HomeMy Public PortalAboutExhibit MIEC 105H - Public Service Commission Stipulation and AgreementAttachment 7
BEFORE THE PUBLIC SERVICE COMMISSION
STATE OF MISSOURI
In the Matter of the Application of Southern )
Union Company d/b/a Missouri Gas Energy, )
The Laclede Group, Inc. and Laclede Gas Company )
for an Order Authorizing Sale, Transfer, and
Assignment of Certain Assets and Liabilities
from Southern Union Company to Laclede Gas
Company and, in Connection Therewith, Certain
other Related Transactions
Case No. GM-2013-0254
STIPULATION AND AGREEMENT
TABLE OF CONTENTS
BACKGROUND 2
APPROVAL OF THE TRANSACTION 4
I. GENERAL 4
II. CONDITIONS 7
1. RATE MORATORIUM 7
2. RATE BASE OFFSET 8
3. PREMIUM AND ACQUISITION COSTS 8
4. TREATMENT OF REGULATORY ASSETS 10
5. AFFILIATE TRANSACTIONS AND COST ALLOCATION MANUAL (CAM) 11
6. ADHERENCE TO PREVIOUS COMMISSION ORDERS AND
STIPULATIONS AND AGREEMENTS 11
7. TARIFFS 11
8. DEPRECIATION RELATED -ISSUES 12
9. CREDIT IMPACTS AND REMEDIAL MEASURES 13
10. PROTECTION FROM ADVERSE CAPITAL COST IMPACTS 14
11. OTHER FINANCIAL CONDITIONS 15
12. SERVICE QUALITY CONDITIONS 17
13. CONTINUING SERVICES AGREEMENT (CSA) 21
14. GAS SUPPLY AND HEDGING PLANS 23
15. GAS SAFETY 25
16. INSULATION OF MGE FROM LG BUSINESS 26
17. FURTHER INSULATING CONDITIONS 26
1
18. INTERSTATE AND INTRASTATE TRANSPORTATION AND
STORAGE COSTS 29
19. TRANSPORTATION TARIFFS [ALL CUSTOMER CLASSES] 31
20. ENERGY EFFICIENCY PROGRAMS 32
21. LOW INCOME WEATHERIZATION PROGRAM 32
22. ASSUMPTION OF KCMO FRANCHISE AGREEMENT 32
23. ISRS MONITORING AND REPORTING REQUIREMENTS 32
24. RETAIL GAS MARKETING PLAN REPORTING 33
25. TREATMENT OF INCIDENT -RELATED FEES, COSTS AND EXPENSES 34
26. DEFERRED TAXES 34
27. FILING OF ANNUAL REPORTS 34
28. ASSUMPTION OF EXECUTION RISK 34
29. ADHERENCE TO MISSOURI RULES 34
30. NO DETRIMENTAL IMPACT 35
31. COMMISSION AUTHORITY 35
32. ACCESS TO INFORMATION 35
33. COMMITMENTS ARE MISSOURI JURISDICTIONAL 37
34. FERC APPROVAL OF JOINT APPLICATION 37
35. SUG/MGE DATA ROOM FILES 37
III. PREFILED TESTIMONY TO BE RECEIVED INTO EVIDENCE 38
IV. NO DETRIMENT 38
V. GENERAL PROVISIONS 38
2
BEFORE THE PUBLIC SERVICE COMMISSION
OF THE STATE OF MISSOURI
In the Matter of the Joint Application of Southern
Union Company d/b/a Missouri Gas Energy
The Laclede Group, Inc., and Laclede Gas
Company for an Order Authorizing the Sale,
Transfer, and Assignment of Certain Assets and
Liabilities from Southern Union Company to
Laclede Gas Company and, in Connection
Therewith, Certain other Related Transactions
Case No. GM-2013-0254
STIPULATION AND AGREEMENT
COME NOW Southern Union Company d/b/a Missouri Gas Energy ("SUG"), The
Laclede Group, Inc. ("LG"), Laclede Gas Company ("Laclede Gas" or the "Company")1, the
Staff of the Missouri Public Service Commission ("Staff'), Office of the Public Counsel
("OPC"), City of Kansas City, IBEW Local Union No. 53, Midwest Gas Users Association and
Missouri Department of Natural Resources (collectively "Signatories") and respectfully request
that the Missouri Public Service Commission ("Commission") approve the following Stipulation
and Agreement (hereinafter referred to as the "Stipulation" or "Agreement" or "Stipulation and
Agreement"). Counsel for the Kansas City Power & Light Company, KCP&L Greater Missouri
Operations Company, a non -signatory party to this case, has had an opportunity to review this
Stipulation and Agreement and has indicated he will not object to it or request a hearing on the
issues resolved. Counsel for United Steelworkers District 11, AFL-CIO does not join in this
Agreement at this time and is still considering its position. In support of this Stipulation and
Agreement, the Signatories state the following:
' Upon the closing of this Transaction any reference in this Stipulation and Agreement to "Laclede Gas" or "Laclede
Gas Company" or "Company" in connection with events occurring after that date are intended to include the MGE
Division unless otherwise specified herein.
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BACKGROUND
On January 14, 2013, Southern Union Company, d/b/a Missouri Gas Energy, The
Laclede Group, Inc., and Laclede Gas Company ("Joint Applicants") filed a Joint Application
asking the Commission to approve a transaction (the "Transaction") in which Laclede Gas would
acquire the entire franchise, works, and systems of Southern Union's Missouri Gas Energy
operating division ("MGE" or "MGE Division" or "MGE operating division") all in accordance
with a certain Purchase and Sale Agreement ("PSA"). In addition, by the Joint Application,
Laclede Gas seeks authority from the Commission to obtain the funds necessary to finance the
Transaction. Also, filed with the Commission in support of the Joint Application were the direct
testimonies and schedules of Mark D. Waltermire, Suzanne Sitherwood, Steven L. Lindsey and
Robert J. Hack.
By Order issued January 15, 2013, the Commission directed that notice of the filing of
the Joint Application be given to potentially interested persons and entities and established
February 13, 2013 as a deadline for the filing of Applications to Intervene.
Interventions were filed and granted by the Commission on behalf of United
Steelworkers District 11 AFL-CIO; City of Kansas City, Missouri; IBEW Local Union No. 53;
Kansas City Power & Light Company and KCP&L Greater Missouri; Midwest Gas Users'
Association and the Missouri Department of Natural Resources.
On February 4, 2013, Laclede Gas filed its Motion for Leave to Enter into Certain
Interest Rate Swap Agreements which request was approved by Commission Order issued on
February 13, 2013.
In response to a Motion for an Order Establishing an Early Technical Conference filed on
February 14, 2013 by the Joint Applicants, the Commission that same day by order scheduled a
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Technical Conference for March 18, 2013, and directed the parties to file a proposed Procedural
Schedule on or before March 22, 2013.
On March 13, 2013, the Joint Applicants filed their First Amended Joint Application by
Interlineation and the Supplemental Direct Testimony of Suzanne Sitherwood.
Certain of the Signatories appeared at the Technical Conference on March 18, 2013, and
thereafter on March 21, 2013 the Joint Applicants and Staff filed with the Commission a motion
requesting an extension of the deadline for filing a proposed procedural schedule. By order
issued March 22, 2013, the Commission extended the time to file a procedural schedule to April
15, 2013.
On April 16, 2013, certain Signatories (LG, Laclede Gas, MGE, and Staff) filed a Motion
for One Day Extension of Time and Status Report seeking an additional two weeks to undertake
discovery and to engage in discussions prior to establishing a formal procedural schedule.
On April 22, 2013, the Commission issued its Order Further Extending Time to File
Proposed Procedural Schedule which set a filing date no later than April 29, 2013.
On April 27, 2013, a Joint Motion for Extension of Time was filed seeking additional
time to discuss procedural mechanisms that would allow Laclede Gas, Staff and other parties to
facilitate settlement of Laclede's rate case (GR-2013-0171), and also allow the acquisition case
parties to reach an agreement on a procedural schedule.
On May 13, 2013, Staff, LG, Laclede Gas, and MGE filed a Joint Motion for Further
Extension of Time seeking a 10 day extension to file procedural schedule for good cause shown.
On May 22, 2013, having resolved all issues affecting the setting of a procedural
schedule, the parties filed a Joint Motion to Establish Procedural Schedule which the
Commission adopted in its Order Adopting Procedural Schedule on May 29, 2013.
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Having engaged in discovery or having had the opportunity to engage in discovery, the
Signatories met to discuss resolution of this matter on a number of occasions. As a result, the
Signatories have now reached a Unanimous Stipulation and Agreement set forth below which
they recommend to the Commission, subject to the conditions and representations contained in
the Agreement, that the acquisition of the MGE assets by the Laclede Gas Company will be
reasonable and not detrimental to the public interest. This Agreement disposes of all issues in
this case.
