20160916Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM
TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
FROM: BRANDON KARPEN
DEPUTY ATTORNEY GENERAL
DATE: SEPTEMBER 15, 2016
SUBJECT: QUESTAR GAS AND DOMINION RESOURCES MERGER
AGREEMENT, CASE NO. QST-G-16-01
Following extensive negotiations relating to the above captioned merger, Staff signed
onto a Settlement Stipulation that concluded the regulatory approval process before the Utah
Public Service Commission (PSC). Th e PSC’s adoption of the Stipulation grants regulatory
approval of the merger in Utah and a portion of Franklin County, Idaho. While the merger
Application is not before the Idaho Commission, Staff represented Idaho interests during
negotiations. Staff now requests that the Commission issue notice of the Settlement Stipulation
and allow Idaho customers affected by it an opportunity to comment. At the conclusion of the
comment period, if Commission deems it appropriate, Staff recommends adoption of the
Stipulation and that this matter be closed.
BACKGROUND
Questar’s operations are almost entirely in Wyoming and Utah. Franklin County,
Idaho is the only area outside those states served by Questar. Franklin County is located on the
Idaho-Utah border. Its small population and unique geography make the number of customers
served by Questar low with service coming out of Utah. Accordingly, in August 1990, the
Commission approved “a regulatory service contract” with the Utah PSC pursuant to Idaho Code
§ 61-505, allowing the Utah PSC regulatory authority over Questar operations in Idaho. Order
No. 23282.
On March 3, 2016, Questar filed a copy of its “Notice of Agreement and Plan of
Merger” between itself and Dominion Resources, Inc. that was filed in front of the Utah PSC.
Therein, the parties gave notice that Dominion Resources would acquire Questar Corporation.
DECISION MEMORANDUM 2
Dominion stated that it “will continue its tradition of providing safe and reliable service at
reasonable costs to its customers in Utah, Idaho and Wyoming.” According to the Companies,
regulation of Questar Gas will not be affected by the merger. Transmittal Letter at 1-2.
In April 2016, in anticipation of the underlying merger, the Commission updated its
contract with the Utah PSC. The updated contract removed references to Questar’s predecessor,
Mountain Fuel Supply Company, included reference to the Commission’s winter moratorium
Rule 306, and provided a mechanism for automatic renewal or the service contract. IDAPA
31.21.01.306
Additionally, Idaho customers served by Questar were notified of the proposed
merger on multiple occasions through press releases and direct communications—in February,
March, and May 2016. Both Companies also posted the information on their web sites. Under
the agreement between the Commission and the Utah PSC, customers in Idaho were able to
participate in the case before the PSC.
After filing the Application, Questar and Dominion convened settlement negotiations
with the Utah Division of Public Utilities, the Utah Office of Consumer Services, the Utah
Governor’s Office of Energy Development, and other interested parties. Commission Staff
participated in these negotiations and represented Idaho interests. The parties spent considerable
time over several months discussing the merger and its effect on ratepayers. On August 15,
2016, the parties concluded negotiations and signed onto a Settlement Stipulation.
SETTLEMENT STIPULATION
Attached for your review is the Settlement Stipulation now before the Commission.
The terms of the Stipulation include provisions relating to company management, employment
matters, regulatory and financial terms, customer rates, allocation of transaction-related costs,
customer standards, and ring fencing provisions. Idaho Commission Staff is a signatory to the
Settlement Stipulation.
STAFF RECOMMENDATION
Staff recommends that the Commission issue notice of the Settlement Stipulation,
implement a ten-day customer comment period, and after that time, if appropriate, issue an Order
adopting the Settlement Stipulation and close this docket.
DECISION MEMORANDUM 3
COMMISSION DECISION
Does the Commission wish to:
1. Issue notice of the Settlement Stipulation;
2. Implement a ten-day public comment period; and
3. At the appropriate time, adopt the Settlement Stipulation entered into by Staff?

M:QST-G-16-01_bk
BEFORE THE PUBLIC SERVICE COMMISSION OF UTAH
In the Matter of the Joint Notice and
Application of Questar Gas Company and
Dominion Resources, Inc. of Proposed Merger
of Questar Corporation and Dominion
Resources, Inc.
Docket No. 16-057-01
SETTLEMENT STIPULATION
Pursuant to Utah Code Ann. § 54-7-1 and Utah Admin. Code R746-100-10.F.5, and
pursuant to the Contract for Regulatory Services between the Public Service Commission of
Utah ("Commission") and the Idaho Public Utilities Commission dated April 6, 2016, Questar
Gas Company ("Questar Gas") and Dominion Resources, Inc. ("Dominion") (together "Joint
Applicants"); the Utah Division of Public Utilities ("Division"); the Utah Office of Consumer
Services (the "OCS"); the Utah Association of Energy Users ("UAE"); the American Natural
Gas Council, Inc. ("ANGC"); and the State of Utah, Governor's Office of Energy Development
( collectively "Parties" or singly "Party") submit this Settlement Stipulation. The Parties are
authorized to represent that the intervenors in this docket that have not entered into this
Settlement Stipulation either do not oppose or take no position on this Settlement Stipulation.
