal and state pipeline safety

regulations and maintain Sycamore's system in compliance with those

regulations. It is my responsibility to handle communications and interactions

with the Indiana Utility Regulatory Commission's Pipeline Safety Division. I am

also responsible for engineering and design services for all of Sycamore's capital

projects and I oversee Sycamore's response to customer service issues, repairs to

mains and service lines, and planning and implementation of main replacements

and extensions. My responsibilities also include arranging for Sycamore to

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purchase gas through both forward and spot contracts in order to reliably meet our

customers' demands for this commodity. Finally, I manage Sycamore's gas

transportation supply program, including balancing and billing of its

transportation customers' accounts.

Please describe Sycamore's utility system and customer base.

Sycamore owns, maintains and operates 176 miles of gas mains which it utilizes

to distribute gas to 5,502 residential customers, 868 commercial customers, 25

industrial customers and one wholesale customer. Sycamore also serves 3

commercial transportation customers and 5 industrial transportation customers.

All of the gas Sycamore sells to its system customers is purchased by Sycamore

for resale from the two interstate gas pipelines to which Sycamore's mains are

connected: Texas Gas Transmission and Texas Eastern Transmission. Sycamore

also contracts with Texas Gas Transmission for NNS pipeline storage service,

which is used both as a hedge and as a balancing tool.

Have Sycamore's customer counts or gas main miles changed since its last

rate case?

Yes, for both. Sycamore has seen its overall customer count decrease by one

customer. It has added seven miles to its gas mains since the test year upon which

its current base rates are based. Service has been extended to the Reservoir Road

area in Brookville; to the Ridgewood Health Campus in Lawrenceburg; and to

Woodridge Estates Subdivision in Bright. As discussed further below, MGPI of

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Indiana was added as a customer in the former Seagrams Distillery facility, as was

Proximo Distillers. Sycamore worked with both customers to eliminate those

facilities' past reliance on generation of steam from coal. Several bare steel

replacement projects have been completed since Sycamore's last rate case, further

improving system safety and its percentage of unaccounted-for gas. Sycamore

also completed significant water bath heater projects at three of its Texas Gas

Transmission city gate stations. Finally, Sycamore installed a new odorizer

facility and regulator station at its other Texas Gas city gate station.

Has Sycamore completed any post-test-year capital projects?

Yes. As shown on my attached Exhibit JTS-1, Sycamore completed 13 projects

and purchases between October 1, 2017 and March 31, 2018 which added a total

of $570,431.36 to the value of Sycamore's used and useful plant in service.

Are there any gaps in Sycamore's service territory?

Sycamore operates in two nearby but neither contiguous nor interconnected

divisions. Most customers are located in Sycamore's Lawrenceburg Division

centered in and around the communities of Lawrenceburg and Greendale, Indiana.

Sycamore's Brookville Division serves 979 residential and commercial customers

1 industrial customer and 1 industrial transportation customer in the communities

of Brookville and Cedar Grove located approximately 25 miles north of

Greendale.

- 5 -

1 Qll.

2 All.

3

4 Q12.

5 A12.

6

7

8

9

10

11 Ql3.

12 A13.

13

14

15

16

17

18

19

20 Q14.

21 A14.

22

23

Please identify Sycamore's sole wholesale customer.


Page 6of10

Sycamore distributes gas on a wholesale basis to the Town of Aurora, Indiana.

Who manages Sycamore's relationship with the Town of Aurora?

I do. The Town serves approximately 2,500 residential customers of its municipal

gas utility, and I regularly communicate with officials or representatives of that

utility, including at least quarterly about Sycamore's GCA applications. I also

balance and prepare the monthly invoice for its sole transportation customer,

Aurora Casket.

Does Sycamore serve any customers pursuant to a special contract?

Yes. As noted in the testimony of Sycamore's President, John Browner,

Sycamore has a Commission-approved special contract with MGPI oflndiana,

LLC. MGPI owns and operates a large distillery in the city of Lawrenceburg,

Indiana. The Commission approved Sycamore's special contract to provide off-

tariff gas service to MGPI by order dated August 22, 2012 in IURC Cause No.

44193. Unless it is renewed and re-approved by the Commission, that special

contract is set to expire in March of 2022.

Does Sycamore utilize the services of a gas marketer?

Yes. Sycamore contracts with CenterPoint Energy Services for firm gas supply

throughout the calendar year. Through CenterPoint, Sycamore is able to deliver

to its customers firm gas supply at competitive commodity rates. CenterPoint' s

- 6 -

1

2

3

4

5

6

7 Ql5.

8

9

10 A15.

11

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Page 7of10

services have enable Sycamore to minimize its transmission system demand

charges and to properly execute daily nominations and balancing for Sycamore's

supply needs. Sycamore is also able to hedge gas volumes at less than full

contract volumes, improving its ability to complete fixed-price purchases.

Normal Temperature Adjustment

How has Sycamore implemented the normal temperature adjustment

mechanism approved by this Commission on December 6, 2006 in IURC

Cause No. 43141 ("NTA Order")?

Once a year an average of each GCA customer's gas usage in July and August is

used to determine a baseload usage amount for that customer. Then pursuant to

the NTA order, during the months October through April Sycamore determines a

monthly adjustment to those customers' bills based on heating degree days.

Warmer than expected weather results in the customer paying a slightly higher

volumetric rate for their gas utility service, while cooler than expected weather

results in the customer paying a slightly lower volumetric rate. The NTA is not

structured to provide Sycamore any direct net benefit other than from a more

stable revenue stream as its customers are protected from the widest swings in the

cost of their service.

Proposed Change to Service Line Responsibility

- 7 -

1 Q16.

2

3

4 A16.

5

6

7

8

9

10

11 Q17.

12 Al7.

13

14

15

16

17

18

19

20

21

22

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Page 8 of IO

Are Sycamore's customers responsible for repairing and replacing their

service lines located between their property line and Sycamore's gas meter

on the customer's premises?

Typically yes. In most cases the full run of the service line located on the

customer's property, both before and after Sycamore's gas meter, has been owned

by the customer, who is also responsible for its maintenance and repair as well as

its replacement. Sycamore's Tariff Sheet 21, "Section II- Supplying and Taking

of Service" describes at paragraph #5 on page 2 of 2 the customer's responsibility

in this regard.

Does Sycamore handle new service extensions in this same fashion?