APPROVAL OF THE TRANSACTION
In view of the foregoing, the Signatories agree that:
GENERAL
The Commission should issue its Order:
(a) authorizing SUG and Laclede Gas to perform in accordance with the terms of the
PSA;
(b) authorizing the sale, transfer and assignment of certain assets and liabilities of
Southern Union as more fully described in the PSA, from SUG to Laclede Gas, with a requested
effective date of July 31, 2013, and a closing date effective as of the first of September 2013,
subject to the provisions of the PSA and Southern Union's unilateral right to waive the condition
of simultaneous closing of the transaction with Laclede Gas and the sale of its New England Gas
Company assets to Plaza Massachusetts Corp.;
(c) transferring from SUG to Laclede Gas SUG's certificates of convenience and
necessity or granting a certificate or certificates of convenience and necessity authorizing
Laclede Gas to provide natural gas service as a gas corporation and public utility, subject to the
jurisdiction of the Commission, in the service areas presently served by SUG through MGE and,
in connection therewith, waiving the requirements of 4 CSR 240-3.205;
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(d) authorizing Laclede Gas to provide natural gas service in the areas served by SUG
through its MGE operating division in accordance with the rules, regulations, rates and tariffs of
MGE as may be on file with and approved by the Commission on the effective date of the
closing of the transaction, including the tariff sheets reflecting the existing base rates, ISRS rates
and purchase gas adjustment of MGE and authorizing Laclede Gas to adopt said tariff sheets, and
to operate under the same as they may be changed from time to time as provided by law;
(e) authorizing Laclede Gas to adopt SUG's authorized depreciation rates for the
involved assets;
(f) authorizing Laclede Gas to raise up to and including $1.02 billion, at any time
beginning July 31, 2013 and ending one year after closing of the Transaction, by issuing
common or preferred stock, receiving paid -in -capital, and issuing long-term indebtedness,
including debt evidenced by First Mortgage Bonds, by using the Laclede Gas assets and the
MGE assets acquired from Southern Union as security as may be necessary in connection with
the financing of the transaction contemplated by the PSA and this Joint Application or as may be
necessary in accordance with the terms and conditions of any of Laclede Gas' financing
instruments and to execute, enter into, deliver and perform in accordance with all necessary
agreements, notes and other documents as are necessary to issue the debt;
(g)
finding in accordance with Section 393.200 RSMo, that the money, property or
labor to be procured or paid for by Laclede Gas through the issuance and sale of debt and equity
is reasonably required and necessary for the purposes set forth above and will be used therefore
and that such purposes are not in whole or in part reasonably chargeable to operating expenses or
to income;
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(h) authorizing SUG to transfer to Laclede Gas and Laclede Gas to acquire and
record on its books and records the current levels of certain assets and liabilities of SUG related
to the MGE, assets;
(i) authorizing Laclede Gas to account for MGE's pension benefit costs on a basis
consistent with MGE's currently approved methodology as established in MGE Case No. GR-
2009-0355 stipulation and agreement to use FAS 87 calculations for regulatory purposes that do
not reflect the impact of purchase accounting and that the prepaid pension asset receives similar
treatment as the prepaid pension asset under MGE's approved methodology;
(j) authorizing Laclede Gas to account for the MGE gas employees and retirees
postretirement welfare benefit cost on a basis consistent with the methodology used by SUG
immediately prior to the sale and finding that the FAS 106 calculations do not reflect the impact
of purchase accounting;
(k) authorizing SUG, effective upon the closing of the transaction, to terminate its
responsibilities as a gas corporation in Missouri subject to the jurisdiction of the Commission;
(1) authorizing SUG and Laclede Gas to enter into, execute and perform in
accordance with the terms of all other documents which may be reasonably necessary and
incidental to the performance of the Transaction which is the subject of the PSA and this Joint
Application;
(m)
granting such other relief as may be deemed necessary to accomplish the purposes
of the PSA and the Joint Application, as amended, and to consummate the sale, transfer and
assignment of the assets and related transactions pursuant to the PSA.
(n) directing Laclede Gas to submit to the Commission within sixty (60) days of
closing the transaction a listing and description of all items that Laclede Gas exercised under the
authority in paragraph (m) above.
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II CONDITIONS
Laclede Gas has represented to the Signatories that it intends to own and operate two
divisions in Missouri, the MGE Division (defined on page 1) and the Laclede Division, which
will serve the territories currently served by Laclede Gas. The Signatories recommend that the
Commission approve the proposed Transaction involving the sale of the assets of SUG to
Laclede Gas, subject to the following conditions:
1. RATE MORATORIUM
Except as provided herein, Laclede Gas Company shall not file a general rate case
for its Laclede Gas service territory for non -gas costs for either division of the combined entity
prior to October 1, 2015, unless there is the occurrence of a significant, unusual event that has a
major impact on any of its Missouri service territories. For purposes of this agreement, major
impact is defined as loss of $5,000,000 of net income of the combined entity from (i) terrorist
activity or an act of God; (ii) a significant change in federal or state tax laws; or (iii) a significant
change in federal or state utility or environmental laws or regulations, or (iv) a significant change
in financial markets. The Laclede and MGE Divisions will be permitted to file ISRS requests
which conform to Missouri statutes, throughout the term of the general rate case moratorium, but
neither Laclede Gas nor its MGE Division shall seek throughout the expected term of the
Moratorium to use any statutory provision providing for the tracking and recovery or return of
increases or decreases in uncollectible expense, including the provisions of Senate Bill 240 as
truly agreed to and passed in the 2013 session of the Missouri General Assembly.
Laclede Gas will be permitted to file a general rate case for its MGE Division service
territory by no later than September 18, 2013. If Laclede Gas does not file a general rate case for
its MGE division service territory by September 18, 2013 then Laclede Gas Company shall not
file a general rate case for its MGE division service territory prior to October 1, 2015.
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For the first general rate case filing made by Laclede Gas subsequent to October 1, 2015,
Laclede Gas shall include both its Laclede and MGE Division service territories. For any future
rate case filings by Laclede Gas after the first joint rate case filing, nothing in this Stipulation and
Agreement precludes any party from asserting or challenging the lawfulness and reasonableness
of Laclede Gas receiving an increase to general rates for one of its regulated divisions without
having a rate case involving its entire regulated operations by including both Laclede Gas
Divisions.
2. RATE BASE OFFSET
Laclede Gas shall include a rate base offset for its MGE Division in the amount of $125
million. Laclede Gas' MGE Division shall amortize this rate base offset over a period of ten
years commencing on the effective date of close. For clarification, the outstanding balance of
such rate base offset shall serve to reduce rate base for rate making purposes in the context of all
future rate proceedings during the amortization period, which will effectively prevent customers
from paying a return on such rate base offset. This shall result in lower rates and charges in
future periods. .
3. PREMIUM AND ACQUISITION COSTS
a. Premium. The acquisition premium is the total purchase price above net book
value. The amount of any acquisition premium paid for MGE in connection with the Transaction
shall not be recovered in retail distribution rates. Nothing herein shall preclude any party to this
Agreement from taking a position in any future ratemaking proceedings involving the Laclede or
MGE Divisions in Missouri regarding the ratemaking measures and adjustments necessary to
ensure no impact from the acquisition premium on rates. Neither Laclede Gas nor its MGE
division shall seek either direct or indirect rate recovery or recognition of any acquisition
premium in any future general ratemaking proceeding in Missouri. In addition, neither Laclede
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Gas nor its MGE division shall seek to recover in Missouri the amount of any acquisition
premium in the Transaction as being a "stranded cost" regardless of the terms of any legislation
permitting the recovery of stranded cost from Missouri ratepayers.
b. Transaction Costs. Transaction costs are those costs incurred to
effectuate and close the Transaction. Laclede Gas including its MGE division shall not ever seek
to directly or indirectly include or recover in any future proceeding any transaction costs, which
as defined herein include, but are not limited to, outside service costs relating to gaining
regulatory approval, development of transaction documents, investment banking costs, and costs
related to raising equity incurred prior to closing of the Transaction. Neither Laclede Gas nor its
MGE division shall seek either direct or indirect rate recovery or recognition of any transaction
costs through any purported acquisition savings adjustment (or similar adjustment) in any future
general ratemaking proceeding in Missouri. See Attachment 1.
c. Transition Costs. Transition Costs are those costs incurred to integrate and
merge the two entities into one organization, and includes integration planning and execution,
and "costs to achieve." Transition costs include capital and non -capital costs. Non -capital
transition costs can be ongoing costs or one-time costs. See Attachment 1.
(1) Capital Transition Costs. All one-time capital -related transition
costs shall be amortized over a period consistent with their current Commission authorized
depreciation rate.
(2) On -going Non -Capital Transition Costs. Such transition costs
shall be expensed on Laclede Gas' books as incurred. However, in no event shall any amount of
markup for transition services that are provided by SUG above actual cost be included in the
determination of future rates for Laclede Gas.