This Settlement Stipulation shall be effective upon the entry of a final order of approval by the
Commission.
PROCEDURAL HISTORY
1. On January 31, 2016, Dominion, Diamond Beehive Corp. and Questar
Corporation entered into an Agreement and Plan of Merger ("Merger Agreement") by which
Questar Gas' parent, Questar Corporation, will become a wholly-owned subsidiary of Dominion
(the "Merger").
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2. On March 3, 2016, Questar Gas and Dominion filed a Joint Notice and
Application of Questar Gas Company and Dominion of Proposed Merger of Questar Corporation
and Dominion Resources, Inc. in Utah in Docket No. 16-057-01 ("Joint Notice and
Application"). On March 3, 2016, Joint Applicants also filed a Joint Application for Approval of
Proposed Merger of Questar Corporation and Dominion Resources, Inc. before the Wyoming
Public Service Commission ("Wyoming Commission") in Docket Nos. 30010-150-GA-16 and
30025-1-GA-16 ("Wyoming Joint Application"). Both the Joint Notice and Application and
Wyoming Joint Application were accompanied by pre-filed direct testimony of Craig C.
Wagstaff, David M. Curtis, Thomas F. Farrell II, Diane Leopold, and Fred G. Wood III, along
with substantial accompanying exhibits and information supportive of the Joint Notice and
Application and the Wyoming Joint Application.
3. On March 3, 2016, Questar Gas also provided a Notice of Agreement and Plan of
Merger between Questar Corporation and Dominion Resources, Inc. to the Idaho Public Utilities
Commission.
4. On March 18, 2016, the Commission issued a Scheduling Order, Directive to
Stipulate to Date for Technical Conference, and Notices of Hearing and Public Witness Hearing
setting dates for filing testimony and hearings.
5. Since that time, the following parties have intervened: UAE; Nucor; the State of
Utah, Governor's Office of Energy Development; Rocky Mountain Power; and the ANGC.
6. On April 28, 2016, a technical conference was held to discuss and provide
information to the Division, OCS, interested parties, and the Commission and its staff related to
the Merger.
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7. On June 16, 2016, Joint Applicants filed a First Supplement to Joint Notice and
Application ("First Supplement") providing additional information related to the Merger and the
Joint Notice and Application.
8. On July 7, 2016, the OCS filed the Direct Testimony of Gavin Mangelson,
Richard A. Baudino, and Lane Kollen, all with accompanying exhibits. On July 7, 2016, the
Division filed the Direct Testimony of Douglas D. Wheelwright, Charles E. Peterson, and
Kathleen Kelly, all with accompanying exhibits. On July 7, 2016, the ANGC filed the Direct
Testimony of Curtis Chisolm.
9. The Division, OCS, UAE, ANGC, Wyoming Office of Consumer Advocate, and
Wyoming Commission Staff have asked and Joint Applicants have responded to hundreds of
data requests and inquiries.
10. On July 28, 2016, Joint Applicants submitted Rebuttal Testimony of Craig C.
Wagstaff, David A. Cluistian, David M. Curtis, Fred G. Wood III, Maria E. (Gina) Jones, and
James R. Chapman, and the OCS submitted the Rebuttal Testimony of Gavin Mangelson. On
July 28, 2016, UAE filed comments in this docket.
11. During July and August of 2016, the Parties met to discuss settlement of the
matters raised herein. The Parties have reached agreement as set forth below.
12. On August 1, 2016, Joint Applicants and the Wyoming Office of Consumer
Advocate filed a Settlement Stipulation ("Wyoming Settlement Stipulation") in the Wyoming
proceeding.
TERMS AND CONDITIONS
The Pmiies agree for purposes of settlement that the Joint Notice and Application should
be granted and approved subject to the following commitments as set forth in the Joint Notice
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and Application filed on March 3, 2016 and the First Supplement filed on June 16, 2016 with the
Commission in Docket No. 16-057-01 and as modified and supplemented herein, and should be
imposed upon the Joint Applicants as agreed by the Parties and as a condition of the
Commission's approval of the Merger.
1. After the time the Merger is effective as defined in the Merger Agreement
("Effective Time"), Questar Corporation will become a wholly-owned subsidiary of Dominion
that will continue to exist as a separate legal entity (herein refeITed to as "Dominion Questar").