No. This assignment to the customer of ownership and responsibility for nearly

all of the service line is a vestige of Sycamore's century-old business. But this

practice has become increasingly impractical in 2018. Newer federal regulations

on the qualification of gas line operators, including the increasingly limited pool

of contractors licensed to perform such work for customers, have made it

increasingly impractical for someone other than an employee or contractor of

Sycamore to do the work. For example, whereas a decade ago a homeowner

might be able to call their plumber to work on their gas service line, few plumbers

meet today's more stringent standards to work on a gas line. Accordingly, for

extensions of service to new customers, Sycamore proposes to move the

demarcation point for ownership of and responsibility for the customer service

line from the property line to the point at which the service line exits Sycamore's

- 8 -

1

2

3

4 Q18.

5

6 A18.

7

8

9 Q19.

10

11 A19.

12

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19

20 Q20.

21

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Page 9of10

gas meter. The cost to extend service to a new customer from Sycamore's main

to the outlet of Sycamore's meter would then be added to Sycamore's rate base.

How does Sycamore handle repairs to customers' service lines that Sycamore

does not currently own?

Sycamore performs such work, more often than not involving the replacement of

pipe, at the customer's request and charges the customer for the work.

Are you proposing in this case to change the way service line replacements

are handled?

Yes. With this Commission's approval, whenever the portion of the service line

between the curb and the meter has to be replaced, Sycamore would perform the

work at no charge to the customer and the cost of that small project would be

added to Sycamore's rate base. Sycamore would also assume responsibility as the

owner for maintenance and repair of the replaced portion of the service line, again

at no separate charge to the customer other than through future inclusion of the

cost as a utility operating expense built into the base rates collected from all

customers for their utility service.

Are you aware of this type of change with respect to ownership and

responsibility for gas customer service lines having been approved in other

jurisdictions?

- 9 -


Page 10 of IO

1 A20. Yes. In 0 hio that state's Public Utility Commission has approved requests from

2 both Duke Energy and Columbia Gas to gradually transfer to the utility ownership

3 and responsibility for the customer service line all the way to the gas meter, and

4 ''similar arrangements have been approved for Duke Kentucky by the Kentucky

5 Public Service Commission in that commonwealth. See, for example, Kentucky

6 PSC Case No. 2015-00210. Attached as Exhibit JTS-2 is a copy of an excerpt

7 from Duke Kentucky's tariff reflecting the transfer to Duke of responsibility for

8 customer service lines.

9

10 Q21. Does this conclude your testimony?

11 A21. Yes.

- 10 -

Exhibit JTS-1

Sycamore Gas - Post-Test-Year Capital Projects

!!. Project Description Cost

1 Brookville Library Addition * $ 39,192.76

2 MGPI - New Warehouse - Gas Facilities Relocation * $ 219,742.56

3 Tom's Sales & Service - Gas Facilities Relocation * $ 19,817.81

4 Carroll Avenue Main Extension $ 3,265.60

5 Ritzmann Drive Project $ 898.90

6 Pribble Road Gas Main Replacement $ 19,980.65

7 Lawrenceburg #1 Station Odorizer Replacement $ 143,604.50

8 Miscellaneous Gas Main Projects $ 8,036.87

9 Miscellaneous Gas Service Installations (31) $ 74,641.20

10 Gas Meter Replacements and Installations $ 23,426.04

11 Gas House Regulator Replacements and Installations $ 4,008.53

12 New Equipment Purchased $ 11,849.94

- Desktop computer for SCADA system

- Large Format Scanner/Copier

- Fusion Equipment

- Hammer Head Mole

13 Structures and Improvements $ 1,966.00

- Concrete for Sand and Gravel Pits in Yard

Total Capital Expenditures $ 570,431.36

* Reimbursement projects - completed at customer request


Exhibit JTS-2

Excerpt from Duke Kentucky Tariff

Duke Energy Kentucky, Inc. 4580 Olympic Blvd. Erlanger, Kentucky 41018

KY. P.S.C. Gas No. 2 Fifth Revised Sheet No. 23 Cancelling and Superseding Fourth Revised Sheet No. 23 Page 1of2

SECTION IV - COMPANY'S INSTALLATION

1. Installation and Maintenance.

Except as otherwise provided in these Service Regulations, in Service Agreements or Rate Schedules, Company will install and maintain its lines and equipment on its side of the point of delivery, but shall not be required to install or maintain any lines or equipment, except meters and service regulators on Customer's side of the point of delivery without cost to Customer. Only Company's agents are authorized to connect Company's service to Customer's service piping.

2. Gas Service Piping.

The gas service pipe shall be installed by the Company from the Company's main in the street to the curb line at its own expense and from the curb line to the meter, including curb box and valve, at the Company's expense, subject to the Company's rules, regulations and existing prices, upon execution of an application and provided that an adequate distribution main exists in front of the Customer's building. The service piping from the curb to the meter, including street box and valve, installed at the expense of the Customer, shall be maintained at the expense of the Company. No connections or work of any kind shall be done on a gas main or service piping up to the outlet of the meter by anyone who is not a qualified agent or employee of the Company. The Company will assume ownership of customer service lines (curb to meter) following replacement, as well as in instances of new installations.

Only one gas service will be installed in any individual dwelling or building, except in cases where the building's units are sectionalized by acceptable fire separations such as firewalls, regardless of the number of customers to be served within.

The service pipe will be laid from the point of the gas supply connection location to the meter location approved by the Company. Should the distance between the curb and the Customer's building be in excess of 150 feet or involve other special conditions, a suitable meter location, approved by the Company, will be selected.

Service pipe can be installed in the same ditch as the electric, telephone, and cable television cable, providing the electric cable is in a conduit and the gas service pipe has six inches of separation from the cables. Any other utilities will not occupy the ditch with the service pipe, and a minimum of three feet will be maintained between gas service pipe and other utilities.

Service piping will end at the inlet connection of the meter which will be set at the point and entry of the service. If it is necessary to extend the service pipe beyond the point of entry, such exposed service piping in the building under flooring, through walls, coal bins, etc., shall be properly protected and the expense thereof borne by the customer.

In case of more than one building on a lot, a separate service will be run direct from the main to each building except in cases where the building nearest the Company' such cases the meter will be placed on the service in the nearest own extension to the' other building.