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(3) One -Time Non -Capital Transition Costs. The Signatories agree
that one half of one-time non -capital transition costs incurred no later than the first five years
after closing, as described in Attachment 1, shall be amortized over a period of five years
beginning upon the effective date of the rates resulting from the next rate case filed by the
Laclede and MGE Divisions on or after October 1, 2015. Laclede Gas shall provide in any rate
case a listing of all the annual cost reductions by FERC divisional accounts related to the
synergies that the Company alleges justified the deferred transition costs. Laclede Gas shall not
include in customer rates any amount of transition costs that exceed the level of cost reductions
actually experienced by the Company. Laclede Gas will develop and maintain documentation
supporting the cost reductions and transition costs information required to justify recovery of
eligible transition costs consistent with the provisions of this agreement. Any party shall be free
to challenge Laclede Gas' representation of eligible transition costs and offsetting savings.
Laclede Gas shall record and separately identify all one-time transition costs by month, by FERC
account and provide a report of all such costs to the Staff and OPC each year on January 15th
until such time as the Company files its next general rate case. Such report shall identify with
specificity the costs reductions resulting from the incurrence of the one-time transition costs.
4. TREATMENT OF REGULATORY ASSETS
Until otherwise ordered by the Commission, the pre -acquisition regulatory assets of
Laclede Gas and MGE relating to Pensions, OPEB's, low-income energy affordability and
weatherization programs, energy -efficiency programs, deferred Kansas ad valorem tax payments
and any other regulatory deferrals approved by the Commission prior to the date of filing this
Stipulation and Agreement shall be accounted for separately and, for ratemaking purposes, shall
be eligible for inclusion in the cost of service for the company that originally booked the asset in
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accordance with the Commission approved terms and conditions that created or continued the
asset.
5. AFFILIATE TRANSACTIONS AND COST ALLOCATION MANUAL
(CAM)
The Laclede and MGE Divisions shall comply with the Commission's Affiliated
Transaction and Marketing Affiliate Transaction Rules, 4 CSR 240-40.015 and -40.016, and any
variances or waivers granted by the Commission thereto. This agreement relating to affiliate
transactions rule annual reporting requirements shall not waive any part of the record keeping
requirements of Laclede Gas or its parent, or any of its affiliates as required by the Affiliate
Transaction and Marketing Affiliate Transactions Rules. Laclede Gas shall provide Staff and
OPC full access to records of affiliated entities in accordance with the Affiliate Transaction and
Marketing Affiliate Transaction Rules and any variances or waivers granted by the Commission
thereto. Laclede Gas shall file a Stipulation and Agreement in Case No. GC-2011-0098 within
fourteen days of filing the Stipulation and Agreement in this case.
6. ADHERENCE TO PREVIOUS COMMISSION ORDERS AND
STIPULATIONS AND AGREEMENTS
The Laclede and MGE Divisions shall comply with all requirements still effective after
closing resulting from all Commission -approved stipulation and agreements and Commission
orders in all cases applicable to Laclede Gas Company and MGE and MGE predecessor
companies so long as such agreements and orders have not been superseded by a subsequent
Commission order, unless specifically addressed in this Stipulation and Agreement.
7. TARIFFS
Laclede Gas shall file with the Commission an adoption notice to be effective upon the
closing of the Transaction adopting the rates, tariffs, rules and regulations for gas service then in
effect for SUG's Missouri jurisdictional gas operations which are the subject of this proceeding,
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and will continue all services currently provided by SUG through its MGE operating division in
Missouri without interruption, subject to any changes to the rates, tariffs, rules regulations and
services hereafter made in accordance with applicable law.
8. DEPRECIATION RELATED -ISSUES
a. Laclede Gas shall maintain all records necessary to meet requirements of
the Uniform System of Accounts, gas utility depreciation studies and rate case filings including
all requirements presented in Commission Rules 4 CSR 240-40. Data maintained and provided
for gas utility depreciation studies shall include cost of removal and salvage associated with plant
retirements. This data shall be provided to Staff and OPC upon request or as ordered by the
Commission.
b. SUG shall transfer all plant and depreciation reserve records to Laclede
Gas in compliance with the format set forth in Title 18: Conservation of Power and Water
Resources, Part 201 — Uniform System of Accounts Prescribed For Natural Gas Companies
Subject To The Provisions Of The Natural Gas Act (FERC USOA). Laclede Gas shall also
maintain plant by account that allows for the specific identification of the assets acquired from
SUG to the extent such plant account data is available from SUG.
c. Laclede Gas shall adopt the currently ordered depreciation rates for the
involved assets acquired from SUG approved by the Commission in Case No. GR-2009-0355
and attached as Attachment 2.
d. Laclede Gas shall conduct an audit of plant in service as recorded in its
Continuing Property Record (CPR) according to the requirements of 4 CSR 240-40.040 Uniform
System of Accounts Gas Corporations for both the Laclede and MGE Divisions in conjunction
with or prior to the next depreciation study for either or both divisions submitted pursuant to
Commission rules after October 1, 2015. Any omissions or discrepancies noted in these listings
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shall be promptly reported to the Manager of the Engineering and Management Services Unit of
the Missouri Public Service Commission.
9. CREDIT IMPACTS AND REMEDIAL MEASURES
In the unanticipated event that Standard & Poor's ("S&P") Moody's, or Fitch downgrade
Laclede Gas' credit rating to or below BBB- (or each rating agerey's equivalent) =where the "
business or financial risk introduced by this Transaction was a significant contributing factor to
the downgrade, Laclede Gas commits to file:
a. Notice with the Commission with copiesto the Signatories within five (5). .
business days;
b. A pleading with the Commission within, 60 days which shall include the
following:
(1) A plan identifying all reasonable steps, taking into account the costs,
benefits and expected outcomes of such actions, that will be to maintain or restore Laclede
Gas' credit rating to a notch or more above BBB- . If Laclede Gas' plan does not involve taking
steps to maintain or restore its credit rating to a notch or more above BBB-, then Laclede Gas
shall concisely state why the cost of such steps is not reasonable or necessary;
(2) Additionally, Laclede Gas shall specifically address the impact, or lack"
thereof, it believes the BBB- or below grade credit rating has had and will have on its capital
costs;
(3)
Documentation, including but not limited to, a cost of capital study
showing how Laclede Gas will not pass along higher capital costs to its Missouri customers,
directly or indirectly, due to the downgrade.
(4) File with the Commission, every 45 days thereafter until Laclede Gas has
regained its a credit rating above BBB-, a status report with respect to the implementation of
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steps to restore its credit rating above BBB-, and a study that estimates the increased cost of
capital, if any, Laclede Gas has incurred due to a non -investment grade credit rating.
(5)
If the Commission determines that Laclede Gas' BBB- or below credit
rating has caused its service to decline, Laclede Gas shall be required to file a report that
demonstrates to the Commission that it can adequately safeguard capital produced and secured
by its public utility assets. If Laclede Gas cannot sufficiently demonstrate this ability, then
Laclede Gas shall execute reasonable steps to restore its credit rating to above BBB- status.
10. PROTECTION FROM ADVERSE CAPITAL COST IMPACTS
a. Laclede Gas shall not recommend an increase to the cost of capital for its
Laclede or MGE Divisions as a result of this Transaction. Any net increases in the cost of
capital Laclede Gas seeks shall be supported by documented proof: (a) that the increases are a
result of factors not associated with the Transaction; (b) that the increases are not a result of
changes in business, market, economic or other conditions caused by the Transaction; and (c)
that the increases are not a result of changes in the risk profile of Laclede Gas caused by the
Transaction. Notwithstanding any other paragraph of this Stipulation and Agreement, Laclede
Gas shall ensure that the retail distribution rates2 for its customers shall not increase as a result of
the Transaction. The provisions of this section are intended to recognize the Commission's
authority to consider, in appropriate proceedings, whether this Transaction has resulted in capital
cost increases for Laclede Gas — due to a credit ratings downgrade or any other factor resulting
from the Transaction — and to disallow such capital cost increases from recovery in Laclede Gas'
retail distribution rates.
2Retail distribution rates "shall include fixed monthly charges, volumetric delivery charges, Purchased Gas
Adjustment and Actual Costs Adjustment rates."
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b. Laclede Gas shall use good faith efforts to fulfill the foregoing
commitment as well as all of its other commitments in this Stipulation and Agreement and that
failure to comply may expose it to penalties as provided by law.
c. Laclede Gas shall provide documentation that it has access to adequate
working capital short-term lines of credit for the addition of MGE operations.
d. In the event that there is a downgrade to Laclede's current rating, Laclede
shall notify the Staff and OPC.
