STATE OF ILLINOIS

ILLINOIS COMMERCE COMMISSION Northern Illinois Gas Company : d/b/a Nicor Gas Company : : 20-0606 Proposed Revenue-Neutral Tariff Filing to : Address Issues Arising From the Storage : Study Presented in Docket No. 18-1775. : (tariffs filed on June 30, 2020) :

ORDER May 13, 2021

TABLE OF CONTENTS

I. PROCEDURAL HISTORY .................................................................................... 1

II. APPLICABLE AUTHORITY .................................................................................. 2

III. BACKGROUND .................................................................................................... 3

A. Nicor Gas’ Storage Assets and Transportation Programs ......................... 3

B. Nicor Gas’ Storage Study .......................................................................... 4

IV. CONTESTED ISSUES ......................................................................................... 5

A. Need for Transportation Tariff Revisions ................................................... 5

B. Proposed Storage Parameters ................................................................ 18

C. Elimination of Rider 25 ............................................................................. 25

D. Group Size Limits .................................................................................... 27

E. Rate 75 .................................................................................................... 29

F. Storage Allocations .................................................................................. 30

G. System Balancing Charge ....................................................................... 31

H. Tariff Impacts on Transportation Customers ............................................ 34

I. Tariff Impacts on Sales Customers (PGA) ............................................... 38

J. Procedural Issues .................................................................................... 40

K. Other ........................................................................................................ 43

V. COMMISSION ANALYSIS AND CONCLUSION ................................................ 44

VI. FINDINGS AND ORDERING PARAGRAPHS .................................................... 47

STATE OF ILLINOIS

ILLINOIS COMMERCE COMMISSION Northern Illinois Gas Company : d/b/a Nicor Gas Company : : 20-0606 Proposed Revenue-Neutral Tariff Filing to : Address Issues Arising From the Storage : Study Presented in Docket No. 18-1775. : (tariffs filed on June 30, 2020) :

ORDER By the Commission: I. PROCEDURAL HISTORY

On June 30, 2020, Northern Illinois Gas Company d/b/a Nicor Gas Company (“Nicor Gas” or the “Company”) filed tariffs with the Illinois Commerce Commission (“Commission”) to revise its Transportation program. The revenue-neutral tariff filing was made in compliance with the Commission’s directive in the Company’s 2018 rate case, Docket No. 18-1775. The filing was based on a study (“Storage Study”) assessing the implications of how Transportation customers currently use storage. The Commission suspended the tariff filing on July 29, 2020, and subsequently resuspended the filing on November 18, 2020.

Staff of the Commission (“Staff”) participated in this proceeding. Petitions to Intervene were filed on behalf of Constellation NewEnergy – Gas Division, LLC (“CNEG”); Cargill, Inc., Caterpillar Inc., Sterling Steel Company, Ingredion Incorporated, and ExxonMobil Power & Gas Services, Inc., who collectively formed the Illinois Industrial Energy Consumers (“IIEC”); Grain and Feed Association of Illinois (“GFAI”); Illinois Competitive Energy Association (“ICEA”); Retail Energy Supply Association (“RESA”); Illinois Manufacturer’s Association (“IMA”); Illinois Asphalt Pavement Association (“IAPA”); Nucor Steel Kankakee, Inc. (“Nucor”); Sequent Energy Management, L.P. (“Sequent”); and Illinois Energy, USA, LLC (“IE”). The Administrative Law Judge (“ALJ”) granted these Petitions to Intervene.

Pursuant to due notice as required by law and by the rules and regulations of the Commission, a prehearing conference was held in this matter before the ALJ via videoconference on September 1, 2020. An evidentiary hearing was held on February 10, 2021, at which time the written testimony and exhibits of Nicor Gas, Staff, CNEG, IIEC, GFAI, IAPA and ICEA/RESA, were admitted into the record. The record was marked “Heard and Taken” on April 1, 2021.

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The following witnesses testified on behalf of Nicor Gas: Timothy Sherwood, Vice President, Gas Supply Operations, Southern Company Gas; Anne Hizon, Manager, Rates; and Daniel Yardley, Principal, Yardley Associates.

The following witnesses testified on behalf of Staff: Dr. David Rearden, Senior Economist, Policy Program; Theresa Ebrey, Accountant, Accounting Department of the Financial Analysis Division; and Cheri Harden, Rate Analyst, Rates Department of the Financial Analysis Division.

The following witnesses testified on behalf of the intervening parties: CNEG - Joshua Bourget, Principal Analyst, Volume Management, CNEG; IIEC - Michael Gorman, Managing Principal, Brubaker & Associates, Inc; (“BAI”); GFAI - David Vognsen, Vice President, Rates and Regulations, Lathan Ervin Vognsen and Associates (“LEVA”), Louie Ervin II, President and Chief Operating Officer, LEVA; ICEA/RESA - John Mehling, Senior Regional Operations Manager, Direct Energy; Michael King, Managing Partner and Principal, The Hydrodynamics Group, LLC; and IAPA - Kevin Burke III, Executive Vice-President.

On March 3, 2021, the following parties filed Initial Briefs: Nicor Gas, Staff, Nucor, IIEC, ICEA, RESA, CNEG, and GFA/IAPA. On March 12, 2021, the following parties filed Reply Briefs: Nicor Gas, Staff, IIEC, ICEA, RESA, CNEG and GFAI/IAPA. Nicor Gas filed a Corrected Reply Brief on March 15, 2021. On March 17, 2021, the following parties filed Draft Orders/Position Statements: Nicor Gas, Staff, Nucor, IIEC, ICEA/RESA, CNEG and GFA/IAPA.

A Proposed Order was served on April 7, 2021. Briefs on Exceptions (“BOEs”) were filed on April 21, 2021 by the following parties: Nicor Gas, Staff, CNEG, ICEA, RESA, and IIEC. In its BOE, RESA requested Oral Argument. Also on April 21, 2021, a Petition to Intervene and a BOE were filed by Prospect Resources, Inc. No party filed a response to the Petition to Intervene, and it was granted on May 3, 2021. On April 28, 2021, the following parties filed Reply Briefs on Exceptions (“RBOEs”): Nicor Gas, Staff, CNEG, GFAI/IAPA, Nucor, RESA, IIEC and ICEA. The Commission has scheduled Oral Argument for May 10, 2021. II. APPLICABLE AUTHORITY

Section 9-201 of the Public Utilities Act (“Act”) authorizes Commission approval of proposed tariff changes if the tariff is found to be just and reasonable. 220 ILCS 5/9-201(c) (“the Commission shall establish the rates or other charges, classifications, contracts, practices, rules or regulations proposed, in whole or in part, or others in lieu thereof, which it shall find to be just and reasonable”). The Act places the burden of establishing the justness and reasonableness of proposed rates or other charges, classifications, contracts, practices, rules or regulations upon the utility. 220 ILCS 5/9-201(c). Moreover, “a just and reasonable rate is a question of sound business judgment and is not the product of a legal formula.” Central Ill. Light Co., Docket Nos. 05-0160/05-0161/05-0162 (Cons.), Order at 43 (Jan. 24, 2006).

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III. BACKGROUND A. Nicor Gas’ Storage Assets and Transportation Programs Nicor Gas currently owns and operates eight underground aquifer storage

reservoirs, totaling over 149 billion cubic feet (“Bcf”) of non-coincidental on-system working gas storage capacity. Nicor Gas presented evidence that these storage facilities are critical in providing reliable gas service to all of the Company’s customers, as well as supporting economic activity in northern Illinois.

An aquifer reservoir is a naturally occurring underground formation that consists of water-filled, porous sandstone layers covered by a solid dome-shaped caprock. When gas is injected into the storage reservoir, it displaces water from the pores of the sandstone structure, and the pressure in the reservoir rises to levels greater than the reservoir’s original pressure. The displaced water provides the pressure necessary in order to withdraw the gas at a later time. Nicor Gas provided evidence that maintaining appropriate pressure is essential for the functioning and continued viability of the storage fields. According to Nicor Gas, if an appropriate volume of gas is not withdrawn from an aquifer reservoir within a determined period of time, the pressure in the formation will move toward equilibrium. In doing so, gas moves further away from the withdrawal wells and disperses into the overall structure of the geologic formation, making the gas more difficult to reclaim and withdraw. Nicor Gas states that, due to these physical concerns, pressure equalization hinders the withdrawal of the working gas that is stored in the reservoir, resulting in a loss of working gas inventory.

In order to maintain appropriate pressure throughout the year, Nicor Gas states that it carefully plans pressure and gas inventory targets in conjunction with injection and withdrawal activity in order to maintain long-term functionality of its storage assets. This process is called “cycling” storage gas. Nicor Gas states that it plans this cycling so that the fields are filled pursuant to an injection plan so that they are full at the start of the heating season, and gas is then withdrawn pursuant to a plan so that the fields are near empty of working gas at the end of the heating season. Nicor Gas further states that failure to properly cycle gas will negatively impact the storage fields’ ability to deliver gas, and degradation of the fields’ operational capabilities also will directly impact the costs to all Nicor Gas customers, as an incremental reduction in capabilities will mean less gas available to be held in storage, and a need to be replaced elsewhere.

On-system storage allows Nicor Gas to ensure the reliable provision of natural gas supply to all customers on a daily, monthly and seasonal basis. Nicor Gas explains that this includes the ability to meet customer demand on peak days, such as severe weather days where the system reaches high levels of demand, as well as subsequent peak days. For example, high customer demand levels still may occur in February and March, even after a high demand day in January. The Company noted how on-system storage was critical in meeting record customer demand on January 30, 2019, during the Polar Vortex. On that date, the Company stated that approximately 50% of its gas delivered came from storage.