Issued: March 15, 2017 Effective: April 15, 2017 Issued by /s/ James P. Henning, President

s U L . . II .LLL ' t Jildingpcuacn~-§~f~1t~Wim~~l8ii

Talina R. Mathews EXECUTIVE DIRECTOR

J~R.L1.~ EFFECTIVE

4/15/2017 PURSUANT TO 807 KAR 5:011 SECTION 9 (1)

Duke Energy Kentucky, Inc. 4580 Olympic Blvd. Erlanger, Kentucky 41018

KY. P.S.C. Gas No. 2 Fifth Revised Sheet No. 23 Cancelling and Superseding Fourth Revised Sheet No. 23 Page 2 of2

T.he Company shall install excess flow valves (EFV) for all new and renewed service· piping (N) installations for single family homes or other Customer service classifications as part its standard installation and at the Company's expense where such EFV installation is required in accordance with regulations of the Federal Pipeline Hazardous Materials Safety Administration (PHMSA). For all other service piping installations that are not covered by PHMSA installation requirements, the Customer may request the installation of an EFV at the Customer's sole expense. The Company and Customer shall mutually agree upon the timing of such installation with regard to any necessary permitting that may be required. The Customer requesting the installation of an excess flow valve shall be responsible for the actual total cost of such installation and the Company shall provide Customer with a written estimated cost of such installation prior to performing the installation. A deposit of fifty-percent of the estimated cost of installation shall be required prior to the commencement of the installation. The balance of the actual cost of installation shall be due upon completion.

The Company shall not be required to install an EFV if one or more of the following conditions is present:

a. The service line does not operate at a pressure of 10 psig or greater throughout the year; b. Company has prior experience with contaminants in the gas stream that could interfere

with the excess flow valve's operation or cause loss of service to a customer; c. The excess flow valve could interfere with necessary maintenance and operation

activities; or, d. An excess flow valve meeting applicable performance standards is not commercially

available.

3. Company's Property and Protection Thereof.

All meters and equipment furnished by and at the expense of Company, which may at any time be in said premises, shall, unless otherwise expressly provided herein, be and remain the property of Company, and Customer shall protect such property from loss or damage, and no one who is not an agent of Company shall be permitted to remove or handle same.

Issued: March 15, 2017 Effective: April 15, 2017 Issued by /s/ James P. Henning, President

KENTUCKY PUBLIC SERVICE COMMISSION

Talina R. Mathews EXECUTIVE DIRECTOR

J~f?_~

EFFECTIVE

4/15/2017 PURSUANT TO 807 KAR 5:011 SECTION 9 (1)

Duke Energy Kentucky, Inc. 4580 Olympic Blvd. Erlanger, Kentucky 4101 S

RIDERASRP

Ky. P.S.C. Gas No. 2 Second Revised Sheet No. 63 Cancelling and Superseding First Sheet No. 63 Page 1of1

ACCELERATED SERVICE REPLACEMENT PROGRAM RIDER

APPLICABILITY Applicable to all customers receiving service under the Company's sales and transportation rate schedules.

CALCULATION OF ACCELERATED SERVICE REPLACEMENT RIDER REVENUE REQUIREMENT The ASRP Rider revenue requirement includes the following:

a. ASRP-related Plant In-Service not Included in base gas rates minus the associated ASRP~ related accumulated depreciation and accumulated deferred income taxes;

b. Retirement and removal of plant related to ASRP construction; c. The rate of return on the net rate base is the overall rate of return on capital, using the

capital structure and debt rates from the most recent base gas rate case and using a 9. 7% ROE, grossed up for federal and state Income taxes;

d. Depreciation expense on the ASRP-related Plant In-Service less retirements and removals; e. Property taxes related to ASRP and; f. Operation and Maintenance Costs for reconnaissance and relocation of meters.

ACCELERATED SERVICE REPLACEMENT PROGRAM FACTORS All customers receiving service under Rate RS and Rate GS shall be assessed a separate monthly charge that will enable the Company to complete the service replacement program. This monthly charge is in addition to the Customer Charge component of their appllcable rate schedule, as well as any other applicable monthly charges. Customers receiving service under Rate OGS, Rate FT-L, Rate IT and Rate SSIT wilt be assessed a separate throughput charge in addition to their commodity delivery charge, for that purpose.

Rider ASRP will be updated annually, to reflect the anticipated impact on the Company's revenue requirements of net plant additions and projected operations and maintenance expense during the upcoming calendar year. Such adjustments to the Rider will become effective with the first billing cycfe of January, and will reflect the allocation of the required revenue increase based on the revenue distribution approved by the Commission. After each year, the Company will submit a balancing adjustment to true-up the actual costs with the projected program costs for the preceding year. . Any balancing adjustment wlll become effective with the first billing cycle on or. after the effective date of the change.

The charges for the respective gas service schedules for the revenue month beginning January 2018 (T)

are:

Rate RS, Residential Service Rate GS, General Service Rate DGS, Distributed Generation Service Rate FT-L, Firm Transportation service - large Rate IT, Interruptible Transportation Service Rate SSIT, Spark Spread Interruptible Transportation Rate

Issued by authority of an Order of the Kentucky Public Service . Co 'ss· n te Au ust 31 2017 in Cas N 0 ~o 24 lssued: November 21, 2017 Effective: January 2, 2018 lssued by James P. Hennlng, President Isl James P. Henning

$1.80/month $1.78/month $0.00045/CCF $0.00045/CCF $0.00039/CCF

PUBLIC SERVICE COMMISSION

Gwen R. Pinson Executive Director

~'f<~'1~· EFFECTIVE

1/2/2018 PURSUANT TO 807 KAR 5:011 SECTION 9 (1}

{I) (r) (!) (!) (i)

IURC Cause No. 45072 ExhibitMJM Page 1 of 12

DIRECT TESTIMONY OF MICHAEL J. MARTIN

ON BEHALF OF SYCAMORE GAS COMPANY



2 Al. Michael J. Martin


4 A2. My business address is 8835 Worthington Circle, Indianapolis, IN, 46278. I am the

5 President of Martin Energy Consulting and I have been retained by Sycamore Gas Company,

6 Inc. ("Sycamore" or "Petitioner") to provide regulatory advice and to support proforma rate

7 making adjustments at both present and proposed rates for the test year.