2. At the Effective Time, Questar Gas (herein referred to as "Dominion Questar
Gas"), will remain a direct, wholly-owned subsidiary of Dominion Questar and will continue to
exist as a separate legal entity with its own complete set of books and records.
Business
3. Dominion will maintain Dominion Questar Gas' corporate headquarters in Salt
Lake City, Utah. Dominion commits that there are no plans to change the location of Dominion
Questar Gas' corporate headquarters from Salt Lake City to another location for the foreseeable
future.
4. Dominion will establish a new Western Region operating headquarters in Salt
Lake City, Utah. No costs shall be allocated to Dominion Questar Gas customers associated
with the new Western Region operating headquarters in Salt Lake City, Utah without approval
by the Commission.
5. Dominion intends that its board of directors will take all necessary action, as soon
as practicable after the Effective Time, to appoint a current member of the Questar Corporation
board as a director to serve on Dominion's board of directors.
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6. Dominion will take all necessary action to cause a cunent member of the Questar
Corporation board to be appointed as a director to serve on the board of directors of the general
partner of Dominion Midstream Partners, L.P. ("Dominion Midstream") as soon as practicable
after such time as all or part of Questar Pipeline Company ("Questar Pipeline") is contributed to
Dominion Midstream.
7. Dominion Questar Gas will be managed from an operations standpoint as a
separate regional business under Dominion with responsibility for managing operations to
achieve the objectives of customer satisfaction; reasonable rates; reliable service; customer,
public, and employee safety; environmental stewardship; and collaborative and productive
relationships with customers, regulators, other governmental entities, and interested stakeholders.
Dominion Questar Gas will have its own local operating management located in Salt Lake City,
Utah.
8. Questar Gas and Dominion share a common focus on installing, upgrading, and
maintaining facilities necessary for safe and reliable operations. This focus will not be
diminished in any way as a result of the Merger. Absent a material change in circumstances,
Dominion Questar Gas will continue its planned total capital expenditure program with an
estimated $209 million investment in 2017, $208 million investment in 2018, and $233 million
investment in 2019 (excludes investment in peak shaving facility). Any variances to this plan
will be supported by Dominion Questar Gas in its next general rate case. Dominion will
maintain the environmental monitoring and maintenance programs of Dominion Questar Gas at
or above current levels.
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9. Dominion and its subsidiaries will continue to honor the Wexpro Stipulation and
Agreement, the Wexpro II Agreement and the conditions approved in connection with inclusion
of properties in the Wexpro II Agreement ("Wexpro Agreements") and the conditions and
obligations provided therein. Dominion will not contribute Wexpro Company ("Wexpro") to
Dominion Midstream or to any master limited partnership without the Commission's approval.
Employee Matters
10. Dominion will give employees of Dominion Questar and its subsidiaries due and
fair consideration for other employment and promotion opportunities within the larger Dominion
organization, both inside and outside of Utah, to the extent any such employment positions are
re-aligned, reduced, or eliminated in the future as a result of the Merger.
11 . Dominion, as a shareholders' cost, will contribute, within six months of the
Effective Time, a total of $75,000,000 toward the full funding, on a financial accounting basis, of
Questar Corporation's (i) ERISA-qualified defined-benefit pension plan in accordance with
ERISA minimum funding requirements for ongoing plans, (ii) nonqualified defined-benefit
pension plans, and (iii) postretirement medical and life insurance (other post-employment benefit
("OPEB")) plans, subject to any maximum contribution levels or other restrictions under
applicable law, thereby reducing pension expenses over time in customer rates. Dominion
represents that said $75,000,000 contribution, based on cmrent plan funding, would be
permissible and well within maximum contribution levels and other restrictions under applicable
law.
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Regulatory
12. Dominion and its affiliates commit to make officers and employees of Dominion
reasonably available to testify before the Commission and provide information that is relevant to
any matter within the jurisdiction of the Commission.
13. As part of this and future regulatory proceedings, Dominion Questar Gas will
provide information in response to discovery or requests for information about Dominion or its
subsidiaries that are relevant to matters within the Commission's jurisdiction.
14. Dominion Questar Gas, Dominion Questar, and Wexpro will maintain access to a
complete set of their books and records, including accounting records, as well as access to
affiliate charges to Dominion Questar Gas, at their corporate offices in Salt Lake City, Utah.
15. Dominion commits to provide 30 days' notice to the Commission if it intends to
create a corporate entity between Dominion Questar and Dominion Questar Gas.
16. For regulatory purposes, Dominion Questar Gas' accounting will continue to
reflect assets at historical costs, approved depreciation rates, and deferred income taxes based on
original cost in accordance with the Uniform System of Accounts and any relevant Commission
orders.