11. OTHER FINANCIAL CONDITIONS
a. If Laclede Gas' credit rating and/or quality declines primarily because of
the acquisition, then to the extent there are known and measurable increases in financing costs,
such as higher commercial paper or credit facility costs, on a net basis considering all other
capital cost effects of the Transaction, then these higher costs shall not be included in Laclede
Gas rates for either Division, whether through gas adjustment clauses, infrastructure replacement
surcharges or permanent rates.
b. Prior to its current financing authorization expiring, Laclede Gas shall
submit a financing application requesting authority in accordance with the requirement of
Section 393.200 RSMo. Laclede Gas shall file a 60-day notice of intention to file a financing
application. Laclede Gas shall maintain records for purposes of identifying and quantifying
unreimbursed expenditures for the combined Laclede and MGE Divisions with zero as the
starting balance for its MGE division.
c. Laclede Gas shall not provide LG or any affiliates access to Laclede Gas'
credit facilities. LG's credit facility shall not be increased to the detriment of Laclede Gas'
credit facility.
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d. In the event LG's non -regulated operations should result in Laclede Gas'
credit ratings being downgraded to at or below BBB- (or each rating agency's equivalent),
Laclede Gas shall pursue additional legal and structural separation from LG to ensure Laclede
Gas continues to have access to capital at a reasonable cost. Laclede Gas shall not increase its
dividend to LG until there is sufficient evidence that Laclede Gas' credit rating has been restored
to one notch above BBB-, or its equivalent.
e. In the event LG or another affiliate of Laclede Gas voluntary or
involuntarily enters into a bankruptcy proceeding, Laclede Gas shall take all reasonably
necessary steps to ensure that Laclede Gas is not consolidated with such affiliated debtor in
bankruptcy.
f. If Laclede Gas' credit ratings become impaired (i.e. if Laclede Gas credit
ratings are downgraded to BBB- or below) due to risks associated with any of Laclede Gas'
affiliates, then Laclede Gas shall file with the Commission a comprehensive risk management
plan that assures Laclede Gas' access to and cost of capital will not be further impaired, which
shall include a non -consolidation opinion if required by two of the three rating agencies.
g.
Laclede Gas shall not enter into any "make well" agreements, or guarantee
the notes, debentures, debt obligations or other securities of its parent or affiliates, without first
seeking and receiving Commission authorization.
h. Laclede Gas shall not adopt, indemnify, guarantee, or assume
responsibility for payment of the current or future liabilities of any affiliate without first seeking
and receiving Commission authorization.
i. Laclede Gas shall not allow any affiliate's debt to be recourse to Laclede
Gas without first seeking and receiving Commission authorization.
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Laclede Gas shall not allow Laclede Gas' equity to be pledged as
collateral or security for any affiliate or non -affiliate debt or liabilities, without first seeking and
receiving Commission authorization.
k. Laclede Gas represents that the authorized pre-tax rate of return in Case
No. GR-2009-0355 will be equal to or higher than the pre-tax rate of return that Laclede Gas will
sponsor in the next rate case filed prior to October 1, 2015, involving the MGE division.
1. Laclede Gas represents that LG and Wells Fargo have performed the
necessary due diligence to ensure that LG's proposed purchase price for the MGE assets is not
excessive. In addition to relying on such due diligence analysis, Laclede represents that it is
relying on traditional acquisition/merger conditions and not relying on any special ratemaking
considerations to justify the value it has assigned to the MGE assets. To the extent the goodwill
assigned to the MGE assets is impaired and negatively effects Laclede Gas' cost of capital
primarily as a result of this transaction, all net costs associated with the decline in Laclede's
credit quality, considering all other capital cost effects of the Transaction and the impairment,
shall be excluded from the determination of rates.
m. For the first five years after closing of the Transaction, Laclede shall
provide Staff and OPC its annual goodwill impairment analysis in a format consistent with the
provisions of paragraph 32a within 30 days after it is performed. Thereafter, this analysis will be
made available for Staff and OPC upon request.
12. SERVICE QUALITY CONDITIONS
a. Customer Service Performance Reporting
Laclede Gas Company and its MGE Division shall continue to provide all service
quality reporting that exists at the moment prior to the closing of this transaction. Both Laclede
Gas and its MGE division will strive to meet or exceed the customer service and operational
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performance levels currently provided to its customers. Laclede Gas shall provide the Staff and
OPC monthly reports (within 30 days of month -end) on its performance with respect to such
metrics and standards for Laclede Gas and its MGE Division. Such reports shall contain
monthly information including but not limited to: calls offered, abandoned call rate and average
speed of answer performance, customer service organization charts, customer service staffing,
number of estimated bills (including consecutive estimates), number of inside and outside
installed automated meter reading devices (AMR), a list of customer pay station locations, and
the actual Missouri jurisdictional bad debt write-off by customer class, including the dollar
amount written -off, number of accounts written -off and revenue by customer class. Laclede
shall continue to file MGE's Annual Customer Service Report in this docket. Representatives
of the Laclede Gas and MGE Divisions shall meet with the Staff and OPC on a quarterly basis
to discuss: (a) actual performance relative to pre -acquisition service metrics identified herein;
(b) any material improvement to or decline from historical performance levels, together with an
explanation for such decline; (c) the measures being taken or to be taken to address any material
decline in such service levels and the timeline for completing such measures; and (d) any
substantive changes in customer service procedures, metrics or standards relating to call center
operations and staffing, customer billing, meter reading, customer remittance, credit and
collections, and connections, disconnection and reconnection. The Staff and/or OPC may
request additional periodic meetings with Laclede Gas to discuss customer service operating
procedures and the level of service being provided to the customer.
b. Virtual Hold Reporting and Interactive Voice Response (IVR)
Laclede Gas Company shall continue to provide to Staff and OPC for its Laclede
and MGE Division operations the Call Back In Queue (CBIQ) and the Monthly Virtual Hold
Executive Summary Reports that shall include information on Eligible Calls, Return Calls
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Selected and Continue Hold Options. In the event that Laclede Gas utilizes an alternative call
back technology in the future, comparable reporting metrics shall continue to be required.
All changes to the Laclede or MGE Division IVR shall be discussed in advance,
prior to implementation, with the Staff. In particular, for all changes that would potentially
lengthen or prolong the customer time in the IVR, Laclede Gas shall provide all analysis to the
Staff as part of the discussion.
c. Customer Service Operating Procedures
The present practices of Laclede Gas and MGE in the following areas shall be
continued, or improved upon to ensure that customers do not experience a decline in service
levels:
(1) Laclede Gas and its MGE division shall follow credit and collection
practices consistent with Commission rules.
(2) Laclede Gas and its MGE Division shall restore service consistent with
Commission rules.
(3) Laclede Gas and its MGE division shall use bill test procedures to ensure
bill accuracy.
(4) Laclede Gas and its MGE division shall take appropriate steps to maintain
the operation of its automated meter reading system.
(5)
Laclede Gas shall, for its Laclede and MGE Divisions, identify: (a)
personnel responsible for handling Commission complaints and ensure they have proper
authority, (b) after hours contact personnel, and (c) management employee(s) accountable for
ensuring Laclede Gas employees are trained in and maintain a working knowledge of Missouri
customer service rules and regulations.
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(6) Laclede Gas and its MGE Division shall continue their participation in
LIHEAP.
(7) Laclede Gas and its MGE Division shall take appropriate steps to
maintain timely operation of its "stopped meter reporting" and shall submit monthly "stopped
meters reports" to the Staff and OPC.
(8) Laclede Gas and its MGE Division shall submit monthly "inactive meters
showing consumption" reports to the Staff and OPC.
(9) Laclede Gas shall provide monthly reports to the Staff and OPC
indicating the number of insourced and the outsourced personnel by functional area as defined
on page 13 of the Booz & Company, November 15, 2012 Synergies Study Results — Board of
Directors Review presentation.
(10) Within 30 days after closing of the Transaction, Laclede Gas shall
provide its organizational charts as of the date of closing, by each operating division and
department, and all subsequent revised organizational charts as they become available. Laclede
Gas shall provide on a quarterly basis updated employee rosters by each operating division and
department. In addition, Laclede Gas shall provide on a monthly basis its Promotions and
Transfers Reports, and its Hires and Separations Reports. If the reports do not include MGE
personnel, Laclede Gas will provide similar information for MGE personnel.
(11) Laclede Gas shall provide a quarterly synergies report to the Staff and
the OPC which specifically quantifies each of the synergies that result from the merger and as
described in Laclede Gas filings in GM-2013-0254 unless Laclede Gas develops such report on
a more frequent basis. Laclede Gas shall maintain all supporting documentation used to develop
these quarterly reports for the review of Staff and OPC upon request.
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(12) Laclede Gas shall provide the Staff and OPC within 10 business days all
merger related presentations made to its Board of Directors.
(13) Laclede Gas shall notify the Staff and OPC regarding progress on the
implementation of major systems affecting customer service levels, including but not limited to
customer billing, customer call center operations, credit and collections, connection,
disconnection and reconnection, payment remittance, service order process and meter reading.
(14) Laclede's obligation to provide the information set forth in paragraphs 9-
12 shall continue until Laclede's next rate case after the moratorium in which elimination of or
modification of such obligations may be proposed.