9 A3. I received a Bachelor of Science degree in Accounting from Trine University (formerly

10 known as Tri-State University) in Angola Indiana in 1973 and a Master of Business

11 Administration degree from Valparaiso University, Valparaiso, IN with Honors in 2008.

12 Following retirement from Northern Indiana Public Service Company ("NIPSCO") as their

13 Director Regulatory and Governmental Affairs in 2013, I became Campus Director for Trine

14 University's Indianapolis Regional Campus in Avon, IN until October 2014. In October, 2014, I

15 opened an energy consulting practice and began teaching undergraduate and graduate classes in

16 economics, finance and accounting as an adjunct instructor for various colleges and universities

17 which included Butler and Trine University. Starting in the summer of2015 and ongoing, I have

11 Pafle 0 -

IURC Cause No. 45072 ExhibitMJM Page 2of12

1 been lecturing for Trine University at one of its Southeast Asia partner schools located in

2 Melaka Malaysia teaching many of the same disciplines aforementioned.

3 Q4. Please describe your previous assignments as President of Martin Energy

4 Consulting and work experience and responsibilities while employed by NIPSCO and

5 others prior.

6 A4. I provided a small manufacturing business advice on options to improve energy

7 efficiency in a new plant site under consideration and incentives available from both their natural

8 gas and electricity provider. I also provided regulatory advice for an independent pipeline

9 company regarding state and federal pipeline safety rules. Prior to being retained by Sycamore to

10 prepare proforma adjustment in this rate case, I provided Sycamore strategic options to address

11 TDSIC and federal mandate requirements in Indiana.

12 While employed by NIPSCO I testified on several rates, regulatory, and tariff matters on the

13 natural gas segment of that company. Prior to joining NIPSCO by way of a merger between its

14 parent company, NiSource and The Columbia Energy Group, I represented two of Columbia's

15 natural gas distribution companies in similar capacities. While employed by Columbia, I

16 participated in several rate cases and provided testimony on most issues that are addressed in

17 determining a utility's need for rate relief.


19 ("IURC")?

20 A4. Yes, on several occasions. In addition, I have testified before the Pennsylvania Public

21 Utility Commission, Maryland Public Service Commission and New York Public Service

21Page


1 Commission. I have also been also actively involved in the American Gas Association,

2 Pennsylvania Energy Association, and Indiana Energy Association and served as the Chair of

3 their Regulatory Committees.


5 AS. I have been retained by Sycamore to prepare and support proforma adjustments on a

6 present and proposed rate basis to financial information for the test year twelve months ended

7 September 30, 2017. The books and records which are the starting point for the proforma

8 adjustments are supported by Cindy Hughes, Sycamore's Chief Financial Officer. The primary

9 purpose of Sycamore's proforma adjustments, as described in more detail later in this testimony,

10 is to restate its revenues, expenses and plant expenditure to annualize, normalize, amortize and

11 eliminate non- reoccurring costs during the test year. I will also testify to tariff rule changes and

12 the rates on the rate schedules filed in this case. Lastly, I will also support the calculations in the

13 company's allocated cost of service study that will be filed after the filing of the company's case-

14 in-chief.

15 Q6. Please explain the proforma adjustments to Sycamore's Operating Revenue.

16 A6. Sycamore's Gas Operating Sales Revenues on a per book basis is an aggregate of

17 revenues collected from customers based on purchased gas cost recovered through the applicable

18 GCA rates, distribution volumetric and customer charges in its various rate schedules, the

19 application of the NTA and taxes. The first step is to remove all revenue related to the GCA

20 mechanism. Second, Sycamore must price-out all retail and wholesale customer sales and

21 transportation customer deliveries based on bill :frequency date for the test year. Lastly,

3jPage


1 Sycamore is adjusting upward its test year revenue to increase the test year sales to reflect

2 warmer than normal weather occurring in the test year. I used the data that supports Sycamore's

3 monthly NTA adjustment to make this test period weather normalization adjustment.

4 Q7. Please explain the bill frequency adjustment.

5 A 7. Sycamore assigns each customer a billing code number based upon their classification

6 (residential, commercial, industrial or transportation) and their applicable rate schedule for

7 service. The bill frequency aggregates the customer actual usage by billing code for the test

8 period and further records how much actual usage has occurred in each rate step of the applicable

9 rate schedule. For example, Sycamore's General Service Rate Schedule has different charges for

10 volumetric usage in the first 30 therms, next 70 therms, next 900 therms, next 4,000 therms and

11 all over 5,000 therms. The bill frequency data provides usage in each usage category for each

12 billing code. Exhibit MJM-1 takes the usage data from the bill frequency report by billing code

13 and prices the volumetric usage by the effective distribution charges at present rates.

14 The bill frequency report also indicates the number of customers in the test period that fall within

15 the Group 1, Group 2 and Group 3 customer charge categories. Customers are placed in a

16 category based upon the meter size used to measure the amount of gas they consume on a cubic

17 feet basis per hour. At present rates those charges are $12.00 per meter per month for a group 1

18 customer, $24.00 per meter per month for a group 2 customer and $75.00 per meter per month

19 for a group 3 customer. Only customers receiving service under General Service, School

20 Transportation Service and Firm Transportation Service have specific customer charges based on

21 usage. Customers taking service on all other Sycamore Rate Schedules are subject to only one

41Page


1 customer charge. The amount of test year revenue from customer charges at present rates, by

2 rate schedule, is also shown on Exhibit MJM-1.

3 Q8. Please explain the aforementioned weather normalization adjustment.

4 A8. The test year usage was adjusted to reflect normal usage. During the test year, actual

5 heating degree days as reported by the National Weather Service in Cincinnati, Ohio were

6 warmer than normal for six of the seven months of October through April. As a result

7 Sycamore's weather normalization adjustment resulted in adding usage to its test year for pricing

8 revenue at present rates.

9 In this case the weather normalization adjustment was determined based on application of the

10 Normal Temperature Adjustment (NTA) mechanism for the test year. This mechanism applies

11 to customer taking service under Rate GS - General Service and Rate WS- Wholesale Service.

12 Customers receiving service under either Rate GS or Rate WS are weather sensitive therefore the

13 volume billed under the NTA is a reasonable approach to determine the weather normalization

14 adjustment in this case. Further, the NTA rate schedule requires that all usage billed under the

15 NTA is priced at the third step for General Service customers and the applicable volumetric rate

16 for Rate WS. The volumes billed under the NTA mechanism are shown on customers bills. The

17 applicable volumes have been priced at the third step and volumetric rate under Rate GS and

18 Rate WS respectively on Exhibit MJM - 1. That exhibit reflects an adjustment to test year

19 revenues from Sycamore's Rate GS customers. Sycamore's revenue from its sole Rate WS

20 customer, the City of Aurora, has not been similarly adjusted because the City's weather

21 normalized usage has already been factored into Sycamore's bills during the test year.