Nicor Gas states that on-system storage also allows the Company to balance variations in customer demand and can provide an implicit price hedge that helps to reduce natural gas cost volatility. Nicor Gas explains that, together with its own

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purchasing activity, the Company uses its on-system storage to: (i) serve a base level of winter load; (ii) meet high demand day supply needs through on-system storage withdrawals; (iii) serve as an essential supply source under design load conditions; (iv) balance variations between anticipated Transportation customer receipts and actual receipts; and (v) balance weather-driven load differences from day-ahead supply plans.

Transportation customers purchase their gas from a third party. At present, of the Company’s 2.2 million customers, approximately 260,000, or 12%, are Transportation customers. The remaining customers purchase their gas from the Company and are referred to as Sales customers. Nicor Gas currently offers Transportation customers three distinct programs, and the rules governing the customer’s use of storage under these programs have largely remained static since their inception:

• Rider 25 – In effect since 1984, Rider 25 is the Company’s original transportation program available to commercial and industrial customers, regardless of size.

• Daily Read transportation service – Large commercial and industrial customers could take this service under Rates 76 and 77 starting in 1988. The Company expanded this service in 1996 to include Rate 74 customers and later expanded again to include Rate 75.

• Customer Select – This program offers all customers the option to purchase their gas supply from a third party. First offered as a pilot program in 1998, the Commission approved an expansion to include all residential and commercial customers served under Rate 1, 4, and 5 in 2002.

B. Nicor Gas’ Storage Study Through the Storage Study and the testimony of Mr. Sherwood, the Company

explained how the natural gas market has evolved due to changes in the electric generation market, yet the rules governing how Transportation customers can use on-system storage generally have not changed for decades. The Company explains that these market changes have resulted in interstate pipelines, utilities, and independent power producers changing the way they use their gas assets. With these market changes, Transportation customers are using the Company’s storage assets in a different manner than when the tariffs originally became effective.

In Docket No. 18-1775, Nicor Gas presented the Storage Study, pursuant to a Commission directive, which assessed the implications of how Transportation customers currently use storage. Nicor Gas described how the Storage Study compared the Company’s three transportation programs, included a discussion of the applicable tariffs, and terms and conditions currently governing these programs, and assessed Transportation customers’ use of on-system storage to evaluate the operational risks associated with the manner in which these customers use storage. Nicor Gas’ Storage Study concluded that Transportation customers use storage in a manner that, while consistent with the provisions set forth in current tariffs, imposes risks to the Company’s ability to manage its storage assets and meet the needs of all customers. In this proceeding, Nicor Gas updated much of the data underlying the Storage Study and confirmed that the issues identified with storage cycling and the uncertainty in

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Transportation customer deliveries persist. The Company states that the changing marketplace and the flexibility offered to customers under current tariffs now require Nicor Gas to take significant actions to protect the storage fields. IV. CONTESTED ISSUES

A. Need for Transportation Tariff Revisions 1. Storage Cycling

a. Nicor Gas’ Position Nicor Gas states that the Storage Study’s identification of storage cycling issues

supports its proposal to revise its Transportation tariffs, protect its storage fields going forward, and treat all storage users in a similar fashion. Therefore, Nicor Gas proposes tariff changes that address the Company’s immediate concerns, while balancing the interests of all stakeholders. Nicor Gas notes that Staff also recognizes that the rules governing the Transportation customers’ use of storage must be tightened.

Nicor Gas notes that storage cycling is essential to the operation of the storage fields, which no party disputes. While the Company stated that it has managed to operate the storage fields in the required manner, the Company has made clear that if changes are not made, operational storage activity under the current tariffs may result in degradation of the assets. Mr. Sherwood testified that the Company must carefully plan for the proper cycling of its storage fields in order to protect and maintain their ability to deliver gas throughout the heating season. He further testified that while each year’s plan has a certain degree of flexibility, each deviation from the planned injection and withdrawal pattern has an impact on the aquifer field and significant and/or repeated deviations can have a lasting adverse cumulative impact on storage operations.

Nicor Gas states that it presented detailed data and analysis in the Storage Study, which was prepared by Nicor Gas employees that operate these fields and are tasked with maintaining the viability of these important storage assets. Nicor Gas explains that the Storage Study showed that Transportation customers’ use of storage assets does not support operational viability of the assets. Mr. Sherwood testified that Transportation customers do not cycle their gas out of storage by the end of withdrawal season, highlighting the disconnect between what is needed to operate the storage fields and what is permitted under the current tariffs. He further testified that Nicor Gas is obligated to cycle the gas Transportation customers fail to cycle in order to meet required storage targets. The Company continues to point out that these tariff changes are forward-looking and seek to prevent damage to these valuable assets before it is too late.

b. Staff’s Position Staff states that Nicor Gas argues that its Storage Study and other evidence

supports the need to amend the storage usage by Transportation customers and suppliers by decreasing transporters’ and suppliers’ flexibility to use storage. Staff disagrees with the Intervenors to some extent as the evidence supports some tightening of the storage usage parameters, but not all of the changes proposed by Nicor Gas. Thus, Staff proposed a set of parameters that decreased storage usage flexibility, since the original proposals by Nicor Gas were too extreme. Staff’s concerns were addressed by the revisions set forth in Staff Cross Exhibit 1.0.

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Due to the geologic nature of its aquifer storage fields, Nicor Gas faces limits in how it can fill and withdraw gas from them. The fields must be filled with gas in an orderly manner. Withdrawals from aquifer fields are also restricted by a schedule that preserves the maximum daily capability until Nicor Gas hits its peak day. As a result, on days during injection season (generally May-October), the utility is circumscribed in how much it can inject, while not being able to withdraw gas at all. Similarly, during withdrawal season (generally November-April), the utility is unable to inject gas into aquifer storage fields. Nicor Gas must retain the maximum ability to withdraw gas until the peak day, while also keeping the ability to withdraw gas until March. In addition, the utility must fill the storage field to its capacity in the injection season, while withdrawing as much gas as possible during withdrawal season so as not to degrade the fields’ capabilities. Thus, the utility must operate the aquifer storage fields under several restrictions under changing conditions that it must react to during the entire year. Staff Ex. 1.0 at 4.

Transportation customers purchase gas from natural gas suppliers at rates that are not set by the Commission. Sales customers buy gas at regulated rates through the Company’s Purchased Gas Adjustment (“PGA”) Rider 6. Nicor Gas delivers natural gas to both Sales and Transportation customers’ premises. To give Transportation customers access to storage, they are granted capacity rights on Nicor Gas’ storage system. They are allocated an amount of storage equal to at least 30 times their Maximum Daily Contract Quantity (“MDCQ”),1 which is termed 30 days of bank. The tariff regulates how much Transportation customers can inject into or withdraw from their storage accounts. Daily Read customers can bring in up to two times their MDCQ in the winter and are allowed to bring in up to their usage plus 25% of their storage allocation in summer. Nicor Gas Ex. 1.2 at 1. The difference between customers’ usage and deliveries to the system are added to or subtracted from their storage accounts. Id. at 4-5.

If customers reach 90% of their storage allocation by November 1, they retain full storage usage rights. If the customers fail to attain the 90% level, their storage usage rights are reduced. Nicor Gas’ Transportation customers are not currently required to use the storage services in exactly the same way as the utility uses them. For example, on a given day, daily read customers can inject gas in the winter and withdraw gas in the summer. Daily read customers are not required to completely empty their allocation in the winter nor are they required to fill it completely in the summer. However, it is imperative that the storage fields be fully filled in summer and emptied to the correct amount in the winter so as not to degrade the storage fields’ capabilities. Id. at 5-7.

Nicor Gas states that it is constrained to relatively constant injection and withdrawal programs. But the current tariff permits daily read customers to vary their injections and withdrawals by a relatively greater amount. In order to maintain its required physical injection and withdrawal schedules, Nicor Gas must “lean against” that activity; during injection season, it must inject more gas in ratepayers’ name on a day when Transportation customers are either withdrawing gas or not injecting as much gas as forecasted. Similarly, during withdrawal season, Nicor Gas must withdraw more gas in ratepayers’ name on a day when Transportation customers are injecting gas or

1 MDCQ is an estimate of the volume of gas that a customer will use on its peak day.

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withdrawing less gas than forecasted, which is the same idea as the daily balancing. Nicor Gas must “lean against” Transportation customers when they use storage in a way different from what Nicor Gas plans. Id. at 6.

c. ICEA/RESA ICEA/RESA argue that in seeking approval of tariff changes, Nicor Gas has the

burden of proof. “In utility rate case, requiring intervenors to establish unreasonableness is no substitute for requiring proof of reasonableness.” Citizens Util. Bd. v. Ill. Commerce Comm’n, 276 Ill. App. 3d 730, 747, (1st Dist. 1995). ICEA/RESA point out that “the Commission is not merely an arbitrator between the utility and parties opposing a rate change, it is an investigator and regulator of utilities responsible for the setting of rates for all affected by the rates.” Citizens Util. Bd. v. Ill. Commerce Comm’n, 2018 IL App (1st) 170527 at ⁋ 25, citing Citizens Util. Bd. v. Ill. Commerce Comm'n, 276 Ill. App. 3d at 740. ICEA/RESA argue that the Commission should reject Nicor Gas’ proposed tariff changes if either the Commission credits Intervenors’ arguments about the unreasonableness of Nicor Gas’ proposed tariff changes or the Commission does not find that Nicor Gas established the reasonableness of its proposed changes on the record.

ICEA/RESA further argue that when restructuring rates, the utility must estimate the impact on customers. “Where the utility has presented no evidence concerning the impact of rate restructuring on ratepayers, it has not met its burden of proving the restructuring just and reasonable for those ratepayers.” Citizens Util. Bd., 276 Ill. App. 3d at 738-39. According to ICEA/RESA, in Citizens Util. Bd., the Appellate Court rejected a tariff change that, among other changes, “reduce[s] the burden on businesses and allocate more costs for recovery from residential consumers.” Id. at 738. ICEA/RESA contend that the Appellate Court held that “in the absence of evidence concerning the impact of the rate restructuring on consumers, the Commission had no basis for the required findings [that it will impose just and reasonable burdens on all ratepayers].” Id. ICEA/RESA conclude that Nicor Gas bears the burden of providing and justifying the cost impact on ratepayers.