17. Dominion Questar Gas will not seek any changes to existing filed rates, rules,
regulations, and classifications under Questar Gas' Utah Natural Gas Tariff No. 400 ("Tariff')
because of the Merger, before its next general rate case, except to revise the Tariff to change the
name of the operating entity. The Company will file for a name change within 21 days of the
Effective Time.
18. Dominion Questar Gas will continue to file annually and follow the
Commission's Integrated Resource Plan process and guidelines.
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19. Dominion Questar Gas will maintain established gas-supply interchangeability
Wobbe indices for Questar Gas' receipt points and will be in compliance with the Commission's
requirements.
20. Goods and services provided to Dominion Questar Gas by Dominion or its
subsidiaries shall be priced consistent with the Affiliate Expense Standard set fo1ih in Section
2.06 of the Tariff. Dominion Questar Gas will have the burden of proof to show that prices for
goods and services provided by Dominion or its other subsidiaries to Dominion Questar Gas are
just and reasonable.
21. Dominion Questar will not seek recovery of any acquisition premium (goodwill)
or fair value in excess of net book value associated with the Merger from Dominion Questar Gas
customers. Dominion will not record any goodwill or fair value in excess of net book value
associated with the Merger on Dominion Questar Gas' books and will make the required
accounting entries associated with the Merger on that basis. Dominion Questar will not seek
recovery of any acquisition premium (goodwill) or fair value in excess of net book value
associated with the Merger through allocation of cost to the affiliated companies of Dominion
Questar.
22. Dominion Questar will not sell all or a majority of Dominion Questar Gas'
common stock without Commission approval.
Financial
23. Dominion, through Dominion Questar, will provide equity funding, as needed, to
Dominion Questar Gas in order to maintain an end-of-year common equity percentage of total
capitalization in the range of 48-55 percent (48-55%) through December 31, 2019.
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24. Dominion commits to use commercially reasonable efforts to maintain credit
metrics that are supportive of strong investment-grade credit ratings (targeting the Single-A
range) for Dominion Questar Gas. For the first four years following the Effective Time, in any
rate proceeding where Dominion Questar Gas' rate ofretum is established or it seeks to reset the
previously authorized rate of return on rate base, Dominion Questar Gas will demonstrate that its
cost of debt proposed for recovery in rates is not greater than would have been incmred absent
the Merger, and will hold customers harmless from any increases in the cost of debt caused by
the Merger. Nothing in this provision shall limit the Parties, in any general rate proceeding, from
presenting any arguments or evidence as to the appropriate rate of return for Dominion Questar
Gas, consistent with the provisions of Paragraph 60 of this Settlement Stipulation.
25. Neither Dominion nor its other subsidiaries will, without the Commission's
approval, make loans to Dominion Questar Gas that bear interest at rates that are greater than the
lower of (i) rates being paid at the time of such loan by Dominion or such other subsidiary on its
own debt or (ii) rates available, at the time of such loan, on similar loans to Dominion Questar
Gas from the market.
26. Dominion Questar Gas will not lend funds to Dominion or other Dominion
entities, including Dominion Questar.
27. Dominion Questar Gas will not transfer material assets to or assume liabilities of
Dominion or any other subsidiary of Dominion without the Commission's approval.
28. Dominion Questar Gas will not transfer its debt to Dominion, or any other
subsidiary of Dominion, without the Commission's approval.
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29. Dominion will continue to provide to Dominion Questar Gas no less than the
same access to sholi-term debt, commercial paper, and other liquidity that Questar Corporation
currently has in place for Questar Gas.
30. Dominion commits that Wexpro will not be a paliy to a money pool. To the
extent that sholi-term working capital is required by Wexpro, it will be provided under the terms
of a one-way intercompany note at the actual cost of that short-term debt at the Dominion level.
Community
31. Dominion, at shareholders' expense, will increase Questar Corporation's historic
level of corporate contributions to charities identified by local leadership that are within
Dominion Questar Gas' service areas by $1 ,000,000 per year for at least five years following the
Effective Time. Dominion Questar Gas will maintain or increase each jurisdiction's historic
level of community involvement, low income funding, and economic development effo1ts in
Questar Gas' cunent operation areas.
32. Dominion, at shareholders' expense, will establish a newly-formed advisory
board for its Western Region operations composed of regional-based business and community
leaders. This board will meet and receive information and provide feedback on community
issues, government relations, environmental stewardship, economic development opportunities,
and other related activities that affect Dominion's and Dominion Questar Gas' local
stakeholders.
Customer Rates
33. Within five (5) business days of the filing of this executed Settlement Stipulation,
Questar Gas will petition to withdraw its pending application before the Commission in Docket
No. 16-057-03 to increase annual non-gas distribution revenue by approximately $22 million.