SI Page

1 Q9. Please explain adjustments to operating expense.


2 A9. Adjustments to operation and maintenance, depreciation, and taxes other than income tax

3 expense are shown in Exhibit MJM - 2 and explanations and calculations are found on pages I

4 through 8.

5 As shown on pages I through 6 of Exhibit MJM-2, Sycamore is making 13 adjustments to

6 Operation and Maintenance Expenses at present rates.

7 Adjustment no. 2 on page 1 of Exhibit MJM- 2 eliminates all purchased gas expense from the

8 test year operating expenses, FERC Account #804, as such costs, other than unaccounted for gas,

9 are recovered in Sycamore's GCA filings. Sycamore has calculated the cost of unaccounted for

10 gas in the test period by multiplying the company's overall unaccounted-for rate of 0.4%, as

11 reported to the Department of Transportation (DOT) in March 2018 for calendar year 2017, by

12 the gas purchased volumes in the test year GCAs, plus the weather normalization used in the

13 proforma revenue calculations all listed in therms.

14 Adjustment No. 3 on page 2 of Exhibit MJM -2 adjusts Sycamore's operating expenses for

15 additional payroll related expenses not included in the test year. First, Sycamore has included a

16 cost of $38, 793, in FERC Account #870, to increase the test year for operational management

17 services provided by Superior Utility Operations, Inc. during the test year but not billed

18 Sycamore until after the close of the test year. Secondly, Sycamore is adding $21,800 to reflect

19 payroll of Superior Utility Operations, Inc. ("Superior") operations employees who performed

20 overtime work on behalf of Sycamore in October, November and December 2016 but not

21 recorded as an expense by Sycamore until after the test year. Sycamore renegotiated an

6IPage


1 agreement with Superior, effective October 1, 2016, that calls for all overtime worked by

2 Superior employees over and above regular time to be billed directly to Sycamore. Third, all

3 direct employees of Sycamore received an increase in pay effective January 1, 2018.

4 Annualizing these increased salaries requires a positive adjustment of $13, 000 to the test year

5 payroll expense. Fourth, during the test year, Sycamore updated the scope of duties for its

6 employee responsible for Sycamore's system-wide mapping of underground piping and other gas

7 system infrastructure. Having completed the work to create the maps, the cost of which project

8 was treated as a capital expense, going forward this same employee will keep all maps of

9 Sycamore's infrastructure up-to-date, among other functions, the cost of which is an operating

10 expense. Annualizing this cost requires a positive adjustment of $53,699 to Sycamore's test year

11 annual operating expenses in FERC Account #880. Fifth, in May 2018 Sycamore will begin

12 receiving services of a Utility Technician who will be employed by Superior but dedicated full-

13 time to Sycamore projects. The $92,350 addition to Sycamore's test year expenses includes his

14 annual salary, benefits and overhead and is divided equally among FERC Account## 887, 892

15 and 902. Addition of this employee is to needed to allow better management of Sycamore's

16 daily operations as required to comply with increased pipeline safety compliance

17 regulations. This employee will be assigned to various operation and maintenance activities,

18 including meter reading.

19 Adjustment No. 4 on Exhibit MJM- 2, page 3 to Operations and Maintenance Expenses reflects

20 an annual amortization of expenses incurred to process this rate case for Sycamore. The

21 estimated total expense of $226,000 includes the estimated cost oflegal and regulatory

22 professionals as well as sending billing notices to customers regarding this rate case. Sycamore is

7JPage


1 amortizing these costs over 3 years as this represents the expected time frame between rate cases

2 going forward.

3 Adjustment No. 5 on Exhibit MJM-2, page 3 adjusts the expense of the fee annually submitted to

4 the IURC to take into consideration the gas purchased volumes and amounts to reflect

5 normalized weather in therms priced at the most recent gas cost of $0.397/therm. The

6 distribution margins priced at present rates in the test year was added to this total. The sum of the

7 two was multiplied by the current IURC fee billed to their jurisdictional utilities.

8 Adjustment No. 6 on Exhibit MJM -2, page 4 adjusts FERC Account #923 outside services for

9 the cost ofretaining students part-time from DePaul Cristo Rey High School for clerical work in

10 Sycamore's business offices. These services were initiated in August 2017 therefore the test

11 period results were adjusted for the eleven months not reflected in test year expenses.

12 Adjustment No. 7 on Exhibit MJM - 2, page 4 adjusts FERC Account #923 for the other 50% of

13 Superior Utility Operations, Inc. management services provided Sycamore during the test year

14 and going forward but not reflected in test year expenses.

15 Adjustment No. 8 on Exhibit MJM-2, page 4 adjusts Sycamore's per book test year amounts of

i6 uncollectible expense in FERC Account #904 to reflect a three-year average of net bad debt

17 expense, gross write-offs less recoveries, of the twelve-month periods ended September 2015,

18 September 2016, and September 2017. Three years is deemed as a reasonable period to

19 normalize any abnormally large or small bad debt write-off activity.

20 Adjustment No. 9 on Exhibit MJM-2, page 5 is to increase Sycamore's test year expenses by

21 $15,000 to reflect the cost of developing and maintaining welding procedures and training

SI Page


1 programs so Sycamore can better improve its pipeline safety efforts in compliance with the

2 Federal requirement set forth at 49 CFR 192 and under API 1104.

3 Adjustment No. 10 on Exhibit MJM-2, page 5 increases Sycamore's test year expenses for the

4 cost of higher insurance premiums now being paid the Company's insurance company for

5 increased property casualty, liability, workers compensation, and directors and officers

6 insurance. The new policy went into effect in August 30, 2017.

7 Adjustment No. 11 on Exhibit MJM-2, page 5 increases costs under AC 926 - Employee

8 benefits for providing medical insurance and a 401 K savings program to Sycamore's direct

9 employees. Effective January 1, 2018 Sycamore is experiencing an increase in medical insurance

10 premiums of $1, 710 per month. These costs over an annual period are being added to

11 Sycamore's test year expenses. Sycamore will also incur $400 in additional annual cost for

12 contributing funds to direct employees' 401 K saving plan.

13 Adjustment No-. 12 to Exhibit MJM-2, page 6 includes the increase in rental expense incurred by

14 Sycamore for their new operations center, customer service center and company administrative

15 offices. Sycamore transferred its operation to the new facilities in June 2017.