ICEA/RESA aver that no party supporting Nicor Gas’ proposal addressed the legal standard for approval of Nicor Gas’ proposed tariffs. According to ICEA/RESA, the Storage Study fails to support its claim that Transportation customers and suppliers use storage in a manner that adversely impacts the operational and physical integrity of its aquifer storage fields. ICEA/RESA argue that the direct testimony and individual hysteresis graphs that Nicor Gas provided in discovery to bolster that claim are flawed. Indeed, continue ICEA/RESA, Nicor Gas has not provided any evidence to support a claim that its aquifer storage fields will be adversely impacted now or in the future absent material modifications to its current storage parameters. ICEA/RESA urge that the Commission find that Transportation customers and suppliers use storage in a manner that has no adverse impact on the operational and physical integrity of Nicor’s storage fields and reject Nicor’s sweeping tariff proposals.

ICEA/RESA note that they sponsored testimony from Mr. King, a geologist who has conducted numerous studies of gas storage fields, including one for Nicor Gas at its Pittsfield Storage Field. See ICEA/RESA Ex. 2.0 at 2-3. ICEA/RESA further note that Mr. King explained that there are three primary ways that the operational integrity of a

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mature aquifer storage field—such as those at issue in the Storage Study—can be adversely impacted. According to ICEA/RESA:

The first is through the over-pressurization of the gas reservoir beyond the safe operating pressure, which compromises the integrity of the reservoir caprock. The second way is by filling the gas storage field with more gas than can be contained within the geological confines of that field. The third is the withdrawal of too much cushion gas, which can result in aquifer fluids flooding the gas field pore space to the point of disrupting required gas storage withdrawals.

Id. at 6-7. According to ICEA/RESA, a thorough review of the Storage Study as well as the

supporting evidence sponsored by Mr. Sherwood and discovery led Mr. King to conclude that Nicor Gas’ claim that Transportation customers’ use of storage adversely impacts the operational integrity of its eight aquifer storage fields is unsupported. ICEA/RESA posit that Mr. King based his conclusion, in part, upon an evaluation of the following: 1) the hysteresis curves for Nicor Gas’ eight fields; 2) the results from Nicor Gas’ reservoir study reports; and 3) the hypothetical individual field hysteresis graphs that Nicor Gas provided for its Ancona and Troy Grove gas storage fields. According to ICEA/RESA, Mr. King’s testimony included a detailed analysis of the operational integrity of Nicor Gas’ eight gas storage fields from a physical impact on storage operations standpoint. Specifically, argue ICEA/RESA, Mr. King analyzed whether Nicor Gas’ current transportation tariffs—which Nicor Gas admits have been adhered to by Transportation customers, both large-volume (traditional Transportation) customers and customers served under Nicor Gas’ Customer Select program—are adequate to protect the operational integrity of its storage fields. Id. at 5.

Mr. King concluded that Nicor Gas has not demonstrated that Transportation customers’ use of storage under its current tariff parameters negatively impacts the physical integrity of its eight storage fields. Moreover, Mr. King’s direct testimony clearly demonstrated that Transportation customers’ reported deviations from Nicor Gas’ ideal annual storage plan have not impacted its ability to maintain the operational integrity of its aquifer storage fields currently, nor will they do so in the future. Id. at 4-5. On the contrary, ICEA/RESA continue, Mr. King’s analysis, particularly his analysis of hysteresis graphs and reservoir studies, shows that Nicor Gas has maintained the physical integrity of its storage fields for many years and will continue to do so under the existing tariff parameters. Id. at 5-6.

According to ICEA/RESA, Mr. King took specific aim in his testimony at the Ancona and Troy Grove gas fields because they can provide 60.9 Bcf and 48 Bcf, respectively, of Nicor Gas’ total working gas volume of 149.74 Bcf. Collectively, these two fields provide approximately 72% of Nicor Gas’ total working gas capacity and therefore, conclude ICEA/RESA, are representative of Nicor Gas’ gas storage operations. Id. at 9.

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According to ICEA/RESA, regarding the Ancona Storage Field, there is no evidence to suggest that Nicor Gas has been unable to operate that field at optimal pressures. Indeed, ICEA/RESA continue, Mr. King also concluded that Nicor Gas has been able to operate below maximum allowable gas storage volumes. Id. at 10-11. Similarly, ICEA/RESA highlight, Mr. King analyzed the Troy Grove gas storage field, concluding that Nicor Gas has been able to operate that field at optimal pressures and below maximum allowable gas storage volumes. Id. at 11-13. ICEA/RESA caution that while Mr. Sherwood attempted to demonstrate that large volume (traditional Transportation) customers’ use of storage impacts the physical integrity of the Troy Grove Field, Mr. King pointed out that the simulation he provided did not include daily flow rates. ICEA/RESA continue that for a theoretical simulation to realistically show how a specific class of storage customers’ use of a gas storage field operations (in this case Troy Grove) has impacted physical storage operations it must include known customer daily flow rates. According to ICEA/RESA, Nicor Gas did not provide this information because it is not available. Id. at 18-19.

ICEA/RESA point out that Nicor Gas admits that its on-system storage fields are operated in aggregate for the benefit of the system in total and not for any one individual customer or rate class. Id. at 20. Mr. King opined that Nicor Gas does not meter Transportation customers’ gas storage injection or withdrawal volumes from any one gas storage field, such as Troy Grove. Therefore, Nicor Gas’ formula for allocating traditional Transportation customers’ daily injection volumes in its theoretical simulation of Troy Grove cannot be validated nor are the assumptions underlying the simulation reflective of annual conditions. Id. at 19-20.

ICEA/RESA argue that if Nicor Gas’ theoretical hysteresis simulations were to be believed, it would mean that Transportation customers inject a volume of gas into Troy Grove that exceeds that entire field’s seasonal storage volume. ICEA/RESA note that Nicor Gas’ graph also implies that the Troy Grove field is exclusively used by Transportation customers, and they are injecting in more gas than the field can safely store. ICEA/RESA contend that this cannot be true because Nicor Gas has indicated that it stores more than one group of customers’ natural gas in its eight storage fields, which leads any reasonable observer to conclude that the Troy Grove theoretical hysteresis graph is flawed and does not support Nicor Gas’ claims. Based on the foregoing, Mr. King concluded that the Troy Grove theoretical hysteresis graph for traditional Transportation customers should be disregarded. Id. at 19-21.

ICEA/RESA state that the Company, in its rebuttal evidence, effectively abandoned its argument that the use of Nicor Gas’ storage fields by Transportation customers and suppliers harmed the physical integrity of those fields. According to ICEA/RESA, Mr. Sherwood hardly responded to Mr. King’s findings. Instead of attempting to address those findings directly, Mr. Sherwood merely restated the same arguments and offered no counter arguments to support Nicor Gas’ position that Transportation customers and suppliers have negatively impacted the physical integrity of its storage fields.

ICEA/RESA reiterate that the hysteresis graphs Mr. Sherwood provided to support his claims are based upon flawed assumptions, and, therefore, are without merit. Indeed, per ICEA/RESA, the data provided offers an incomplete picture and should not be

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considered. ICEA/RESA report that it is for these reasons that Mr. King concluded that Nicor Gas has not demonstrated that the storage operations of large volume Transportation customers and Customer Select customers have caused or will cause any physical harm to the fields. See ICEA/RESA Ex. 4.0 at 3-5.

ICEA/RESA highlight that Mr. Sherwood admits that Transportation customers’ use of Nicor Gas’ gas storage facilities has not impacted the physical integrity of the Company’s gas storage fields. Nicor Gas Ex. 4.0 at 26. ICEA/RESA state that Mr. King concluded that Nicor Gas’ storage operations, including Transportation customers’ use of available gas storage services under current tariffs, have been successful for decades and will continue to be successful well into the future. Further, according to ICEA/RESA, the current status of Nicor Gas’ storage operations refutes Nicor Gas’ claim that its proposed tariffs are necessary in order to enable the Company to maintain the operational integrity of its aquifer storage fields. ICEA/RESA Ex. 4.0 at 8-9.

ICEA/RESA note that Staff similarly concluded that Nicor Gas’ claims lack evidentiary support, and Dr. Rearden questioned its validity. After enumerating the many changes Nicor Gas proposed to its tariffs (see Staff Ex. 1.0 at 7-9), Dr. Rearden concluded that Nicor Gas’ “empirical support is not persuasive.” Id. at 10. ICEA/RESA point to Dr. Rearden’s testimony that Nicor Gas retains the ability to prudently cycle its fields under the current tariff regime. Dr. Rearden relied on Nicor Gas’ admission that during the past ten years Nicor Gas has never failed to withdraw a sufficient volume of gas from or reached an appropriate level of inventory at each of its storage fields by the end of each withdrawal period. Dr. Rearden concluded that under its current tariffs, Nicor Gas has been able to adequately cycle its aquifer fields and that is it unclear the extent to which its aquifer storage fields are, or are likely to be, compromised by its current regime of tariffs. Id. at 10-11.