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The Commission's granting of the petition to withdraw is a condition of this Settlement
Stipulation. Contingent upon the consummation of the Merger, the Parties further agree that
Dominion Questar Gas will not file a general rate case to adjust its base distribution non-gas
rates, as shown in Questar Gas' existing Tariff, prior to July 1, 2019 or later than December 31,
2019, unless otherwise ordered by the Commission. Dominion Questar Gas will not file an
application for a major plant addition with a rate-effective date prior to March 1, 2020, absent
emergency circumstances, except to address the peak-hour needs set forth in Questar Gas' 2016-
2017 Integrated Resource Plan (Docket No. 16-057-08). Dominion Questar Gas will bear the
burden to demonstrate such emergency circumstances. Dominion Questar Gas will not seek a
deferred accounting order prior to March 1, 2020, absent circumstances that are extraordinary
and unforeseeable and that would have a material financial impact on Dominion Questar Gas.
Dominion Questar Gas will bear the burden to demonstrate such material financial impact and
extraordinary and unforeseeable circumstances.
34. The Parties agree that the Utah Conservation Enabling Tariff ("CET") accrual
caps will be suspended until rates become effective in the next filed general rate case. To the
extent that the balance in the CET accrual account is above the accrual cap, the incremental
amount will not be assessed interest during the suspension period. The amortization cap will
remain in place.
Compliance with the Law
35. Dominion and Dominion Questar Gas will continue to comply with all existing
laws, rules, regulations, provisions of its Tariff, orders, and directives of the Commission, as
applicable, following the Effective Time.
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Integration Progress Report
36. Dominion Questar Gas will work with the Division and the OCS on a
collaborative basis to develop rep01iing requirements for an Integration Progress Report on
planned and accomplished activities relative to the Merger. The report will also identify and
include associated transition and transaction costs. Dominion Questar Gas will file the first
Integration Progress Report with the Commission on or before April 15, 2017 for the period
ending December 2016 and will provide updates quatierly thereafter until the conclusion of the
next general rate case.
Transaction Costs
37. Transaction costs associated with the Merger will not be recovered through rates
of Dominion Questar Gas or recovered through charges from affiliated companies of Dominion
Questar to Dominion Questar Gas. Transaction costs shall be defined as:
1. Legal, consulting, investment banker, and other professional advisor costs
to initiate, prepare, consummate, and implement the Merger, including obtaining
regulatory approvals.
11. Rebranding costs, including website, advertising, vehicles, s1gnage,
printing, stationery, etc.
111. Executive change in control costs (severance payments and accelerated
vesting of share-based compensation).
1v. Financing costs related to the Merger, including bridge and permanent
financing costs, executive retention payments, costs associated with shareholder
meetings, and proxy statement related to Merger approval.
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Transition Costs
38. Any transition or integration expenses ansmg from the Merger will not be
deferred for future recovery from customers and will be expensed by Dominion Questar Gas and
its affiliates as incurred during the transition period. Dominion Questar Gas' revenue
requirement for the purpose of developing distribution non-gas base rates will be evaluated in the
next general rate proceeding, and that filing shall identify all transition costs, if any, in the base
period and the test period. Transition or integration costs that are capitalized and not expensed,
including, but not limited to, information technology investments in new hardware and software,
including related costs, to conve1i, conform, and/or integrate Questar Corporation and
subsidiaries' systems into and with Dominion's systems, will be itemized and disclosed in the
next general rate case. Dominion Questar Gas will have the burden of proof to show that the
transition or integration costs are reasonable and result in a positive net benefit to customers.
Shared Services / Cost Allocation
39. Dominion Questar Gas will not seek recovery in its next general rate case of any
increase in the aggregate total Operating, Maintenance, Administrative and General Expenses
(excluding energy efficiency and bad debt costs) per customer over the 12 months ended
December 2015 baseline level, unless it can demonstrate that the increase in such total expenses
was not caused by the Merger. This amount per customer for the 12 months ended December
2015 was $138.24. For the first four calendar years following the Effective Time, Dominion
Questar Gas will provide, on an annual basis, a baseline comparison between 2015 and the
current year for Operating, Maintenance, Administrative and General Expenses for Questar
Pipeline and Wexpro. Additional detail and the calculation of the 2015 baseline for Questar Gas,
Questar Pipeline and Wexpro are shown in Attachment 1.
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40. Joint Applicants shall hold customers harmless from any increases in the
aggregate total costs for shared or common services provided by Dominion Questar Corporation
and/or Dominion Resources Services Company, Inc. ("Dominion Resources Services") that are
caused by the Merger.