16 Adjustment No. 13 to Exhibit MJM-2, page 6 of Sycamore's test year eliminates the cost of all

17 charitable giving and goodwill advertising.

18 Sycamore is presenting its proforma adjustments under Nos. 14 and 15 to Taxes Other than

19 Income Taxes on page 7 of Exhibit MJM-2.

9IPage


1 Adjustment No. 14 on Exhibit MJM-2, page 7 is additional employer payroll taxes to be incurred

2 on the direct employee payroll increased discussed earlier in the operation and maintenance

3 expense adjustment.

4 Adjustment No. 15 on Exhibit MJM-2, page 7 is to adjust Sycamore's test year to remove the

5 cost of Utility Receipts Tax being recovered through Sycamore's GCA mechanism and only

6 include the cost of Utility Receipts Tax of proforma revenues at present rates for the test year.

7 Sycamore has utilized its proforma revenue for the test year at present rates and reduced such

8 amount by bad debt cost and revenues received from its Wholesale Service rate schedule. Bad

9 debt cost represents revenues not being collected by Sycamore. Revenue from wholesale gas

10 service is from a municipality that is exempt from utility receipts tax.

11 QlO. Please explain the calculation of Sycamore's rate base in this case.

12 AlO. Sycamore's Rate Base as of March 31, 2018 is shown on Exhibit MJM-3. Gas utility

13 plant included CWIP on Sycamore's books and records as of September 30, 2017. As of March

14 31, 2018, however, all of that CWIP had been placed into service. Sycamore has also included

15 additional gas plant in rate base that was put in service within six months of the close of its test

16 period. From these amounts rate base has been credited for Accumulated Depreciation Reserve

17 as of September 30, 2017. An additional credit has been included for the annualized effect of

18 depreciation expense added to the test period on plant placed in service during the test period but

19 receiving less than one year's value of depreciation expense. Also Accumulated Depreciation

20 has been adjusted for depreciation expense occurring on gas plant added post test year.

lOIPage


1 Added to Net Utility Gas Plant on Exhibit MJM- 3 is a 13-month average of the balance of

2 materials and supplies for the 13 months ended September 30, 2017.

3 Finally rate base has been adjusted for the inclusion of cash working capital. Sycamore has

4 utilized the long-established method of determining it requirement for cash working capital in

5 rate base by including one-eighth (1/8) of proforma operation and maintenance expenses

6 excluding purchased gas cost. The total amount of the rate base on Exhibit MJM -3 will be used

7 to determine the revenue deficiency required by Sycamore to earn the overall rate of return

8 supported by witness Cynthia Hughes.

9 Qll. Please explain the tariff changes proposed by Sycamore in this case.

10 Al 1. Attached as Exhibit MJM-4 are draft tariffs containing all of the proposed rates, charges,

11 and changes in rules and regulations being proposed by Sycamore in this rate case. Sycamore is

12 not proposing to add or eliminate any customer rate schedules in this case. Furthermore,

13 Sycamore is not changing the rate structure reflected in its current tariff rate schedules.

14 Sycamore is using the results of its cost of service study, however, to increase the fixed charges

15 in all of its rate schedules to continue through gradualism to move the customer charges to a

16 level that fully recovers the fixed costs per rate schedule incurred by Sycamore when providing

17 gas service. All remaining revenue necessary to earn its proposed rate of return on rate base will

18 be recovered from customers and their appropriate rate schedule based on the cost allocations

19 shown in the cost of service study.

20 In addition, Sycamore is proposing a new tariff sheet, Extension of Company facilities. In the

21 past, Sycamore used contractual agreements to calculate the cost of adding new customers and

lllPage


1 whether a contribution was needed from them. The new tariff defines a standard installation and

2 commits Sycamore to providing free piping, to be installed by Sycamore, from the distribution

3 main to the meter installation. This is a simple procedure and will accommodate many of

4 Sycamore's extensions of its distribution system going forward.

5 In addition, to be consistent with Indiana Senate Bill 560 and with Section 8-1-39-11 of the

6 Indiana Code, Sycamore has added a provision in this new tariff to make rural extensions on its

7 system based on a 20-year discounted cash flow formula.

8 Because Industrial Service extensions are unique, Sycamore will continue to determine the cost

9 of installing the necessary infrastructure for customers in that class to receive gas service on a

10 case-by-case basis.


12 A13. Yes.

12 I Page

DESCRIPTION

Rate GS- General Service Customer Charge Per Month:

Group 1 Meters

Group 2 Meters

Group 3 Meters

Total Bills and Customer Charge Revenue

Distribution Charges:

First 30 therms

Next 70 therms

Next 900 therms

Next 4,000 therms

Over 5,000 therms

Total Therms and Distribution Revenue

Total General Service Revenue

Rate WS - Service to Aurora for Resale Customer Charge Per Month

Distribution Charge -All gas delivered

Total Wholesale Service Revenue

Total Sales Service Revenue

Rate ITS -Interruptible Transportation Service Customer Charge Per Month

Distribution Charge

Total Interruptible Transport Service Revenue

Rate ES- Employment Stabilization Service Customer Charge Per Month

Distribution Charge

Total Employment Stabilization Service Revenue

Rate FT - Firm Transportation Service Customer Charge Per Month

Group 1 Meter

Group 2 Meter

Group 3 Meter

Total Bills and Total Customer Charge Revenue

Distribution Charges:

First 30 therms

Next 70 therms

Next 900 therms

Next 4,000 therms

Over 5,000 therms


Total Firm Transportation Revenue

Special Contract Service Customer Charge Per Month

Distribution Charge

First 45,000 therms

Next 45,000 therms

Over 90,000 therms


Total Special Contract Revenue

Total Transportation Service Revenue

Total Distribution Service Revenue

Sycamore Gas Company Calculation of Proforma Revenue at Present and Proposed Rates

For The Twelve Month Period Ended September 30, 2017 PUBLIC VERSION

Number

of Bills

74,284

1,773

240

76,297

12

Bill Ing

Quantities

(therms)

1,488,847

1,650,951

1,607,628

634,665

787.055

6,169,146

2,334,915

8,504,061

21,321,524

Proforma at Present Rates

Ajustment for Billing Quantity Adjusted

Normal Weather

(therms)

960,350

960,350

960,350

For Normal Weather

(therms)