ICEA/RESA note that Dr. Rearden also testified that Nicor Gas had not adequately identified and tailored its proposal to the customers that are most responsible for the difficulty in cycling its fields. ICEA/RESA highlight that Dr. Rearden concluded that Nicor Gas’ proposed amendments to its transportation tariffs appear to be a broad solution that is imposed on all Transportation customers, rather than targeted at the customers responsible for any difficulty claimed by Nicor Gas. Id. at 12-13.

d. IIEC’s Position IIEC states that Nicor Gas claims Transportation customers’ behavior necessitates

modification of its Transportation tariffs, and Nicor Gas claims that Transportation customers are not utilizing their access to storage facilities in a way that supports the long and short-term reliability of those facilities. Nicor Gas Ex. 1.0 at 11. It is IIEC’s position that Nicor Gas’ claims were not backed by record evidence and have not proven to be reasonable and balanced changes to Transportation service. IIEC notes that Dr. Rearden reached similar conclusions in his direct testimony, specifically pointing out that Nicor Gas had not identified and tailored its proposal for the customers responsible for the alleged difficulties in storage field cycling. Staff Ex. 1.0 at 12.

In the view of IIEC, the Company has been offering transportation service programs, including storage service under the same rules and parameters since the mid-1980s, and apparently there has been no indication that the Transportation customers’

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use of storage has harmed the short and long-term reliability of Nicor Gas’ facility in that time period. Nicor Gas Ex. 1.0 at 5. IIEC notes that indeed, Nicor Gas suggests that the problem, if there is one, is related to supplier behavior caused by new wholesale market participation of electric generation that is fueled by natural gas, and gas-fired electric generation which has grown significantly over the last “decade”. See id. at 11. It is IIEC’s position that these changes to the wholesale gas market are not in any way related to or caused by Transportation customers’ behavior.

IIEC observes that if Nicor Gas has any problems, which it has not proven in this case, they appear to relate to the behavior of a few suppliers related to modifying nominations and delivery of gas and changing intraday nominations to accommodate the variations in the uncertain needs of wholesale market electric generators’ needs for gas delivery related to power markets outside of the Company’s service area. IIEC Ex. 2.0R at 14-15. That is, Nicor Gas implies, without proof, that its suppliers are modifying deliveries of gas in the wholesale market, which inhibits Nicor Gas’ ability to predict whether suppliers will fully deliver gas in line with their daily nominations in a way that allows Nicor Gas to manage and/or operate its system efficiently. However, IIEC observes the record here shows that over at least the last eight years, Nicor Gas has been able to operate its aquifer storage fields in a manner consistent with maintaining the operational integrity of the storage assets and has consistently cycled gas storage to comply with Nicor Gas’ storage protocols or operating procedures. IIEC Ex. 1.0 at 9, 11. According to IIEC there is no need for the tariff revisions at this time.

IIEC takes the position the Company’s proposed change to its transportation tariffs is not appropriate, and the Company simply has not provided evidence to support its claims of a need for a change in its tariffs’ terms and conditions. IIEC Ex. 1.0 at 7. A reasonable and balanced interpretation of the evidence in this case shows that the Company’s proposed change to its tariffs is highly prejudicial to Transportation customers, and creates a significant imbalance in services provided to Sales customers versus those the Company proposes to provide to Transportation customers. IIEC Ex. 2.0R at 10-12. The Company’s arguments against the existing Transportation tariffs suggesting they create detriments to Sales customers are without merit or wrong, and the Company has failed to provide evidence supporting its claims. Id. IIEC states that the Company’s proposed changes are prejudicial to Transportation customers, are not justified nor reasonable, and its allegations that Sales customers may be harmed by behavior of Transportation customers has been proven to be incorrect. Indeed, the evidence is quite clear, based on Nicor Gas’ change in its rebuttal testimony, that if there is difficulty in the management and operation of Nicor Gas’ system on a daily basis, it is attributable entirely to a very limited number of suppliers. IIEC states that the record lacks evidence challenging the operating behavior of traditional Transportation customers in this case, which is consistent with these same customers’ behavior for the last decade over which Nicor Gas has offered transportation service. In IIEC’s opinion there is simply no problem identified or evidence presented in support of Nicor Gas’ claims against Transportation customers behavior in this case.

IIEC recommends the Commission reject Nicor Gas’ filing in this case, and direct it to hold meetings with Staff, Transportation customers, and suppliers to succinctly identify behavior that is causing operational problems for Nicor Gas, and to identify

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potential remedies to cure any operational problems while maintaining fair and reasonable Transportation tariff services to long-term customers of the utility.

IIEC points out that the evidence suggests that Transportation customers do not cycle storage capacity, which impacts Nicor Gas’ ability to effectively manage the storage cycling of their reservoir reserves. Nicor Gas Ex. 1.0 at 10. IIEC reasons that the Company has effectively cycled its storage assets over the historical period covered by the Storage Study. IIEC Ex. 1.0 at 8-9. IIEC notes that the Company’s update to the storage analysis cycling behavior shows that the Company has continued to successfully cycle its storage assets over the period 2015-2020, under the current tariffs’ terms and conditions. IIEC observes that Figure 1 of Mr. Gorman’s direct testimony clearly shows that the Company is cycling its storage capacity in line with its injection and withdrawal seasons and meeting its storage cycle parameters. IIEC Ex. 1.0 at 9; IIEC Ex. 2.0R Conf. at 17-18. In IIEC’s opinion, the Company’s evidence indicates that it has been able to utilize its gas sales functions, along with Transportation customers’ daily and monthly gas deliveries, to effectively comply with its storage cycling parameters and balance its system. The Company is able to complement Transportation gas deliveries with modified Sales customer gas deliveries in order to meet its gas storage cycling parameters. IIEC Ex. 1.0 at 11. IIEC says that Nicor Gas has not identified any negative impact or cost increase to Sales customers in operating its system.

It is IIEC’s position that the Company’s evidence does not suggest or prove that its gas procurement for Sales customers is operationally impeded, results in suboptimal gas procurement or that service reliability is impaired by operating its system in a manner similar to the manner that it has operated for decades. IIEC Ex. 2.0R at 12. Due to changes in wholesale gas markets, however, certain safeguards may be necessary to discourage the behavior of a very limited number of Suppliers, in not reliably delivering gas in line with daily gas nominations or altering nominations in the intraday period. According to IIEC, this limited supplier phenomenon could be cured by correcting the behavior of a small number of current suppliers without requiring extensive modifications of its Transportation tariffs. See IIEC Ex. 2.0R at 14; IIEC Ex. 2.2 Conf.

IIEC suggests that the Company claims that a change in its Transportation tariffs’ terms and conditions will provide incentives to modify Transportation customers’ behavior. According to IIEC attempting to modify the behavior of the stakeholder that may be causing operational problems to Nicor Gas is reasonable. The Company has failed to establish that it is the Transportation customers’ behavior that needs to be modified. Further, the Company’s evidence shows that only a limited number of suppliers may need to change their behavior, but these stakeholders are not obligated to operate based on the terms of Nicor Gas’ tariffs. As such, Nicor Gas’ proposed change in tariff terms and conditions will not change the behavior of the stakeholders that may be causing the operational difficulties.

IIEC notes Nicor Gas’ claim that it needs to change daily and monthly nomination parameters in order to provide economic incentives for Transportation customers to more effectively manage gas nominations and deliveries, and the cycling of storage is not supported by the record evidence. IIEC points out that its witness Mr. Gorman outlined Transportation customers’ behavior over the injection and withdrawal seasons and

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showed that Transportation customers do comply with Nicor’s storage asset injection and withdrawal parameters. IIEC Ex. 1.0 at 15.

IIEC says that Nicor Gas’ complaint about cycling largely relates to the transition from the withdrawal season to the injection season for the month of April. See id. at 10. Nicor Gas asserts that in April, Transportation customers are too slow in removing gas from storage to meet its cycling parameters. See Nicor Gas Ex. 1.1 at 18. IIEC notes that because of this, Nicor Gas says it modifies gas deliveries for Sales customers and modifies its withdrawals from storage in order to meet its storage cycling objectives. IIEC does not dispute that Nicor performs this function. According to IIEC, managing its gas system is a responsibility that Nicor Gas has to both Sales customers and Transportation customers, and it is fully compensated for the cost of managing this gas system balancing and storage cycling function by both Sales customers and Transportation customers. IIEC observes that while Nicor Gas does assert that it must modify its gas procurement for Sales customers, and modify its injections and withdrawals in order to achieve the storage cycling objectives, it has failed to provide any evidence that its gas cost to its Sales customers has been negatively impacted in any way, nor has it shown evidence that the reliability and safety of service is in any way impaired by the way it has operated its system for decades. It is IIEC’s position that Nicor Gas’ arguments and criticisms of Transportation customers’ behavior are without merit and should be rejected.

IIEC observes that in rebuttal, the Company suggests that because it has to at times enter the intraday market to buy gas in order to keep its system in balance, it can present “risk” of procuring gas on an uneconomic or non-optimal basis. Nicor Gas Ex. 4.0 at 4, 24. IIEC says there are several flaws in this argument. First, as IIEC witness Gorman pointed out, simply because Nicor Gas is purchasing gas on the intraday market, does not mean it is paying a higher price for that gas than the gas it would have paid for under its longer-term contracts. IIEC Ex. 2.0R at 11-12. Second, the Company regularly must purchase gas on the intraday market in order to track unexpected changes in demands of its Sales customers that are driven by unpredictable external events including weather. Hence, according to IIEC, Nicor Gas’ need to buy gas is caused by many factors, the largest of which is due to the uncertain demand of Sales customers related to uncertain weather-induced demands and is not necessarily caused by the behavior of suppliers and/or Transportation customers. Again, in IIEC’s opinion Sales customers’ demands are impacted by external factors such as changes in the weather, which has a material impact on procuring gas for these customers. Further, IIEC suggests that Nicor Gas is able to balance its system on a daily basis and cycle its storage capacity, by relying on deliveries from both Sales customers and Transportation customers. While Nicor Gas has not acknowledged it, Transportation customers incur their own upstream pipeline capacity and storage costs in order to reliably deliver gas supply to Nicor Gas even during periods of peak demand. IIEC Ex. 2.0R at 22. In IIEC’s opinion, Nicor Gas’ arguments only acknowledge resource costs it incurs in order to balance the system, and while it does not dispute it actually relies on resources for Transportation customers as part of its daily balancing and gas storage cycling, it failed to give any consideration or credit to the? cost of Transportation customers to meet their obligations to deliver gas to Nicor Gas.