13. CONTINUING SERVICES AGREEMENT (CSA)
a. SUG shall make all of the services outlined in the draft CSA and its schedules
(attached as Attachment 3 to this Stipulation) available to Laclede Gas as required under the
terms of that agreement. SUG and Laclede Gas represent that the CSA agreement and its
schedules comprise all services necessary from SUG to continue and maintain the operations at
pre -transactions levels. Nothing herein shall preclude any party from challenging the necessity,
propriety or cost of a particular continuing service in any general rate case proceeding in which
the cost of such service is sought to be recovered.
b. SUG and Laclede Gas shall provide the Signatories the final CSA upon closing of
the Transaction.
c. SUG and Laclede Gas represent that the goal of transition services is 1) to provide
for a seamless transition of all operating functions from SUG to Laclede Gas and 2) to ensure
that all operating functions are performing at pre -transaction levels prior to the termination of
remaining transition services. Not less than 30 days prior to the termination of any CSA, Laclede
Gas shall notify the Signatories and, if requested by a Signatory, coordinate a technical
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conference with the Signatories to describe how the transition service will be provided by
Laclede Gas.
d. Laclede Gas shall provide to the Signatories, at least every 90 days after close of
the transaction until completion of all CSA services, a transition status report of the progress
being made towards the assumption by Laclede Gas of all transition services that are being
provided to Laclede Gas. Laclede Gas shall provide advance notice to the Signatories of all
changes to transition plans and/or CSAs, including but not limited to those that impact customer
service quality and gas supply. Copies of any and all amendments or other changes to the
transition plans/CSAs shall be provided with the Laclede Gas transition status reports. Laclede
Gas shall file these status reports in the Commission's Electronic Filing Information System
("EFIS"), under the case number GM-2013-0254.
e. SUG and Laclede Gas shall participate throughout the period continuing services
are being provided in in -person meetings in Jefferson City with the Signatories to discuss
transition status and progress. Upon the determination of the Signatories these in -person
meetings may be handled instead through a conference call.
f. During the first 9 months following the close of the transaction, the Laclede Gas
management and a representative of SUG shall attend quarterly meetings with the Signatories to
provide presentations and status reports on the progress of the transaction and transition plans.
After the nine -month period, Laclede Gas management shall continue to attend such meetings
subject to discussion in Laclede Gas and MGE Division's next rate case regarding the continuing
need for such meetings. When possible, parties will attempt to coordinate these meetings with
any other meetings that may be scheduled for other purposes.
g.
Laclede Gas shall notify the signatories immediately if the CSA is determined to
be required beyond the 9 month transition period after date of close.
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h. Laclede Gas management including the Chief Executive Officer of LG, the
President of Laclede Gas and the Senior Vice President, Chief Innovation and Integration Officer
and any other participants that Laclede Gas deems necessary shall be present for a minimum of
two on -the -record presentations before the Commission to be scheduled in May 2014 and
December 2014. If transition concerns still exist after December 2014, an additional on the
record presentation may be required. Laclede Gas shall present witnesses to provide live
testimony and be prepared to discuss the status of the transition and any problem areas and to
offer action plans to ensure completion of a seamless transition without disruption to ratepayers.
Laclede Gas witnesses shall be available for questions from the Signatories regarding the
progress of the transition involving matters contained in this Stipulation. After the closing of this
Transaction, the Staff shall file a pleading on behalf of the Signatories proposing dates for the on
the record presentations. A representative from SUG management shall be present for the first
on -the -record presentation in May 2014.
i. The Joint Applicants represent to the Signatories that they anticipate the CSAs
will only be needed for a period of 9 months from the date of closing.
14. GAS SUPPLY AND HEDGING PLANS
a. Laclede Gas shall assume from SUG, the transportation, storage and related
contracts in place for the MGE division; and shall also assume MGE's gas supply and hedging
contracts, including both physical and financial hedging. To the extent that the assignment by
SUG of any gas supply and hedging contracts require third party consent the PSA provides for
SUG to obtain such consents, and SUG has created a process to do so. Although none are
expected, Laclede Gas shall promptly inform Staff and OPC of any issues it encounters
regarding the consents and shall provide Staff and OPC evidence of such contract assumptions
within 30 days after closing of the Transaction. After the closing, Laclede Gas shall provide to
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Staff and OPC a list of all contracts that were not assumed and a description of all modified
terms in contracts that were assumed. If Laclede Gas does not assume a contract or modifies a
contract in any material way, it shall have the burden of showing and documenting that on a net
basis such changes in the assumption of, or terms and conditions of contracts were beneficial to
customers.
b. Laclede Gas shall present to Staff and OPC its gas supply and hedging plans for
its Missouri customers every fall, no later than October 30. The gas supply and hedging plan
presentations shall include at least as much detail as the MGE plans included prior to the
Transaction. The presentation shall include Laclede Gas' and MGE's gas supply and hedging
plans for the upcoming 24 months. Laclede Gas gas supply and hedging plans presentation shall
include gas supply plans for normal, colder and warmer weather, storage plans, and hedging plans
including strategies and control policies, and implementation (timing, types, etc.) of hedges.
c. MGE shall not delay normal gas supply planning and hedging related to the
operation of these properties because of the proposed sale of these properties.
d. MGE and Laclede Gas shall provide to Staff and OPC a listing of all financial
hedges related to the MGE properties, including a list of hedges that were liquidated before 5
days prior to the related contract expiration from the date of the Purchase and Sale Agreement
until closing of the Transaction. MGE shall transfer all OTC and exchange -traded financial
hedges that will reflect the same cost for natural gas that would have otherwise been attributable
to the operation of these properties absent the sale and purchase of assets.
e. Lacking details from Laclede Gas as to how the MGE supply functions will be
carried out after the completion of the transaction, Laclede Gas' Gas Supply Department shall
update the Staff procurement department and OPC on a monthly basis for the first three years
following close of the Transaction through a series of monthly conference calls. Such calls shall
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address any current and known or planned material changes in the gas supply functions, practices
and personnel being employed by the MGE Division to manage its gas supply assets. Laclede's
update shall include a written explanation and documents to support how current or planned
material changes to MGE's gas supply functions, practices and personnel are consistent with the
objective of providing safe and adequate service reliability while achieving the most economical
cost. If in any given month there are no current or planned material changes to MGE's gas
supply functions, practices and personnel a statement to that effect shall be provided.
f. Laclede Gas may present a proposal to Staff, OPC and the Commission regarding
a comprehensive framework for considering, evaluating and potentially approving or incenting
gas supply, transportation or hedging. Any Party shall be free to support, oppose or seek
modification to such a proposal if made by the Company.
g.
Laclede Gas' CAM and Standards of Conduct, once approved by the
Commission, shall be applied to gas supply transactions for the Laclede and MGE Divisions.
The CAM and referenced Standards of Conduct to be filed in Case No. GC-2011-0098 do not
pertain to Asset Management Arrangements/Agreements ("AMAs"). Accordingly, if Laclede
Gas chooses to use one or more AMAs for its Laclede or MGE Divisions, Laclede Gas shall
document fair market price and fully distributed cost as set forth in 4 CSR 240-40.015 and
40.016, unless and until changes to the CAM and referenced Standards of Conduct addressing
AMAs are approved by the Commission.
15. GAS SAFETY
Laclede Gas represents that it is fully familiar with the safety line replacement programs
which SUG has initiated. Laclede Gas intends to continue with these programs and will utilize
its resources in such a manner so as to provide safe and reliable service for its
Missouricustomers. After the acquisition, the combined company shall continue to follow all
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Commission orders that were issued relating to safety matters involving MGE.
Laclede Gas shall retain all the maintenance/operations records for the facilities which
are the subject of the Transaction and maintain the records necessary to demonstrate compliance
with the specific requirements of pipeline safety regulations. These records shall be made
available to Staff or OPC for inspection.
16. INSULATION OF MGE FROM LG BUSINESS
To insulate the MGE Division and Laclede Gas from the Transaction, LG represents that:
a. MGE will be owned and operated as a division of Laclede Gas, which shall
remain a separate subsidiary of LG, unless otherwise approved by the Commission.
b. Laclede Gas shall not transfer to LG or any subsidiary thereof, directly or
indirectly, assets necessary and useful in providing service to MGE's Missouri customers
without Commission approval.
c. Laclede Gas will diligently exercise its best efforts to insulate the Laclede and
MGE Divisions from any adverse consequences from its other operations or the activities of any
of its affiliates.
d. Laclede Gas shall submit reports certifying its compliance with this paragraph on
a quarterly basis to the Staff electronically through EFIS and to OPC, and other interested parties
that are permitted to receive proprietary or confidential information as contemplated by
applicable Commission rules or orders until the Commission determines that the Laclede and
MGE Divisions are insulated from LG's other operations and the activities of any of its affiliates
or that the requirement is no longer needed.