1,488,847

1,650,951

2,567,978

634,665

787.055

7,129,496

2,334,915

9,464,411

Present

Rates

($/therm)

12

24

75

0.5472

0.4405

0.3218

0.2609

0.2145

900

0.1089

Total Revenue

At Present Rates

$

891,408

42,552

18 000

951,960

814,697

727,244

826,375

165,584

168 823

2 702 724

3,654,684

10,800

254 272

265,072

3,919,756

812,848

4,732,603


Exhibit MJM-1

Adjustment No. 2: Natural Gas Purchased Expense

Sycamore Gas company

Detail of Adjustments

To adjust "Natural Gas Purchase Expense" to eliminated cost of

natural gas recovered through the GCA from base rates

Test Year Purchases - Therms (from GCA's 131-135)

Additional Purchases for normal weather (NTA reports)

Sub-Total

Unaccounted - For Percentage - Sycamore UAFG Report to DOT March 2018

Estimated Unaccounted For Gas

Anticipated Cost of Gas - Per Therm

Source: GCA 137, Feb. - April, 2018, Schedule 3

Total Proforma Natural Gas Purchase Expense

Less: Natural Gas Purchase Expense in Test Year

Decrease in Natural Gas Purchase Expense - AC 804


Exhibit MJM-2

1of7

Details Adjustment

7,818,760

960,350

8, 779,110

0.004

35,116

0.397

13,941

(3,560,327)

(3,546,386)



Adjustment No. 3: Operation and Maintenance Expense Adjustments

To adjust payroll expenses for those not fully reflected in the test year

A/C 870 has been adjusted to include the cost of providing operational

Management services from Superior Utility Operations, Inc not

reflected in the test period

AC 874 has been adjusted to reflect a change in billing from its

contract construction company,Superior Utility Operations, Inc.

for customary services not billed in the test period prior to the January, 2017

change in contract

In January 2018, Sycamore awarded its full time employees an annual

payroll increase. The adjustment has been recorded to AC 920

Sycamore adjusted AC 880 for additional expense

to annualize mapping costs.

In May, 2018 Superior Utility Operations, Inc will be adding a Utility Technician

- perform construction and maintenance activities as assigned.

This person would enable the Company to re-assign an existing contractor employee

to a new role, to comply with expanding pipeline safety compliance

and management of work activities. The fully loaded cost will be billed to

AC 887, AC 892 and AC 902 on the basis 1/3 to each

Total increase in payroll expenses

Detail

38,793

21,800

13,000

53,699

'Adjustment

197,843


Exhibit MJM-2

2 of7



Adjustment No. 4 - Operation and Maintenance Expenses

To adjust test period AC 928 - Rate case Amortization Expenses to

reflect the annual cost of preparing the current case amortized

over a 3 year period.

Sycamore's estimated incremental cost of preparing, filing and

possibly litigating a base rate filing before the IURC

Amortization Period - Years

Annual expense

Adjustment No. 5 - Operation and Maintenance Expenses

To adjust test year AC 928 - Regulatory Commission Expenses

to reflect the current IURC fee applied to proforma operating

revenue at present rates.

Natural Purchased Gas Costs for the test year

Additional Purchases on normalized weather

Cost of Gas from GCA 137, Schedule 3

Additional Gas Cost

Proforma distribution revenue at present rates

Total Operating Revenue

IURC Assessed Fee for 2017

Total Annualized Cost

Amount in the test year

Annual adjustment

960,350

$0.397


Exhibit MJM-2

3 of7

Detail

226,000

3

3,560,327

381,259

4,732,604

8,674,190

0.0013308680

11,544

8,940

Adjustment

75,333

2,604



Adjustment No. 6 - Operation and Maintenance Expense

In August 2017 Sycamore entered into a work study contract with

DePaul Cristo Rey High School for students to provide clerical

services during the work week.

The annual level of the work study contract

Amount recorded during the test year to AC 923

Adjustment

Adjustment No 7 - Operation and Maintenance Expense

To adjust AC 923 outside services for Management Service provided

by Superior Utility Operations, Inc not reflected

within the test year


To adjust AC 904 Uncollectible Accounts Expense to reflect a

three year average of Net bad debt write -offs (actual amounts written

off less recoveries) for the period October 2014 through September 2017

Three years of net bad debt written off

3 year

Three year average

Amount recorded in AC 904 during test period

Adjustment

Detail

30,000

2,900

21,110

3 7,037

(176)


Exhibit MJM-2

4of 7

Adjustment

27,100

38,793

7,213




Sycamore Gas Company is improving its pipeline safety procedures and

is implementing an ongoing training procedure for welding in accordance with

Federal requirement 49 CFR 192 under API 1104

Adjustment to AC 874 - Training Expenses


Effective August 30 Sycamore property Casualty insurance was increased

its Property casualty insurance provider that its policy would increase

Policy for 2017and 2018 period

Policy for 2016 and 2017 period

Adjustment to AC 924


Sycamore is experiencing a monthly increase in medical insurance

premiums effective January 1, 2018

Monthly premiums effective 2018

Monthly premiums during 2017

Monthly increase

Number of months not in test year

Adjustment to AC 926 - Employee Benefits

Sycamore has contributed additional amounts into employee

401 K accounts related to the payroll increase not reflected in the test year

Detail Adjustment

256,314

213,736

6,320

4,610

1,710

12

15,000

42,578

20,520

400


Exhibit MJM-2

5 of7




In May, 2017 Sycamore moved into a new operation center to

better meet the needs of its customers. The new facility

is under a lease arrangement. Sycamore will adjust its test period

for the higher cost of the lease

Monthly cost of new building lease

Number of months

Annual cost of new building lease

Amount of building rents in test year

Adjustment to AC 931- Rents


Sycamore is eliminating all charitable giving and

institutional advertising in AC 930 occurring in the test year

Details Adjustment

6100 12

73200

56971

16,229

(3,247)


Exhibit MJM-2

6 of7

Sycamore Gas Compa_ny


Adjustment No. 15 -Taxes other than Income Taxes

Sycamore Gas Company will incur an additional amount of

Payroll Taxes (FICA) on the annually increase of $13,000

awarded full time employees

Adjustment to Taxes other than Income taxes

Adjustment No. 16 - Taxes other than Income Taxes

Sycamore Gas Company will adjust its utility gross receipts tax expense

to reflect the amount based on the test year distribution margin

recovered in this case at present rates

Gas Service Distribution Revenue Proforma at Present Rates

Less Wholesale customer receipts

Less Bad Debt expense

Receipts subject to Utility Receipts Tax

Utility Receipts Tax Rate

Proforma at Present Rates

Gross Receipts in the test year

Adjustment to Taxes other than Income Taxes

Detail

4,732,605

265,072

7.037.00

4,460,496

1.40%

62,446.94

110,162

Adjustment


Exhibit MJM-2

7 of7

1,000

1,000

(47,715)