41. Joint Applicants shall hold customers harmless for any changes in income taxes,
and/or accumulated deferred income taxes, recoverable in Dominion Questar Gas rates caused by
the Merger, to the extent that such action would be consistent with the tax normalization rules.
42. Questar Pipeline's rates will change only pursuant to proceedings before the
Federal Energy Regulatory Commission ("FERC").
43. Joint Applicants shall hold customers hannless from any increases in Wexpro's
shared services costs or income tax expense caused by the Merger.
44. No later than January 1, 2018, Dominion Questar Gas will present and review
with the Division and the OCS, for informational purposes, a proposed methodology for
allocation of shared services costs. Dominion Questar will use the current allocation
methodologies, including Distrigas, to allocate shared services costs to its subsidiaries until
January 1, 2018. Dominion Questar Gas may propose another allocation methodology for use
after December 31, 2017, provided that it has presented such methodology for review as set forth
above.
45. Dominion Questar Gas will work with the Division and the OCS on a
collaborative basis to develop affiliate transactions reporting requirements and will file such
information with the Commission beginning on July 1, 2018 for the 12 months ending December
31, 2017 and thereafter annually.
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46. Costs that have been denied recovery by the Commission in prior orders, unless
subject to regulation by another governmental agency, will continue to be excluded from rates
absent fmiher order from the Commission.
Customer Satisfaction Standards
4 7. Within 120 days of the Effective Time, Dominion Questar Gas will meet with the
Division and the OCS on a collaborative basis and update Customer Satisfaction Standards,
taking into account recent historical results. Dominion Questar Gas will report qua1ierly on its
performance relative to the Customer Satisfaction Standards. Quarterly repmiing will continue
until Dominion Questar Gas' next general rate case filing. If the Dominion Questar Gas service
levels become deficient, meaning they fall short of the Customer Satisfaction Standards as shown
in the report, Dominion Questar Gas will file a remediation plan with the Commission explaining
how it will improve and restore service to meet the Customer Satisfaction Standards.
Additional Ring Fencing Provisions
48. Dominion Questar Gas shall maintain separate long-term debt with its own debt
rating supplied by at least two of the recognized debt rating agencies. Any of the debt used to
capitalize Dominion Questar Gas shall be kept within the regulated utility.
49. Dominion Questar Gas shall establish and maintain its own bank accounts that are
in its own name and direct access to exclusively committed credit facilities. Dominion shall
provide Dominion Questar Gas with access to no less than $750,000,000 in sholi-term debt or
commercial paper programs.
50. In connection with its notification to the Commission of dividends paid by
Dominion Questar Gas, Dominion Questar Gas shall provide a cash flow summary and explicitly
notify the Commission if payment of any dividend would result in its actual common equity
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component of total capitalization falling below 45 percent (45%), usmg the method of
calculating equity levels under the ratemaking precedents of the Commission. In addition,
Dominion Questar Gas will make annual financial statements for Wexpro and Questar Pipeline
available to regulators.
51. Upon request, Dominion and all of its affiliates and subsidiaries must provide the
Cornn1ission, the Division, and the OCS, including their auditors and authorized agents, and
intervenors in rate proceedings, as appropriate, with reasonable access to transactional,
accounting and other information, including personnel necessary to explain the requested
information, regarding any costs directly or indirectly allocated to Dominion Questar Gas.
Dominion and Dominion Questar Gas commit to maintain access to the requested books and
records in Salt Lake City, Utah, or, at the option of the Division, or the OCS, Dominion Questar
Gas agrees to pay reasonable travel costs to the location of the requested documents and
personnel; such travel costs will not be passed on to Dominion Questar Gas customers.
52. Dominion Questar Gas will clearly reflect all of its costs and investments in its
financial reports, including costs and assets that are directly assigned or allocated to it from
another subsidiary of Dominion. An audit trail will be maintained so that allocable costs can be
specifically identified.
53. Dominion and Dominion Questar agree not to assert in any forum that the
provisions of PUHCA or its successor PUHCA 2005 (EP Act 2005), or the related Ohio Power v.
FERC case, preempt the Commission's jurisdiction over affiliated interest transactions and will
explicitly waive any such defense in those proceedings. In the event that PUHCA or its
successor PUI-ICA 2005 (EP Act 2005) is repealed or modified, Dominion and Dominion Questar
agree not to seek any preemption under such subsequent modification or repeal.