17. FURTHER INSULATING CONDITIONS
To further protect customers from potential negative impacts of this Transaction, Laclede
Gas represents that:
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a. The Transaction shall have no adverse effect on Laclede Gas' budget and funds,
including the MGE division's budget and funds, to meet capital needs, including, but not limited
to, service line and main replacement programs. Laclede Gas affirms its commitment to the
safety line replacement program schedules for MGE currently in effect and approved by the
Commission in its Case No. GO-2002-0050.
b. For the next MGE rate case prior to October 1, 2015, total joint and
common costs allocated to the MGE Division for purposes of setting retail distribution rates will
not increase as a result of the Transaction above the levels authorized by the Commission in
Case No. GR-2009-0355 and proposed in the Surrebuttal Testimony of Michael R. Noack, dated
October 14, 2009. Schedule H•8 - Corporate Allocation, of Mr. Noack's testimony reflects pro
forma joint and common costs before application of the Expense Capital Rates of $5,087,099.
Net corporate plant allocated to MGE is $669,314 per Schedule C, page 1 of 2, column e, line
35. It is understood, however, that joint and common costs allocated to MGE for purposes of
setting retail distribution rates may increase or decrease for reasons that are not a result of the
Transaction (including, but not limited to, factors such as wages and salaries increasing over
time, organizational differences which result in a function being provided at the corporate level
versus at the business unit or vice versa, labor efficiencies and technological efficiencies).
Laclede Gas agrees that in any rate proceeding, it has the burden of proving the reasonableness
of any allocated or assigned cost to Laclede Gas, including its MGE division, from any LG
affiliate, including all corporate overhead allocations.
c. Laclede Gas shall retain all documentation relative to the analysis of the
Transaction. This documentation shall include a list of: (1) all Laclede Gas and MGE personnel,
consultants, legal and financial and accounting advisers; (2) the time (in hours) spent by those
individuals on related work; (3) other expenses, costs or expenditures incurred or recognized by
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Laclede Gas that are related to the Transaction; (4) business entities (corporate, subsidiary and
division) where the costs were booked, including account number, account description and
amount; and (5) description of the nature of the work performed and costs incurred.
d. Laclede Gas shall maintain its books and records so that all acquisition
costs related to the Transaction are segregated and recorded separately. Subject to the
protections found in 4 CSR 240-2.135 and/or 4 CSR-240- 2.085, during its next general rate
proceeding, Laclede Gas shall disclose to the Staff, OPC, and other interested and authorized
parties the acquisition, merger, transition, and transaction costs recorded in Laclede Gas's books
and records in the appropriate test year and test year updates or true -ups. This condition does
not restrict Laclede Gas' right to seek rate recovery of merger and acquisition costs related to
future transactions. Other parties may oppose recovery of merger and acquisition costs related to
future transactions.
e. Laclede Gas shall create and maintain records listing the names of LG
employees whose costs are allocable to Missouri jurisdictional operations, number of hours
worked, type of work performed and travel and other expenses incurred for all work related to
all merger and acquisition activities related to the Transaction through the end of the test year,
updated test year or true -up test year in MGE's next general rate case.
f. Laclede Gas shall submit to the Commission's Staff electronically in EFIS
as a filing to this case and to OPC verified journal entries reflecting the recording of the
Transaction on Laclede Gas' books and records and provide a narrative description of each such
entry within ninety (90) days of closing.
g•
Within six (6) months of the closing of the Transaction, Laclede Gas shall
perform, provide, and discuss with all interested and authorized parties a study of the impact of
the acquisition of MGE by Laclede Gas on Laclede Gas' structure, organization, and costs.
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Laclede Gas shall verify the accuracy of corporate administrative and general ("A&G")
allocations to MGE, including the specific impacts of the acquisition of MGE by Laclede Gas on
Laclede Gas' A&G expense and cost allocation methodology and identify the process used to
allocate A&G costs, transition costs and expenses to its regulated, merger and acquisition, sale
and non -regulated functions of its regulated divisions as well as its non -regulated subsidiaries.
h. Laclede Gas shall provide to Staff and OPC on a monthly basis monthly
Statement of Income and Balance Sheets that shall be consistent with SEC financial reporting
requirements. Such monthly reports shall reflect financial results for Laclede Gas and its MGE
Division regulated and non -regulated operations on a separate basis. Laclede Gas shall also
provide to Staff and OPC variance reporting reflecting all changes in all revenues, expenses and
capital investment on a monthly basis.
18. INTERSTATE AND INTRASTATE TRANSPORTATION AND
STORAGE COSTS
a. In making decisions regarding interstate or intrastate pipeline transportation and
storage capacity for either divisions, Laclede Gas shall continue to evaluate alternatives with the
objective of ensuring safe and adequate reliability while achieving the most economical cost.
Laclede Gas and MGE shall formally conduct a comprehensive evaluation as deemed necessary
by them but no less frequently than every three years. This evaluation shall be submitted and
presented to Staff, OPC, and other interested parties subject to the protections found in 4 CSR
240-2.135 and/or 4 CSR 240-2.085.
b. For Laclede Gas' comprehensive evaluation of pipeline transportation capacity
and storage capacity, including pipeline storage and on -system storage (Demand/Capacity
Analysis), Laclede Gas shall provide to Staff and OPC for each Laclede and MGE Division
service area (MGE's service areas are Kansas City, Joplin, and St. Joseph):
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(1) Laclede Gas' estimated peak day (coldest day) requirements for the next five years
and the capacity (on -system storage and pipeline capacity and any delivered supply)
available to meet such requirements.
(2) All supporting documentation, workpapers, analyses and calculations (including but
not limited to projected growth (positive or negative), HDD or temperature data
reviewed, the peak HDD and date of occurrence and timeframe/method used to determine
peak HDD, contract demand studies and any forecast assumptions affecting contract
capacity. The documentation shall include fully functioning electronic spreadsheets and
workpapers (in Excel, if possible), including source data and output data.
(3) A complete explanation of the methodology and logic and reasoning used in the
Company evaluation and estimates/forecasts.
(4) An explanation of the inclusion (or exclusion) of firm, interruptible, school
aggregation, and transportation volumes in the Company's capacity evaluation. Include
references to the Company's tariff language where appropriate.
If Laclede Gas revises the transportation capacity or storage capacity from that identified
in the Demand/Capacity Analysis, Laclede Gas shall prepare an addendum to the
Demand/Capacity Analysis within 6-months of making such changes, explaining the changes
and the rationale for the changes, and provide the addendum to Staff and OPC. Laclede Gas
shall file the Demand/Capacity Analyses and addendums, in EFIS, under case number GM-2013-
0254.
c. Laclede Gas shall notify OPC, Staff, and other interested parties, subject to the
protections found in 4 CSR 240-2.135 and/or 4 CSR 240-2.085, if and when Laclede Gas adds or
changes pipeline capacity (transportation and storage capacity) of a quantity equal to or greater
than 10% of Laclede Gas or MGE Division's existing capacity and shall keep and provide OPC
and Staff, appropriate documentation regarding such decisions. Laclede Gas' notification shall
be provided within 30 days of the effective date of changes. This documentation shall include,
but not be limited to: all proposed terms, including rates (and any discounts), amount of capacity,
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delivery and take points, any storage capabilities, maximum storage quantities, maximum daily
withdrawal quantities, maximum daily injection quantities, whether the capacity is firm,
interruptible, etc., capacity release and off -system sales opportunities, the reason for the
additional capacity or change, and all negotiations regarding the new or change in capacity. This
information shall be provided upon request within the time normally provided for discovery
under the Commission's rules. However, in no event shall the providing of this information
constitute preapproval by OPC or Staff or any other proper party.
19. TRANSPORTATION TARIFFS [ALL CUSTOMER CLASSES].
Laclede Gas shall retain the same terms and conditions of its MGE Division's current
transportation service tariffs, including the threshold for eligibility for such service, until such
time that changes may be proposed in any subsequent general rate case proceeding that is
initiated commencing not less than three or more years after the effective date of the
Commission Order approving this Stipulation and Agreement. Nothing herein shall preclude
changes in rates or charges for service during such period as may be approved by the
Commission as a result of (i) any ISRS filing made by the Company or (ii) a general rate case
proceeding initiated by Laclede Gas so long as Laclede Gas does not to seek in such a rate case
proceeding to increase a transportation rate element or charge or the distribution rates for any
customer class by a greater than equal percentage. This provision should not be read or
interpreted to mean or require Laclede Gas or its MGE division to file any proposed change to
the aforesaid terms and conditions of transportation, including eligibility thresholds, in such rate
case or preclude Laclede Gas or its MGE division from making, or preclude any Signatory from
opposing, Commission filings to implement changes to the aforesaid terms and conditions of
transportation service that are mutually agreeable to Midwest Gas User's Association.
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20. ENERGY EFFICIENCY PROGRAMS
The Transaction shall have no impact on Commission orders related to the respective
energy efficiency programs of Laclede Gas or MGE. The Commission's orders with respect to
MGE's existing energy efficiency programs shall remain in full force and effect with respect
MGE until further modified by the Commission.