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e. CNEG’s Position CNEG agrees with and supports the analysis performed by ICEA/RESA and

adopts the arguments and conclusions of ICEA/RESA. f. Nucor’s Position

Nucor argues that Nicor Gas has not demonstrated that it has either: (1) failed to operate its aquifer storage fields in a manner which supports their ongoing integrity and viability; or (2) taken out-of-market steps to ensure that its aquifer storage fields maintain their integrity due to the way in which Transportation customers are using their storage rights.

The Company claims it must enact the proposed tariff changes now because “Nicor Gas is running out of tools at its disposal to balance the system while maintaining safe and reliable service for all [its] customers.” Nicor Gas Ex. 4.0 at 12. Despite Nicor Gas’ predictions, Nucor states that there is no evidence in the record that Nicor Gas has been unable to safely maintain the operational integrity and reliability of its storage assets. In fact, Nicor Gas itself claims that it currently operates its storage “fields as operationally required and [diligently works] to maintain them in a way that keeps them healthy.” Id. This assertion is backed up by the analysis of several Intervenor witnesses, who demonstrate that the proposed tariff revisions are not needed for Nicor Gas to effectively manage its storage assets. ICEA/RESA Ex. 2.0 at 15-16.

Additionally, Nicor Gas has failed to demonstrate that it is forced to take out-of-market actions that are increasing the costs for its Sales customers due to the way in which its Transportation customers are using its storage assets. Nicor Gas justifies the proposal as being necessary to prevent Sales customers from over-paying for their gas costs, but the Company has not submitted any evidence that its gas costs have been unreasonable, to which both Staff and IIEC agree. Because Nicor Gas has not identified either any operational or financial reasons for the proposed tariff changes, Nucor supports the other Intervenors in opposing those tariff changes.

2. Nominations vs. Delivery Variances a. Nicor Gas’ Position

Nicor Gas identifies one of the issues underlying the necessity of these changes as the variances that are permitted under the current tariffs between nominated amounts of gas and those delivered. Mr. Sherwood testified that the nominated volumes appear to have no correlation to weather and expected demand, unlike overall customer usage, which can correlate to weather. The Company argues that this results in unpredictability regarding the levels of gas that will be nominated/delivered to the system. Nicor Gas asserts that such variance between Transportation customers’ nomination and their actual usage is inconsistent with the physical operational requirements of the system.

b. Staff’s Position Staff states that Mr. Sherwood discusses actions by suppliers in which they

nominate an amount in the day ahead, timely nomination windows but then decrease that nomination in the intraday nomination window. He attributes this behavior to gas fired generation becoming a bigger part of the electric generation mix, replacing coal

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generation. He states that “it has created an economic incentive, when circumstances warrant, for suppliers to shift gas deliveries previously designated for Nicor Gas to an off-system entity, and frequently doing so during the last pipeline nomination cycle.” Nicor Gas Ex. 4.0 at 19. Mr. Sherwood explains that the Company’s understanding is that there are significant non-performance penalties in the electric market. Staff states that suppliers then have a strong economic incentive to shift gas to an off-system gas-fired generator if it is called to generate power, sometimes on relatively short notice, and often late in the gas day. Staff Ex. 4.0R at 4-5, Attach. B.

Staff investigated the empirical basis for this belief. Nicor Gas provides the timely and final nominations for all suppliers for 2014 through 2018 for each day in the year. Id., Attach. A. A few suppliers reduce their nominations by substantial amounts for many days in the year, and these reductions accumulate to a very large volume over the course of the year for those suppliers. On the other hand, it appears that most suppliers do not routinely behave in this manner. Further, the reductions generally fall in the last couple of years of data. Id. at 5.

In 2014, the decreases totaled 4.3 million British thermal units (“MMBtus”). In 2015, it was 13.2 MMBtus; in 2016, 28.2 MMBtus. After 2016, however, those volumes flattened out. In 2017, the reductions added up to 25.1 MMBtus, while the total is 20.7 MMBtus in 2018. It is also notable that in 2014, five suppliers accounted for 86% of the total reductions in nominations. For 2015, four suppliers constituted 93% of the total. Similarly, for subsequent years, four suppliers summed to 91% in 2016, 93% in 2017, and 95% in 2018. Id.

Staff states that this supplier behavior could induce Nicor Gas to act in a way that may raise gas costs to Sales customers by trying to counteract its effects. Nicor Gas must balance its system every day, and changes for which there is little warning make that task more complex. Nicor Gas has not estimated the increase in gas costs caused by counteracting this behavior, either by individual transaction or collectively. Nicor Gas should not have to engage in uneconomic transactions to balance its system caused by supplier behavior, and the tariffs should prevent the need for such transactions. Id. at 6.

Staff recommends that any changes be targeted to dissuade actions that require Nicor Gas to make uneconomic transactions. With respect to the nomination withdrawals, the amendments should be aimed at making the nomination changes too expensive for the suppliers that seem to be making those changes as part of their business strategy. A specific, per unit charge for reduced nominations, possibly above a specific percentage or volume, should directly discourage this nominating strategy. The charge needs to be large enough to discourage the behavior, while some consideration should be given for single events that are more difficult for the supplier to control or that could be the result of random factors. Staff recommended that a reduction from timely nominations should be subject to a charge if it exceeds 15% of the nomination. And the charge should be 10% of the higher of the daily index price and that month’s PGA gas cost. Id. at 6-7.

Staff points out that Mr. Sherwood argued that the nomination change charge is not needed if Nicor Gas’ position in surrebuttal testimony is accepted by the Commission. If the Commission decides to approve parameters besides what is in Nicor Gas’ proposals, then Mr. Sherwood recommended an alternative method to discourage large

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reductions in nominations from final confirmed nomination to the confirmed nomination for the Timely Cycle. Nicor Gas Ex. 7.0 at 11-13. Staff recommends that the Commission adopt the charge as modified by Staff Cross Exhibit 1.0.

c. ICEA/RESA ICEA/RESA emphasize that the sole problem that Nicor Gas has quantified to any

degree is limited to problematic behavior from a few suppliers that did not actually deliver the amount of gas nominated, and Nicor Gas was able to address these events with its currently existing tools. According to ICEA/RESA, IIEC similarly highlighted the disconnect between Nicor Gas’ identified problem and the “solution” that impacts all Transportation customers.

ICEA/RESA note that Staff raises two critical issues as well. First, according to ICEA/RESA, Staff correctly identifies that while Nicor Gas has identified incidences of suppliers actually delivering less gas than they nominated, Nicor Gas has not estimated the increase in gas costs caused by counteracting this behavior, either by individual transaction or collectively. ICEA/RESA contend that to the extent this behavior exerts an impact on Sales customers, there is no evidence in the record as to whether the net impact is a harm to Sales customers. See id. at 9-10. ICEA/RESA argue that this lack of evidence is crucial, because without evidence to determine whether the aggregate net impact to Sales customers is $1, $100, or $100,000,000, it is impossible to determine whether changes made to mitigate this impact are just and reasonable. See id. at 10.

Second, ICEA/RESA highlight that Staff was consistent with ICEA, RESA, and IIEC’s contention that only a few suppliers are delivering substantially less than they nominate. According to ICEA/RESA, the limited scope of the problem (in terms of participants) suggests that the solution should be supplier-specific rather than across-the-board for the entire market. Mr. Mehling proposed one such solution—an ability to make intraday reductions to nominations for a fee—but Nicor Gas and Staff did not appropriately treat that proposal as a replacement (rather than a supplement) to Nicor Gas’ radical overhaul.

ICEA/RESA note that Nicor Gas made a range of claims about the allegedly dire state of supplier behavior, but that the record is not consistent with those statements. For example, ICEA/RESA contend that while Mr. Sherwood complained that Transportation customers were causing Nicor Gas to take harmful actions based on their behavior, the Company could not identify a single instance in which a harm actually occurred—or, in fact, any quantified cost to Sales customers.

ICEA/RESA concede that Nicor Gas did both identify and quantify one issue: suppliers reducing deliveries to the citygate too late for Nicor Gas to purchase replacement supply. However, ICEA/RESA highlight Staff’s conclusion that 95% of the issue is caused by about five or six suppliers. See Staff Ex. 4.0.

d. IIEC’s Position According to IIEC, the record shows the Company has not been able to accurately

define what behavior is causing the difficulty in its management of its daily operating parameters. IIEC explains that in Nicor Gas’ direct case, Mr. Sherwood argued that the Company could not predict Transportation customers’ nominations, which made it difficult

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to plan for daily operations, and required it to modify injections and withdrawals to storage, or change gas procurement on an intraday basis in order to keep its system in balance. Nicor Gas Ex. 1.0 at 10. IIEC points out that in his rebuttal testimony, Mr. Sherwood modified his position by implying the Company’s problems are not related to accurately predicting Transportation customers’ nominations, but rather are related to suppliers’ behavior and not Transportation customers’ behavior. Nicor Gas Ex. 4.0 at 3. IIEC indicates that Nicor Gas’ discovery responses demonstrate that it was a handful of suppliers, and not Transportation customers who were not delivering gas in line with nominations and changing nominations in an intraday period. IIEC Ex. 2.0R at 14. Mr. Sherwood’s change in explanation for the problems leading to Nicor Gas’ claimed daily operational difficulties was both a material omission from its original filing and a significant modification to the Company’s original filing. IIEC argues that despite this material change in the Company’s evidence identifying the handful of stakeholders that are allegedly creating its daily operational issues, the Company has not adequately pulled back from the onerous and expensive changes it is proposing to its Transportation tariff terms and conditions. The behavior of the handful of problem suppliers are not controlled by these tariff rates.