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54. The Joint Applicants commit to provide for and effect the appointment of a
"Special Bankruptcy Director" to serve as a member of the Board of Directors of Dominion
Questar Gas ("DQG Board"). Said Director shall be nominated by and retained from an
independent entity such as CT Corporation (at Dominion shareholder expense) and shall not be
employed by Dominion or any other Dominion affiliate. Said Director shall not participate in
ordinary and routine activities of the DQG Board and shall have no voting rights except in the
event of a vote by the DQG Board to approve a voluntary bankruptcy petition to be filed under
Title 11 of the U.S. Code on behalf of Dominion Questar Gas. Notice of such vote shall be
provided to the Special Bankruptcy Director and no voluntary bankruptcy petition on behalf of
Dominion Questar Gas may be filed without the affirmative vote of the Special Bankruptcy
Director. It is the intent of the Parties that the Special Bankruptcy Director will consider the
interests of all relevant economic stakeholders, including without limitation the utility's
customers, and the financial health and public service obligations of Dominion Questar Gas, in
exercising his or her responsibilities, subject to applicable law. Concurrent with the notice to the
Special Bankruptcy Director, Dominion Questar Gas will provide confidential notice to the
Commission, Division and the OCS.
55. Dominion or Dominion Questar Gas shall provide notice to the Commission, the
Division, and the OCS of any bankruptcy petition or other filing that petitions for Dominion or
any of its subsidiaries to be declared bankrupt. If the petition is voluntary, the notice shall be
provided within three (3) business days of the petition's filing. If the petition is involuntary, the
notice shall be filed within three (3) business days after the day on which the petition is served
upon the entity subject to the petition or prior to any hearing adjudicating the petition, whichever
is soonest.
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Other Provisions
56. The Joint Applicants agree that they will use commercially reasonable efforts in
consultation with interested suppliers and marketers to coordinate an upstream nomination
process with Kern River Gas Transmission Company similar to the process cunently available
with Questar Pipeline Company, which nomination process is generally described in the Joint
Motion for Dismissal filed with the Commission on October 15, 2014 in Docket 14-057-19.
Within 120 days following the Effective Time, representatives of Dominion and Dominion
Questar Gas will meet with interested transportation customers, the Division, the OCS, and any
other interested parties and will act in good faith to review concerns of transportation customers
and will consider any proposal by interested transportation customers regarding direct access by
marketers/transporters to such customers.
57. Dominion Questar Gas will notify customers of the Merger in the following ways:
1. A notice will be posted on Dominion Questar Gas' website within 5 days
of the Effective Time notification.
11. Notification will be published in the Gas Light News billing insert within
60 days of the Effective Time notification.
GENERAL
58. The Parties agree that settlement of those issues identified above is in the public
interest and that the results are just and reasonable.
59. The Parties agree that no part of this Settlement Stipulation or the formulae or
methods used in developing the same, or the relevant Commission orders approving the same
shall in any manner be argued or considered as precedential in any future case. All negotiations
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related to this Settlement Stipulation are privileged and confidential, and no Paiiy shall be bound
by any position asserted in negotiations. Neither the execution of this Settlement Stipulation nor
the order adopting it shall be deemed to constitute an admission or acknowledgment by any Party
of the validity or invalidity of any principle or practice of ratemaking; nor shall they be construed
to constitute the basis of an estoppel or waiver by any Party; nor shall they be introduced or used
as evidence for any other purpose in a future proceeding by any Party except in a proceeding to
enforce this Settlement Stipulation.
60. Nothing in this Settlement Stipulation or Commission approval of this Settlement
Stipulation shall constitute an approval, pre-approval or determination of prudence or cost­
recovery as to any expenditures, the prudence or appropriateness of any particular capital
structure or cost of capital, or any other ratemaking issue other than as expressly provided in the
Settlement Stipulation. Dominion Questar Gas shall retain its burden to demonstrate the
prudence of its expenditures and the justness and reasonableness of any rates it proposes in the
future, and all Paiiies will retain all rights to challenge or propose adjustments to Dominion
Questar Gas' request for any change in its rates in any regulatory proceeding.
61. Questar Gas, Dominion, the Division, and the OCS each will make one or more
witnesses available to explain and support this Settlement Stipulation to the Commission. Such
witnesses will be available for examination. As applied to the Division, and the OCS, the
explanation and support shall be consistent with their statutory authorities and responsibilities,
and nothing in this Settlement Stipulation shall abrogate the authority and responsibilities of the
Division under Utah Code Ann. § 54-4-4. So that the records in these dockets are complete, all
Parties' filed testimony, exhibits, and the Joint Notice and Application and its exhibits, and the
First Supplement and its exhibits shall be submitted as evidence.
-19-
62. The Parties agree that if any person challenges the approval of this Settlement
Stipulation or requests rehearing or reconsideration of any order of the Commission approving
this Settlement Stipulation, each Party will use its best efforts to support the tenns and conditions
of the Settlement Stipulation. As applied to the Division, and the OCS, the phrase "use its best
efforts" means that they shall do so in a manner consistent with their statutory authorities and
responsibilities. In the event any person seeks judicial review of the Commission's order
approving this Settlement Stipulation, no Paiiy shall take a position in that judicial review
opposed to the Settlement Stipulation.