(46,715)


Calculation of Original Cost Rate Base Net of Accumulated Depreciation

At March 31, 2018

Utility Plant in Service as of September 30, 2017

Utility Plant in Service - Six Months Subsequent to Test Year (March 31, 2018)

CWIP as of March 31, 2018

Total Utility Plant in Service as of March 31, 2018

Accumulated Depreciation as of September 30, 2017

Additional Annualized Depreciation Expense to test year

Depreciation Expense on utility plan added through March 31, 2018

Total Accumulated Depreciation Reserve at March 31, 2018

Total Utility Plant in Service Net of Accumulated Depreciation

Material and Supplies - 13 month Average

Cash Working Capital

Operation and Maintenance Expense as Adjusted

Allowance for 45 days

Total Cash Working Capital

Total Original Cost Rate Base net of Accumulated Depreciation

Detail

30,814,180

291,678

365

15,559,057

29,544

9,475

2,655,366

0.125


Exhibit MJM-3

Adjusted

31,106,223

15,598,076

15,508,147

275,591

331,921

16,115,659


Exhibit MJM-4

Proposed Sycamore Gas Tariff

Sycamore Gas Company Tariff for Gas Service 1.U.R.C. No. G-2

Extension of Company Facilities

Obligation to Serve

Original Sheet No. Page No. 1 of 3

The utility will maintain an obligation to extend its gas facilities to customers subject to

restrictions involved in adding new customers and adding facilities for existing customers also

subject to curtailment provisions found elsewhere in the company's tariff and economic tests

described further below.

Standard Installation

The Company shall provide to any Residential Customer, without charge, a Standard Installation. A Standard Installation shall consist of up to 150 feet of underground service pipe to be supplied by a distribution main operating at 60 psig or less along with a meter and other equipment necessary to provide the service. All costs in excess of such Standard Installation shall be included, along with the cost of distribution mains in the economic tests described below.

The Company will supply a non-Residential Customer served by a distribution main operating at 60 psig or less without charge for a service up to 150 feet of 2-inch Iron Pipe Size or smaller diameter from the main to the service connection at the meter set with a delivery pressure of 10 psig or less. A charge will be applied by the Company for a service in excess of 150 feet.

Upon request for Gas Service by a prospective Customer or a group of prospective Customers (subdivision) located in the same area, the Company will extend without charge its facilities including distribution mains, underground service pipes, meters and other equipment necessary to provide the service, in the following circumstances:

1) That Company's estimate of the present value of its Non-Gas Cost Revenue, calculated at the applicable monthly customer charge and distribution charges under Rate GS provided to the prospective Customer(s) for a period of five and one-half (5.5) years, is equivalent to or in excess of Company's estimate of the following:

a. the cost of installing distribution main(s) and other facilities, and b. the cost in excess of a Standard Installation defined above, and;

2) The prospective Customer must be considered permanent, and the connected load provides an expected usage level to warrant the capital expenditure involved.

Rural Area Extension

Upon request for Gas Service by a prospective Customer in a Rural Area (defined below), or a group of prospective Customers located in the same Rural Area, that is (or are) eligible to receive service under Rate GS - General Service, Company will extend without charge its

Effective: ------Issued by John Browner, President


Tariff for Gas Service l.U.R.C. No. G-2

Rural Area Extension (Continued)

Original Sheet No.

Page No. 2 of 3

facilities including regulator stations, distribution mains, underground service pipes, meters and other equipment necessary to provide the service provided:

1) That Company's estimate of the present value of its Non-Gas Cost Revenue, calculated at the applicable monthly customer charge and distribution charges under Rate GS, provided to the prospective Customer(s) for a period of twenty (20) years is equivalent to or in excess of Company's estimate of the following:

a. the cost of such distribution main(s) and other facilities, and b. the cost in excess of a Standard Installation as defined above and;

2) The prospective Customer must be considered permanent, and the connected load provides an expected usage level to warrant the capital expenditure involved and;

3) Company's capital investment in extension of facilities to such Rural Areas pursuant to this section on and after (when TOSIC plan is approved to a period seven (7) years thereafter has not exceeded an amount to be provided in the TOSIC filing)

4) "Rural Area" is defined, for purposes of this section, as any area within Company's service territory that is unincorporated, or other areas as approved by the Commission.

Deposits

If the cost of the facilities necessary to provide the Gas Service requested exceeds the applicable allowance described above; Company may require either a deposit or adequate provision of the payment of a deposit equal to the cost of the facilities extension in excess of the allowance limit.

Any refundable extension deposit accepted by Company shall be subject to refund until the expiration of the six-year contract period. For each Customer connected to the extension, Company shall refund an amount by which five and one-half (5.5) times the estimated annual Non-Gas Cost Revenue described above for gas appliances actually installed exceeds the estimated cost of connecting such Customer. At no time shall the aggregate refund made to any depositor exceed the amount of extension deposit received from such depositor. Any deposit to be refunded will be made on annual installments.

Upon request for Gas Service by a prospective Customer where, in Company's opinion, the facilities extension is of such length and the prospective Non-Gas Cost Revenue which may be developed by it is so meager as to make it doubtful whether the Non-Gas Cost Revenue from the extension would pay a fair return on the investment involved; or, in the case of a real estate development with slight or no immediate demand for service; or in the case of Industrial installations requiring slight or irregular service and requiring extensive equipment.

Effective: _____ _

Issued by John Browner, President

Sycamore Gas Company Tariff for Gas Service 1.U.R.C. No. G-2

Targeted Economic Development Projects

Original Sheet No. Page No. 3 of 3

Targeted Economic Development Projects pursuant to Ind. Code Ch. 8-1-39 are excluded from the provisions above and economics will be determined on a case by case basis

Effective: _____ _

Issued by John Browner, President

Documents

OFFICIAL EXHIBITS FILED...Mar 18, 2010 · petition: Johns S. Browner, Cynthia S. Hughes, Nichole M. Clement, John T. Stenger and Michael J. Martin. The same testimony was also filed