IIEC reports that Mr. Sherwood argued that suppliers often do not deliver the amount of nominated gas each day, or they change daily nominations within an intraday period. Nicor Gas Ex. 4.0 at 3. This variance between gas nominated and gas delivered causes the Company to adjust storage injections and withdrawals, and/or participate in intraday gas procurement in order to balance its system or cycling storage. IIEC says that significantly, the players that are causing the daily variance of gas nominated and delivered are suppliers, and not Transportation customers. In IIEC’s opinion, Nicor Gas has not explained how changes in Transportation tariff terms and conditions can impact the behavior of suppliers. Suppliers do not pay the penalties outlined in the Transportation tariffs – the Transportation customers do. Nicor Gas’ concern with a few suppliers should not result in penalties to Transportation customers because Transportation customers’ behavior is not at issue in this proceeding. Quite literally, Nicor Gas is proposing to penalize the wrong player, and has not clearly defined the problem that needs to be fixed in order to eliminate operating risk of its system. Thus, IIEC says Nicor Gas’ proposal must be rejected.

IIEC observes Mr. Sherwood’s evidence, while updated in rebuttal testimony, does not accurately describe problems with the specific stakeholders which Nicor is alleging are causing its problems with daily operating procedures. In his rebuttal testimony, Mr. Sherwood suggests that Suppliers’ behavior is not an anomaly, it happens regularly. Nicor Gas Ex. 4.0 at 3. IIEC says that Nicor Gas’ issue with suppliers is limited to a very few suppliers. Specifically, of the suppliers that do not deliver daily nominated gas or change gas in an intraday period, 3 of 67 Suppliers do not predictably deliver nominated gas, and only 7 of 67 Suppliers have changed intraday nominations. Thus, the vast majority of suppliers have not contributed to operational problems noted by Nicor Gas. IIEC 2.0R at 324-33. As such, the majority of Suppliers are operating consistent with Nicor Gas procedures and only a few are creating challenges to Nicor Gas to operate the system. The majority of suppliers operate in accordance with good operating procedures, do not cause Nicor Gas daily operational problems, and these suppliers should not pay penalties if a penalty is due because of the action of a limited number of other suppliers.

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Again, according to IIEC, the actual suppliers causing the problem have not been identified. Nicor Gas’ evidence is incomplete and does not justify its position.

It is IIEC’s position that the problem, if any, should be cooperatively addressed by Nicor Gas, its Transportation customers and suppliers to equitably modify the Transportation tariffs, not through the wholesale modification of the tariffs proposed by Nicor Gas here.

e. CNEG’s Position CNEG supports ICEA/RESA’s position. B. Proposed Storage Parameters

1. Proposed New Parameters a. Nicor Gas’ Position

Nicor Gas proposes the addition of daily and monthly storage parameters. In order to ensure that all customers utilize on-system storage in a manner in which the fields are required to be operated, the Company proposes that all Transportation customers must keep their daily storage activity and month-end inventory balances within the same set of daily and monthly parameters. The Company modified its original proposal in response to the concerns of Staff and Intervenors.

Nicor Gas describes the intent of its proposal as presenting parameters to more closely align Transportation customers’ use of the storage assets with the optimal operation of those assets. The Company proposes to tighten the flexibility allowed under existing tariffs and provide a cash-out payment structure should a Transportation customer’s daily storage activity and/or monthly inventory balance fall outside the applicable parameters. While the Company describes its initial proposal as designed to reach these operational goals while still maintaining a level of flexibility for Transportation customers, Nicor Gas modified the parameters in response to Staff/Intervenor-specific issues or counter-proposals, including adopting several of Staff’s proposed modifications. Nicor Gas’ final proposal for parameters and cash out procedures are presented in Nicor Gas Exhibit 7.0, as modified by Staff Cross Exhibit 1.0. Nicor Gas notes that Staff supports these parameters as being reasonable. The Company argues that there is no reason that Transportation customers would not be able to operate within the proposed parameters, and that these parameters retain a reasonable level of flexibility for Transportation customers while still providing the necessary guardrails to more closely align Transportation customers’ behavior with the optimal operation of the storage assets.

Finally, the Company states its proposed changes focus entirely on operational concerns, and that these modifications will result in no additional profits for Nicor Gas. Instead, any cash-out costs that Transportation customers may incur will flow to the benefit of Sales customers through the Company’s PGA rider, Rider 6. In this regard, the Company contrasts its operational concerns, for the benefit of all customers, with financial self-interest that underlie the Intervenors’ positions.

b. Staff’s Position Staff, while noting that the Company’s original proposed changes were not well

supported, proposed parameters that gave Transportation customers and suppliers more

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flexibility while granting Nicor Gas more control to balance its system. Staff supports the Commission adopting those parameters set forth in Staff Cross Exhibit 1.0 but would not oppose further discussions following this docket to consider other possible arrangements.

Nicor Gas proposed to significantly narrow the ability of transport customers to vary their storage usage, both daily and monthly. Daily read customers can currently nominate and deliver volumes up to MDCQ plus 25% of storage capacity in summer or twice MDCQ in winter. Under the proposed regime, daily read customers must adhere to daily and monthly parameters that are more restrictive and require them to methodically inject and withdraw gas from storage over the whole year. In particular, under Nicor Gas’ original proposal, transporters will no longer be able to inject gas in winter or withdraw gas in summer. Further, the combination of the daily and monthly restrictions means that transporters have even less room to vary their daily activity. A transporter staying within the daily parameters each day of the month could face further restrictions later in a month depending on the where it starts the month and how it used storage earlier in the month, in order to meet the new monthly restrictions. Staff Ex. 1.0 at 8.

Staff explained in its direct testimony that the evidence presented by Nicor Gas to severely restrict the ability of transport customers and suppliers to use storage was not persuasive for several reasons. Nicor Gas did not project the effects of its proposals on the groups most affected by them. Nicor Gas did not estimate the costs to ratepayers it incurs to prevent its field from being degraded from insufficient cycling. Id. at 10-11. Staff also pointed out that Nicor Gas was able to prudently cycle its fields under the current tariff regime. Id. at 11. Nicor Gas’ initial presentation did not target its reforms to the customers that are the most important source of its difficulties that it has in cycling its aquifer fields. Id. at 11-13.

While Staff states that Nicor Gas’ proposed tariff amendments are too restrictive and not well-justified, Staff argued that there were indications that some further restrictions are appropriate. Transportation customers have a quite a bit of freedom to use storage, while the underlying asset is not as flexible. Nevertheless, the original proposed parameters are not reasonable. One example of this is that there is no leeway for customers to withdraw gas in the summer nor to inject gas in the winter. There should be no requirement for Transportation customers to be limited to using storage exactly as Nicor Gas does. Id. at 15-16.

In addition, in its proposed tariff, Nicor Gas leaves itself the option to adjust its daily storage parameters as necessary to maintain operational integrity of the system. Staff opines that this is an excessive degree of freedom to control storage usage, as proposed storage usage parameters are significantly tighter and proposed cash-out penalties are higher. Nicor Gas has not justified this tariff term or explained how it differs from an operational flow order or critical day. Staff’s concerns are the same for Nicor Gas’ proposed language for monthly cash-outs. Staff Ex. 1.0 at 17-18.

However, the current tariff allows wide latitude to daily read customers to vary their deliveries from day to day. Staff states that some tightening would be reasonable. Id. at 16. In rebuttal testimony, Dr. Rearden provided an alternate schedule of storage parameters, attached to his revised rebuttal testimony as Staff Exhibit 4.1 for daily storage

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parameters and Staff Exhibit 4.2 for monthly storage parameters, which Nicor Gas accepted.

c. ICEA/RESA’s Position ICEA/RESA posit that there does not appear to be much controversy about what

Nicor Gas proposes, but significant controversy as to whether Nicor Gas’ proposed radical changes are justified. ICEA/RESA note the support from CNEG and IIEC for stakeholder processes to determine a better set of parameters to address the actual problems identified in this docket and solutions more proportionate to the unquantified impacts on Sales customers and substantial impacts on Transportation customers. In particular, ICEA/RESA highlight the calls for revised tariff structures to be based on the approach of The Peoples Gas Light and Coke Company.

According to ICEA/RESA, Nicor Gas proposes a radical change in the structure of how suppliers can use storage. Currently, as Mr. Mehling explained, Nicor Gas uses the following tools to manage how suppliers use stored gas:

• Limitations on nominations: suppliers must nominate their gas the day before; intra-day nominations are currently not allowed. They are also subject to maximum daily nominations which restrict deliveries to customers, but from April 1 through October 31, further limit gas storage injections.

• The setting of a maximum amount (MDCQ) of gas that an individual customer can receive on a given day; if that quantity is exceeded, the customer is subject to penalties.

• Limits on withdrawals from and injections to storage such as storage withdrawal factors.

• Operational flow orders (“OFOs”).

• Citygate supply caps. ICEA/RESA Ex. 1.0 at 8. ICEA/RESA contend that the MDCQ and withdrawal/injection limits combined with citygate supply caps ensure that Nicor Gas’ storage assets are filled and emptied in a predictable fashion over the course of a year while allowing suppliers the flexibility to offer valuable products and services to their customers. See id.

ICEA/RESA state that Nicor Gas proposed to replace these basic principles with an entirely new regime:

• Daily nomination limits and Daily Delivery Ranges will be eliminated in favor of daily storage parameters. As described in Nicor Gas’ filing: “All customers/suppliers will be required to deliver a level of gas necessary to stay within the applicable minimum and maximum daily storage activity range. If daily storage activity falls outside of the range, the variance will be cashed out.”