21. LOW INCOME WEATHERIZATION PROGRAM
MGE shall retain the same terms and conditions of the tariff for the weatherization
program now existing between the City of Kansas City, Missouri and MGE for the counties of
Clay, Platte and Jackson, and between MGE and the approved Social Agencies for the rest of
MGE's service territory, although modifications to such weatherization tariff may be proposed in
tariff filings and in any subsequent general rate case proceedings.
22. ASSUMPTION OF KCMO FRANCHISE AGREEMENT
Subject to Commission approval of the Transaction and after Closing of the Transaction,
Laclede Gas will execute, pursuant to Section 5(A) of the existing franchise agreement between
the City of Kansas City, Missouri and MGE dated October 7, 2010, an assumption of all rights
and responsibilities of such Franchise Agreement.
23. ISRS MONITORING AND REPORTING REQUIREMENTS
a. Each year, Laclede Gas shall provide one and three year plans (ISRS Plans) to
Staff and OPC for its gas utility plant projects for its MGE Division for which it will be seeking
to recover some or all of the costs through ISRS charges. The ISRS Plans will be provided on an
annual cycle that is consistent with the planning cycle that Laclede Gas uses for MGE. Staff,
OPC and Laclede Gas will work together to determine the timing of the annual filing, the first of
which will occur no later than 8 months after the close of the acquisition.
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b. The ISRS Plans will, to the extent reasonably practical, show the location and
type of the gas utility plants projects, the amount of the estimated costs associated with each
project (or a series of closely related projects) that is expected to exceed $100,000 in cost over a
three year period and the analysis performed by or for Laclede Gas to justify each gas utility
project. The ISRS reports will also identify the criteria (e.g. compliance with state or federal
safety standards, required facility relocations, etc.) used by Laclede Gas to determine that the
projects will be included in its one year and three year plans for MGE and fully explain how each
of the projects met the identified criteria. If major revisions are made to the ISRS Plans in
between when annual ISRS Plans are provided to Staff and OPC, the revised ISRS Plans and
supporting documentation shall also be provided to Staff and OPC.
c. Within 30 days of providing annual ISRS Plans or revised ISRS Plans to Staff and
OPC for MGE projects, and prior to implementation of the plans, Laclede Gas shall meet with
Staff and OPC to discuss feedback on the plans if such meetings are requested by Staff or OPC.
d. When filing to establish or change an ISRS for MGE, Laclede Gas shall, to the
extent reasonably practical, file a report (1) showing how the actual cost of the projects
compared to the estimated cost of the project and (2) documenting the extent to which the
completed or partially completed project met the criteria used to justify the project.
e. These requirements related to the MGE ISRS gas utility plant projects shall
remain in place through December 31, 2018.
24. RETAIL GAS MARKETING PLAN REPORTING
Laclede Gas shall provide its annual retail gas marketing plans to Staff and OPC. These
plans will be provided on an annual cycle that is consistent with the planning cycle for gas
marketing that Laclede Gas uses for the Laclede and MGE service territories. Staff, OPC and
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Laclede Gas will work together to determine the timing of the annual submissions, the first of
which will occur no later than 8 months after the close of the transaction.
25. TREATMENT OF INCIDENT -RELATED FEES, COSTS AND EXPENSES
Laclede Gas shall account for any costs or damages associated with the incident that
occurred in MGE's service territory on February 19, 2013 in a manner that will insulate the
customers of the Laclede Division from any rate impacts associated with such costs. All
Signatories reserve the right to take whatever position they believe is appropriate regarding the
recovery of such costs in the rates of the MGE Division.
26. DEFERRED TAXES
The Signatories stipulate that for ratemaking and regulatory accounting purposes,
deferred taxes shall be per MGE's books as calculated under the applicable normalization rules
(and reflecting the appropriate deferred tax elements for ratemaking purposes such as tax
associated with CIAC).
27. FILING OF ANNUAL REPORTS
Laclede Gas shall, until its next rate case, file separate annual reports for its Laclede and
MGE Divisions.
28. ASSUMPTION OF EXECUTION RISK
Neither Laclede Gas nor its MGE Division shall include in its retail distribution rates
charged to Missouri consumers any costs related to its execution risk associated with the
Transaction.
29. ADHERENCE TO MISSOURI RULES
Laclede Gas and its MGE Division shall comply with all Missouri Commission rules,
including the Affiliated Transactions Rule, 4 CSR 240-40.015, reporting requirements and other
practices, and its filed and approved tariffs. This paragraph shall not be construed as a waiver of
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any rights or remedies available to Laclede Gas under the law. No conditions or agreements
entered into between parties to this case shall restrict or limit LG's compliance with Missouri
Commission rules.
30. NO DETRIMENTAL IMPACT
Laclede Gas represents that this transaction shall not have any detrimental effect on
Laclede Gas or MGE Division utility customers, including, but not limited to: increased rates or
any adverse effect on quality of service, and further agrees that, should such detrimental effects
nevertheless occur, nothing in the approval or implementation of the proposed acquisition shall
impair the Commission's ability to protect such customers from such detrimental effects.
31. COMMISSION AUTHORITY
Laclede Gas acknowledges that the Commission has, and will continue to have, the
authority after the proposed acquisition to regulate, through the lawful exercise of its statutory
powers, and ensure the provision of service, instrumentalities and facilities as shall be safe and
adequate and in all respects just and reasonable and not jeopardize the ability of Laclede Gas or
MGE to meet its Missouri utility obligations, including MGE's service line replacement program.
Laclede Gas also agrees that the Commission has the authority, through the lawful exercise of its
ratemaking powers, to ensure that the rates charged by Laclede Gas or MGE for regulated utility
service are not increased as a result of the unregulated and/or non jurisdictional activities of LG
affiliates and LG agrees, consistent with such standard, that rates should not be increased due to
such activities.
32. ACCESS TO INFORMATION
a. LG and Laclede Gas shall provide the Staff and OPC with access, upon
reasonable written notice during normal working hours and subject to appropriate confidentiality
and discovery procedures, to all written information provided to common stock, bond, or bond
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rating analysts, that directly or indirectly pertains to Laclede Gas or any affiliate that has affiliate
transactions with MGE or with Laclede Gas to the extent such transaction(s) with Laclede Gas or
any affiliate affect the allocation of costs to MGE. Such information includes, but is not limited
to: reports provided to, and presentations made to, common stock analysts and bond rating
analysts. For purposes of this condition, "written" information includes but is not limited to: all
electronic documents including spreadsheets in original format with formulas and links to other
spreadsheets intact, any written and printed material, audio and videotapes, computer disks and
electronically stored information. Nothing in this condition shall be deemed to be a waiver of
LG's or Laclede Gas's or MGE's right to seek protection of the information, to assert any claim
of privilege, or to object, for purposes of submitting such information as evidence in any
evidentiary proceeding, to the relevancy or use of such information by any party.
b. Nothing in this Stipulation and Agreement shall limit Staffs or OPC's access to
any information whatsoever in any other proceedings. Nothing in this Stipulation and
Agreement shall preclude the Staff or OPC from seeking additional information from Laclede
and its affiliates. Nothing in this Stipulation and Agreement shall preclude the Staff or OPC from
performing spot reviews or conducting oversight of the Company's operations. Nothing in this
Stipulation and Agreement is intended to impinge, restrict or limit in any way Staff or OPC's
discovery powers, including the right to access information and investigate matters related to
Laclede Gas and its Laclede and MGE divisions.
c. LG, Laclede Gas, and MGE shall provide Staff and OPC access to and copies of,
if requested by Staff or OPC, the complete LG, and Laclede Gas Board of Directors' meeting
minutes, including all agendas and related information distributed in advance of the meeting,
presentations and handouts, provided that privileged information shall continue to be subject to
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protection from disclosure and Laclede Gas shall continue to have the right to object to the
provision of such information on relevancy grounds
d. Information sought by Staff and OPC shall be made available in either St. Louis
or Jefferson City or Kansas City upon request. The location of the information will be
determined by the Staff and OPC.
e. Any Signatory may request that Laclede provide a copy of a report submitted to
Staff and OPC pursuant to this Stipulation and Agreement, provided that Laclede Gas reserves
the right to object to such request and/or seek suitable protections to ensure such information is
not improperly disclosed.
33. COMMITMENTS ARE MISSOURI JURISDICTIONAL
The conditions set forth herein are intended to apply only in the context of Missouri
jurisdictional regulatory activities and are not intended to restrict in any way the ability of LG or
Laclede Gas to take any position whatsoever regarding matters covered herein in proceedings
before the Federal Energy Regulatory Commission or any other non -Missouri jurisdictional
regulatory authority.
34. FERC APPROVAL OF JOINT APPLICATION
Prior to closing of this Transaction, SUG and Laclede Gas Company shall obtain all
necessary authorizations under Sections 7(b) and 7(c) of the Natural Gas Act in FERC Docket
No. CP13-497-000.