63. Except with regard to the obligations of the Parties under Paragraphs 59, 61 and
62, of this Settlement Stipulation, this Settlement Stipulation shall not be final and binding on the
Paiiies until it has been approved without material change or condition by the Commission. This
Settlement Stipulation is an integrated whole, and any Paiiy may withdraw from it if it is not
approved without material change or condition by the Commission or if the Commission's
approval is rejected or materially conditioned by a reviewing court. If the Commission rejects
any part of this Settlement Stipulation or impose any material change or condition on approval of
this Settlement Stipulation, or if the Commission's approval of this Settlement Stipulation is
rejected or materially conditioned by a reviewing comi, the Parties agree to meet and discuss the
applicable Commission or court order within five business days of its issuance and to attempt in
good faith to determine if they ai·e willing to modify the Settlement Stipulation consistent with
the order. No Party shall withdraw from the Settlement Stipulation prior to complying with the
foregoing sentence. If any Party withdraws from the Settlement Stipulation, any Party retains the
right to seek additional procedures before the Commission, including presentation of testimony
and cross-examination of witnesses, with respect to issues resolved by the Settlement Stipulation,
-20-
and no Party shall be bound or prejudiced by the te1111s and conditions of the Settlement
Stipulation.
64. This Settlement Stipulation may be executed by individual Parties through two or
more separate, conformed copies, the aggregate of which will be considered as an integrated
instrument.
65. The Parties acknowledge that the Wyoming Settlement Stipulation has been
signed by parties in Wyoming and is pending approval by the Wyoming Commission. The
Parties agree to a "most favored nation clause." If the Wyoming Commission approves the
Merger subject to terms or conditions not contained in this Settlement Stipulation, and the Joint
Applicants accept those terms or conditions, then the Joint Applicants agree to provide those
applicable benefits and protections in Utah.
-21-
RELIEF REQUESTED
Based on the foregoing, the Parties request that the Commission issue an order approving
this Settlement Stipulation and adopting its terms and conditions.
RESPECTFULLY SUBMITTED: August \ '5; 2016.
Utah Division of Public Utilities
Dom.inion Resources, ln.c.
Idaho Public Utilities Commission Sta.ff
State of Utah, Governor's Office of Energy Development
-22-
RELIEF REQUESTED
Based on the foregoing, the Parties request that the Commission issue an order approving
this Settlement Stipulation and adopting its terms and conditions.
RESPECTFULLY SUBMITTED: August Ji 2016.
Utah Division of Public Utilities
Questar Gas Company
Dominion Resources, Inc.
American Natural Gas Council, Inc.
Utah Office of Consumer Services
Utah Association of Energy Users
--f:£.15. ,~
mmission Sta.ff
State of Utah, Governor's Office of Energy Development
Questar Gas Company
12 Months Ended 2015 O&M and A&G per customer
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
(Annual Results of Operations)
(A)
Production
Distribution
Customer Accounts (Exel. Bad Debt)
Customer Service/Information (Exel. EE)
Administrative & General
Bad Debt
Energy Efficiency
Total O&M and A&G
LESS Bad Debt
LESS Energy Efficiency
Adjusted O&M and A&G
Year End Customers
O&M and A&G/Customer (Line 11 divided by 12)
Wexpro
12 Months Ended 2015 O&M and A&G
(Audited Financial Statements)
Operating & Maintenance Expense
Administrative & General Expense
Total O&M and A&G
Questar Pipeline Company
12 Months Ended 2015 O&M and A&G
(FERC Form 2 pages 320-325)
17 Production Expenses
18 Natural Gas Storage, Terminaling and Processing Expenses
19 Transmission Expenses
20 Customer Service and Informational Expenses
21 Administrative & General Expense
22 Total O&M and A&G
1/ FERC Form No. 2, page 320, line 97
2/ FERC Form No. 2, page 321, line 125
3/ FERC Form No. 2, page 323, line, 201
4/ FERC Form No. 2, page 235, line 244
5/ FERC Form No. 2, page 235, line 267
$
$
$
$
$
$
Settlement Stipulation
Docket No. 16-057-01
Attachment 1
(B)
(497,458.97)
58,606,964
23,090,544
5,159,033
50,550,710
2,093,764
23,482,897
162,486,453
(2,093,764)
(23,482,897)
136,909,792
990,383
138.24
25,700,000
29,200,000
54,900,000
(13,426,373) 1/
11,741,717 2/
36,147,778 3/
40,711 4/
26,957,963 5/
61,461,796