• Monthly storage parameters. All customers and suppliers will be “required to deliver a level of gas necessary to stay within the applicable minimum

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and maximum inventory range at month end. If month-end inventory level falls outside of the range, the variance will be cashed out.”

• Punitive cash-out provisions. In support of new daily storage injection and withdrawal limits, Nicor Gas proposes forced “cash-out” transactions where Nicor Gas buys gas stored in on-system assets over 5% above the target storage amount and Nicor Gas sells to the supplier if the gas in storage is more than 10% below the target amount. See Nicor Gas Ex. 2.2 at 23, Proposed Original Sheet No. 49.4. Essentially, they are forced sales and purchases to get the customer back to within no more than 5% above and 10% below the target amount in storage. . . . these provisions are punitive because of the compelled sale (if over the maximum) or purchase (if below the minimum) terms that are a discount (compelled sale) or premium (compelled purchase) to the less favorable to the supplier of two market indexes. No such cash-out structure exists today. While Nicor Gas does place limits on nominations and MDCQ (at a customer level), there is currently not a forced purchase or sale to bring stored gas amounts to pre-selected target levels.

• Reduced flexibility in Storage Banking Service (“SBS”) days of capacity allocated. In place of the current system, in which Daily Read customers can elect more or less than the standard 30 days of SBS capacity and Customer Select customers are given up to six more days in addition to the standard 30 days, the Company proposes that all customers will be allocated 30 days of SBS capacity, with no option to elect less or request more SBS capacity.

• Valuation of stored gas when customers change suppliers or programs. Currently, for daily read customers, gas in storage may transfer with the customer at the election of the customer or the supplier; it is not valued by Nicor. Gas in storage does not move with Customer Select customers. Under the Nicor Gas proposal, a predetermined quantity of gas will transfer with the customer when switching to and from transportation programs and groups. Nicor Gas will charge the new supplier and credit the previous supplier for the predetermined value of gas that moves with the customer.

ICEA/RESA Ex. 1.0 at 8. Thus, allege ICEA/RESA, instead of the MDCQ, withdrawal/injection limit, and citygate limit regime, Nicor Gas is proposing to require not only stringent monthly storage maximums and minimums but daily maximums and minimums. According to ICEA/RESA, the proposed daily and monthly storage maximums and minimums do not reflect the manner in which suppliers use storage and manage deliveries under normal market conditions. Moreover, continue ICEA/RESA, the penalty for missing a monthly or daily target is a punitive cash-out where—like a currency exchange—Nicor Gas buys gas below market (or at least at the lower of two measures of market) and sells gas at above market (or at least at the lower of two measures of the market). See id.

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d. GFAI/IAPA’s Position As Nicor Gas revised its original proposal by allowing Daily Read Transportation

customers, including Rate 75 customers, an election of days of SBS capacity, GFAI and IAPA no longer contest Nicor Gas’ proposed new storage parameters.

Nicor Gas original proposal forced a “one size fits all” 30 days of storage on all customers. After GFAI’s explanations of the bill increases to seasonal customers, Nicor Gas amended its proposal to continue to allow all Daily Read Transportation customers, including Rate 75 customers, to elect less or request more than the standard number of days of SBS capacity. GFAI and IAPA agree with this approach.

e. CNEG’s Position CNEG agrees with and supports all of the analysis set out in ICEA/RESA’s briefs.

CNEG adopts the arguments and conclusions of ICEA/RESA as its own. 2. Cash-out Procedures

a. Nicor Gas’ Position Nicor Gas states that it structured its proposed cash-out terms to incentivize

Transportation customers to adhere to the proposed storage parameters. The Company clarifies that these cash-out provisions are not intended to be punitive and do not result in any increased revenues for Nicor Gas. The Company further stated that as long as a Transportation customer adheres to the storage parameters, the customer incurs no cash-out cost. Nicor Gas points out that parties opposing the cash-out procedures did not address whether any cash-out procedures or incentive mechanism would be acceptable to them, how Nicor Gas could achieve its objectives absent these tools, or the underlying operational need for these procedures.

Nicor Gas presents evidence that the proposed cash-out procedures are necessary, balance the interests of all stakeholders, and take into account Staff’s proposed substantive revisions. Nicor Gas asserts that together the modified storage parameters and cash-out proposals provide more protection than the currently effective tariffs and provide more flexibility for Transportation customers and suppliers as compared to the Company’s original proposal.

b. Staff’s Position “Cash-outs” refer to the practice of the utility resolving differences between actual

storage usage and tariff requirements by either buying or selling gas from the transporter. If a transporter exceeds its tariff allotment because it brought in too much gas, the utility will buy gas from it. Similarly, if a transporter did not bring in enough gas and drops below what the tariff mandates, the utility will sell it gas. Staff Ex. 1.0 at 9.

Staff originally disagreed with the Company’s proposal that the Commission approve the table governing cash-outs as presented in Nicor Gas Ex. 2.2, page 23. There are three tiers, each with an accompanying premium on a sale to the transporter and penalty on purchase from a transporter. For Tier 1, with a variance between -10% to +5% from the storage parameter, the discount on sales to the utility is 15%, while the premium on purchases from the utility is 15%. There is little evidence that small daily or even monthly deviance from the injection or withdrawal parameter imposes this level of cost on

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the utility. It may be an effective deterrent, but it appears to Staff to be an excessive penalty for rather a small difference. The Company admitted that it cannot be sure how rare any imbalances might be. Id. at 17, Attach. E.

Dr. Rearden offered suggestions for the cash-out parameters attached to his rebuttal testimony as Staff Exhibit 4.3. Nicor Gas, in its surrebuttal testimony, accepted some of his suggestions. Ultimately, Nicor Gas confirmed its agreement to certain suggested edits to Nicor Gas’ surrebuttal testimony. Staff Cross Ex. 1.0; Nicor Gas Ex. 7.0 at 11-12.

c. ICEA/RESA’s Position ICEA/RESA argue that the cash-out provisions proposed by Nicor Gas were not

supported by any meaningful analysis and, in particular, Nicor Gas did not even attempt to determine the financial impact of those proposals on Transportation customers. ICEA/RESA argue that Nicor Gas assumed without analysis or support that Transportation customers would avoid charges because they would simply follow the parameters. See, e.g., ICEA/RESA Ex. 3.0C at 6-9. However, Nicor Gas’ assumptions are necessarily inaccurate because Nicor Gas’ parameters would foreclose the storage flexibility that is one of the major drivers of value for Transportation customers. See id.

ICEA/RESA point out that Staff witness Rearden also concluded that Nicor Gas failed to project the effects of its proposals on the groups most affected by them. Staff Ex. 1.0 at 10-13. With respect to Nicor Gas’ cash-out proposal, ICEA/RESA note that Dr. Rearden stated the following:

I continue to argue that the cash-out parameters are too punitive. At a minimum, there must be a range of values when deliveries differ from customer usage and the storage injection or withdrawal parameter, in which cash-outs have no penalty. Deliveries can go awry for different reasons, and suppliers should not be penalized for small mistakes.

Id. at 8. ICEA/RESA acknowledge that Dr. Rearden’s proposed cash-out provisions represent an improvement over the punitive terms Nicor Gas proposes in that Dr. Rearden’s proposal moves Nicor Gas’ proposals “down a tier” and create a new Tier 1 approach. ICEA/RESA express concern, however, that the proposal shares a critical flaw with the Nicor Gas proposal in that it is extremely difficult to hit the daily storage targets day after day. According to ICEA/RESA there are too many variables with customer usage to—even with sophisticated modeling—predict to that level of certainty customer aggregate load day after day, and allowing Nicor Gas to use the cash-out price that is most unfavorable to the supplier is inherently punitive. See, e.g., ICEA/RESA Ex. 3.0C at 7.

d. IIEC’s Position It is IIEC’s position that Nicor Gas has not demonstrated the need for wholesale

revisions to its Transportation tariffs based on the 2018 Storage Study. IIEC agrees with the specific objections to the proposed storage parameters and cash-out procedures raised by other parties in this case. See, e.g., GFAI/IAPA Ex. 4.0 at 8-9. In addition, IIEC notes that to a certain extent, Nicor Gas has presented a moving target on the storage

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parameters and cash-out procedures. Nicor Gas has altered its proposal in surrebuttal and during cross-examination, providing opposing parties with little or no opportunity to respond. Nicor Gas Ex. 7.0 at 6-10; Staff Cross Ex. 1. Staff has proposed modified cash-out and storage parameters in its own rebuttal testimony and through the presentation of cross-examination exhibits providing customers and suppliers with little or no opportunity to respond. See Staff Exs. 4.1, 4.2, and 4.3; Staff Cross Ex. 1.

As Mr. Bourget pointed out, the preferrable approach would be to consider supplier-specific penalties/cash-out structure/fees as opposed to Nicor Gas’ “one-size-fits-all” approach. See CNEG Ex. 3.0 at 3.

e. GFAI/IAPA GFAI/IAPA state that Nicor Gas’ proposed cash-out procedures should be rejected

as they are based upon the erroneous presumption that all Nicor Gas customers can reasonably adopt the parameters it proposes, without sufficiently supporting those parameters and addressing adverse impact to seasonal users.

Nicor Gas also proposes changes to its operating rules in which customers have daily and monthly maximum and minimum injections and withdrawals. Because non-winter use customers, like grain drying facilities and asphalt manufacturing plants, do not always have sufficient consumption to allow them to withdraw the proposed winter minimums, Nicor Gas’ cash-out rules allows it to confiscate customer gas at a fraction of the current market price and could actually require a customer to pay Nicor Gas for the gas it confiscates. GFAI Ex. 2.0 at 14. In a typical year, the GFAI and IAPA Nicor Gas accounts are using very little, if any, gas during the coldest months when Nicor Gas’ proposed tariff dictates the greatest storage withdrawals.