35. SUG/MGE DATA ROOM FILES
All electronic data residing in the SUG/MGE data room shall be provided by electronic
media, with all cell references intact as they exist today, to Staff and OPC upon the closing of
this transaction.
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III. PREFILED TESTIMONY TO BE RECEIVED INTO EVIDENCE
The prefiled direct testimony and schedules of Mark D. Waltermire, Suzanne Sitherwood,
Steven L. Lindsey and Robert J. Hack shall be received into evidence without the necessity of
the witnesses taking the stand.
IV. NO DETRIMENT
The Signatories agree that the intent of the Stipulation is to avoid detrimental impacts to
customers, and that this Stipulation should be interpreted accordingly.
V. GENERAL PROVISIONS
(a) This Stipulation has resulted from negotiations among the Signatories and the
terms hereof are interdependent. In the event the Commission does not adopt this Stipulation in
total, then this Stipulation shall be void and no Signatory shall be bound by any of the
agreements or provisions hereof. The stipulations herein are specific to the resolution of this
proceeding, and all stipulations are made without prejudice to the rights of the Signatories to take
other positions in other proceedings except as otherwise provided herein. The Signatories agree
that any and all discussions related hereto shall be privileged and shall not be subject to
discovery, admissible in evidence, or in any way used, described or discussed.
(b) This Stipulation is being entered into for the purpose of disposing of all issues in
this case. The Signatories represent that the terms of this Stipulation constitute a fair and
reasonable resolution of the issues addressed herein, in a manner which is not detrimental to the
public interest. Except as otherwise addressed herein, none of the Signatories to this Stipulation
shall be deemed to have approved, accepted, agreed, consented or acquiesced to any accounting
principle, ratemaking principle or cost of service determination underlying, or supposed to
underlie any of the issues provided for herein.
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(c) The Signatories further understand and agree that the provisions of this
Stipulation relate only to the specific matters referred to in the Stipulation, and no Signatory or
person waives any claim or right which it otherwise may have with respect to any matter not
expressly provided for in this Stipulation. The Signatories further reserve the right to withdraw
their support for the settlement in the event that the Commission modifies the Stipulation in a
manner which is adverse to the Signatory, and further, the Signatories reserve the right to contest
any such Commission order modifying the settlement in a manner which is adverse to the
Signatory contesting such Commission order. The Signatories agree that the details of this
agreement have no precedential value in any future proceeding not related to enforcement of this
agreement.
(d) The non -utility Signatory Parties enter into this Stipulation in reliance upon
information provided to them by the Joint Applicants and this Stipulation is explicitly predicated
upon the truth of representations made by the Joint Applicants.
(e) In the event the Commission accepts the specific terms of this Stipulation without
modification, the Signatories waive, with respect to the issues resolved herein: their respective
rights pursuant to Section 536.070(2), RSMo 2000 to call, examine and cross-examine witnesses;
their respective rights to present oral argument or written briefs pursuant to Section 536.080.1,
RSMo 2000; their respective rights to the reading of the transcript by the Commission pursuant
to Section 536.080.2, RSMo 2000; their respective rights to seek rehearing pursuant to Section
386.500, RSMo 2000; and their respective rights to judicial review pursuant to Section 386.510,
RSMo 2000. Furthermore, in the event the Commission accepts the specific terms of this
Stipulation without modification, the Signatories agree that the prefiled testimony of all
witnesses who have prefiled testimony in this case shall be included in the record of this
proceeding without the necessity of such witnesses taking the stand.
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(f) The Staff shall have the right to provide, at any agenda meeting at which this
Stipulation is noticed to be considered by the Commission, whatever oral explanation the
Commission requests, provided that the Staff shall, to the extent reasonably practicable,
promptly provide other Signatories with advance notice of when the Staff shall respond to the
Commission's request for such explanation once such explanation is requested from Staff.
Staff's oral explanation shall be subject to public disclosure, except to the extent it refers to
matters that are privileged or previously designated confidential by any signatory.
(g) Except as otherwise addressed in this Stipulation, Commission approval of the
sale of assets of SUG to Laclede Gas, and for the Joint Applicants to execute and perform in
accordance with the terms of the Agreement, does not in any way, limit, form a basis for
determination, or constitute a defense against any Signatory proposing, or the Commission
ordering, the disallowance and/or imputation of account balances, expenses, revenues and/or
other ratemaking findings, regarding MGE or Laclede Gas operations in a future rate proceeding.
(h) To assist the Commission in its review of this Stipulation, the Signatories also
request that the Commission advise them of any additional information that the Commission may
desire from the Signatories relating to the matters addressed in this Stipulation, including any
procedures for furnishing such information to the Commission.
WHEREFORE, the Signatories recommend that SUG's sale of its Missouri properties to
Laclede Gas is reasonable and not detrimental to the public interest and respectfully request that
the Commission approve this Stipulation and Agreement subject to the conditions contained
herein.
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Respectfully submitted,
/s/ Robert S. Berlin
Robert S. Berlin, MBN 51709
Senior Counsel
Staff Counsel's Office
Missouri Public Service Commission
200 Madison Street, Suite 800
P.O. Box 360
Jefferson City, MO 65102
573/526-7779
573/751-9285 (fax)
Bob.berlin@psc.mo.gov
ATTORNEY FOR STAFF
/s/ Todd J. Jacobs
Todd J. Jacobs MBE#52366
Senior Director- Legal
Missouri Gas Energy
3420 Broadway
Kansas City, MO 64111
816-360-5976
816-360-5903 (fax)
Todd.Jacobs@SUG.com
ATTORNEY FOR SOUTHERN UNION
COMPANY D/B/A MISSOURI GAS
ENERGY
/s/ James C. Swearengen
James C. Swearengen, MBN 21510
Paul A. Boudreau, MBN 33155
Brydon, Swearengen& England P.C.
P.O. Box 456
Jefferson City, MO 65102
573/635-7166
573/634-7431 (fax)
lrackers@brvdonlaw.com
ATTORNEYS FOR SOUTHERN UNION
COMPANY DB/A MISSOURI GAS ENERGY,
AND LACLEDE GAS COMPANY
/s/ Marc Poston
Marc Poston, MBN 45722
Deputy Public Counsel
Office of the Public Counsel
200 Madison Street, Suite 650
P.O. Box 2230
Jefferson City, MO 65102
573/751-5558
573/751-5562 (fax)
marc.poston@ded.mo.gov
ATTORNEY FOR PUBLIC COUNSEL
Is/ Michael C. Pendergast
Michael C. Pendergast, Mo. Bar #31763
Vice President and Associate General Counsel
Rick Zucker
Associate General Counsel
Laclede Gas Company
720 Olive Street, 14th Floor
St. Louis, MO 63101
Telephone (314) 342-0532
Fax (314) 421-1979
Email: mpendergast@lacledegas.com
rzucker@lacledegas.com
ATTORNEYS FOR LACLEDE GAS
COMPANY
/s/ Mark C. Darrell
Mark C. Darrell, MBN 57280
Senior Vice President, General Counsel and
Chief Compliance Officer
The Laclede Group, Inc.
720 Olive Street, 15th Floor
St. Louis, MO 63101
314-342-0520
314-421-0979 (fax)
mdarrell@thelacledegroup.com
ATTORNEY FOR THE LACLEDE
GROUP, INC.
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/s/ Mark W. Comley
Mark W. Comley, MBN 28847
Newman Comley& Ruth
601 Monroe Street, Suite 301
Jefferson City, MO 65101
573/634-2266
573/636-3306 (fax)
comleym@ncrpc.com
ATTORNEYS FOR CITY
OF KANSAS CITY, MO
/s/ Stuart Conrad
Stuart Conrad, MBN 23966
Finnegan, Conrad & Peterson
3100 Broadway, Suite 1209
Kansas City, MO 64111
816/753-1122
816/756-0373 (fax)
stucon@fcplaw.com
ATTORNEYS FOR MIDWEST GAS
USERS ASSOCIATION
/s/ Jeremy Knee
Jeremy Knee, MBN 64644
Attorney General's Office
221 West High Street
P.O. Box 899
Jefferson City, MO 65102
573/751-8795
573/751-8796 (fax)
jeremy.knee@ago.mo.gov
ATTORNEYS FOR MISSOURI DEPARTMENT
OF NATURAL RESOURCES
/s/ Michael E. Amash
Michael E. Amash, MBN 58478
Blake & Uhlig
2500 Holmes
Kansas City, MO 64108
816/472-8883
mea@blake-uhlig.com
ATTORNEYS FOR IBEW LOCAL
UNION NO. 53
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CERTIFICATE OF SERVICE
I hereby certify that copies of the foregoing have been mailed, hand -delivered, transmitted by
facsimile or electronically mailed to all counsel of record this 2nd day of July, 2013.
/s/ Robert S. Berlin
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