Nicor Gas’ cash-out rules do not always pay full market price for customer gas it takes via daily cash out of the imbalance created by the difference between customers’ day-ahead scheduled daily deliveries to the Nicor Gas system and its actual daily metered use. Then there are storage rules that establish month-end minimum and maximum storage gas quantities which can allow the Company to further confiscate customers’ storage gas.

GFAI/IAPA state that Nicor Gas’ rebuttal position provided very little in response to the cash-out issues identified. Nicor Gas Ex. 4.0 at 33. Under Nicor Gas’ cash out rate provisions proposed in its rebuttal testimony, when a customer does not have sufficient usage to withdraw the minimum required, Nicor Gas confiscates the customer’s gas, which it would have been forced to procure even if not needed, at a fraction of market price and subsidizes its own retail gas supply. GFAI/IAPA Ex. 4.0 at 8. Nicor Gas’ proposal is based upon the erroneous presumption that all of its customers can adopt the new parameters it proposes, without regard to seasonal users, like members of GFAI and IAPA. As Nicor Gas explained, if a Transportation customer adheres to these storage parameters, the customer incurs no cash-out cost. Ignoring the testimony presented by GFAI and IAPA witnesses, Nicor Gas fails to address the legitimate issues raised, instead boldly concluding, without evidence that if Transportation customers maintain the behavior they engage in under the current tariff provisions, then this tariff proceeding will not have its intended effect.

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CNEG’s analysis suggests that even when gas deliveries match consumption, and the analysis forced adherence to the monthly and daily requirements, CNEG could not avoid falling into non-compliance and incurring cash-out costs as it attempted to comply with all the various requirements proposed. Seasonal customers like GFAI and IAPA cannot substantially modify their behavior.

Additionally, Sales customers stand to benefit from the revenues associated with Transportation customers that cannot adhere to cash out parameters, as cash out revenues go to off-set purchase gas costs. See 83 Ill. Adm. Code 525.40(f). Nicor Gas provided no evidence of bill impacts regarding this cost shifting. Without such evidence, it is impossible for Nicor Gas to show that the cost shifting (and resultant bill impacts) is reasonable.

f. CNEG’s Position CNEG adopts the arguments and conclusions of the ICEA/RESA related to cash-

out procedures as its own. C. Elimination of Rider 25

1. Nicor Gas’ Position Nicor Gas proposes to eliminate Rider 25, under which customer meters are read

monthly and their usage balanced monthly. Nicor Gas states that Rider 25 is no longer necessary since the Company’s installation of AMI throughout the service territory is nearly complete, and the Company will have the capability to read all meters on a daily basis. Nicor Gas explains that these customers can be accommodated in Customer Select, Rate 74, or Rate 75, and will have until February 1, 2022 to make that selection. The Company further states that customers that have not made a selection by that date will default to Nicor Gas’ Sales service as of May 1, 2022. However, a former Rider 25 customer can switch to Customer Select, Rate 74, or Rate 75 at their convenience, as there is no minimum term for that customer to remain a Sales customer, nor is that customer subject to any penalty. Nicor Gas asserts that this proposal removes an obsolete offering and provides customers a window of time to select a rate that can accommodate them. Given this flexibility, Nicor Gas argues that CNEG’s claims that the proposal is anti-competitive are baseless.

In direct testimony, Nicor Gas proposed to create a regulatory asset to ensure that the elimination of Rider 25 was revenue-neutral. Staff opposed that approach. However, given that the Company recently filed a rate case, Docket No. 21-0098, it no longer seeks to create a regulatory asset and will address the revenue issue in the rate case docket.

2. Staff’s Position Staff states that two elements from the Company’s original proposed tariff changes

would create a revenue shortfall. First, eliminating Rider 25 would create a shortfall in both the on-system storage revenue and the administration fees. Second, the elimination of fees associated with the Electronic Bulletin Board (“EBB”) would cause an additional revenue shortfall. Staff Ex. 2.0 at 2.

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Staff has no objection to Rider 25 being discontinued because, according to Dr. Rearden, it is obsolete and current Rider 25 customers can be accommodated in either Customer Select or Rates 74-77. Staff Ex. 1.0 at 4.

With respect to the revenue shortfall, Ms. Ebrey took issue with the Company’s calculated shortfall and proposal by the Company to create a regulatory asset. Staff Ex. 2.0 at 2-8. Ms. Ebrey proposed three options to the Company that would address her concerns. One of the options was for the Company to file a general rate case with an effective date for new rates for the same time as the effective date of the proposed tariff changes in this proceeding. Id. at 8-9. Mr. Yardley opined that “reflecting the impacts within the base rate case is straightforward and eliminates the need for the regulatory asset treatment initially proposed by the Company”. Nicor Gas Ex. 9.0 at 4. Mr. Yardley further stated that the base revenue impacts of changes to the Company’s transportation tariffs in this case will be incorporated in the rate case that was filed on January 14, 2021. Id. at 5. Given the filing of the general rate case by the Company and commitment to reflect the revenue impacts of tariff changes in this docket in the base rates set in the that case, Ms. Ebrey’s concerns have become moot.

Ms. Harden testified about how the revenue shortfall due to the elimination of Rider 25 should be allocated to customers. Ms. Harden testified that any change in the revenue requirement that results from Nicor Gas tariff changes be recovered: (1) through distribution charges; and (2) from all Transportation customers, with the exception of Rate 75. She qualified her recommendation that if the Company filed a rate case with an effective date in proximity to May 1, 2022, the impacts of the proposed tariff changes in this docket could be addressed in the new rate case. Staff Ex. 6.0. at 6. Therefore, Ms. Harden’s issues need not be addressed in this docket.

3. GFAI/IAPA’s Position According to GFAI/IAPA and CNEG, Nicor Gas’ plan to eliminate Rider 25 is not

justified and flawed. If the Commission is inclined to permit the elimination of Rider 25, GFAI and IAPA urge the Commission to consider the GFAI/IAPA’s proposal which includes notice, gradually phasing out the rider, and requiring Nicor Gas to assist customers with selecting the most economical rate schedule.

Nicor Gas is not proposing to gradually add the changes to its transportation tariffs to allow customers to adjust to the bill impacts. Therefore, Nicor has again failed to take into account the bill impact on its customers. A more reasonable approach would be for Nicor Gas to freeze the rider to existing customers at existing locations as part of a future rate case proceeding and gradually phase-out the rider over time, providing Rider 25 customers time to evaluate alternative rate schedules with the assistance of Nicor Gas. In many cases customers on Rider 25 may be eligible for multiple transportation rate schedules and Nicor should assist those customers in making the most economical choice. GFAI Ex. 1.0 at 7.

4. CNEG’s Position CNEG points out that Nicor Gas has not shown that the full elimination of Rider 25

is warranted or justified, and that Nicor Gas has not considered any alternatives to the full elimination of Rider 25. CNEG states that such either-or approach forces customers to

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lose their preferred service option and the option of full backup service. CNEG suggests moving Rider 25 accounts to calendar month billing, as Nicor Gas currently does for Daily Read accounts. Yet, Nicor Gas continues to simply state that the Rider is obsolete, having provided no analysis or other options. Nicor Gas Ex. 4.0.

D. Group Size Limits 1. Nicor Gas’ Position

In response to Intervenors’ proposal that group size limits be removed for Daily Read accounts, Nicor Gas explains that removal of the group limits is not feasible but proposes an increase in the group size limit instead. The Company states that eliminating a group size limit was not feasible given how Nicor Gas bills these groups. Mr. Sherwood clarifies that the Company bills all accounts in one group on the same day. He further states that if Nicor Gas cannot bill just one customer of the group, for any reason, it prevents the Company from billing the remainder of that group. The Company explains that the larger the group, the greater the possibility that billing could be delayed for all customers within that group. Nicor Gas also describes the importance of retaining a group size limit for the time being. In response to suppliers’ preference to increase the group size limit in order to reduce the amount of input needed to allocate their daily nominations to their customer groups/accounts, Nicor Gas proposed to increase the group size limit for Daily Read accounts from 150 to 200, effective May 1, 2022, which no party objected to. Further, Nicor Gas committed to evaluate an optimal group size that balances the interests of the need for timely billing and supplier nomination efficiencies. Nicor Gas maintains that this increased group size limit from 150 to 200 responds to the concerns of Intervenors within the constraints of Nicor Gas’ billing and accounting structures.

2. Staff’s Position Staff agrees with Nicor Gas’ proposal raising the pool size limit to 200 customers

at this time. CNEG, ICEA, and RESA, on the other hand, argue that there are further adjustments to the tariffs that govern pooling that Nicor Gas could make to increase their ability to pool their customers. According to these Intervenors, such a change can improve suppliers’ ability to meet Nicor Gas’ more stringent proposed storage usage parameters. One proposal is to eliminate the cap on pool size completely, while another is to allow suppliers to aggregate all their pools into one.

3. ICEA/RESA’s Position According to ICEA/RESA, Nicor Gas currently limits pools to 150 customers each.

ICEA/RESA Ex. 1.0 at 25. ICEA/RESA state that a pool is a way to aggregate usage of a number of customers—who may use more or less than expected any given day—when calculating nominations and supply commitments, making it easier to manage customers and avoid penalties. ICEA/RESA Ex. 1.0. at 25. ICEA/RESA posit that the effect is magnified when, as Nicor Gas proposes in the present docket, the penalties for missing daily and monthly targets even by a small amount is punitive. ICEA/RESA Ex. 1.0 at 25.

ICEA/RESA note that Mr. Mehling recommended that pool limits be eliminated. See id. Mr. Mehling testified that the reason the 150-customer limit has not been worse for suppliers is that suppliers are able to use the flexibility of the current tariff regime to balance supply across pools and within pools, mitigating the impact of a larger-than-

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optimal number of pools. The negative effects of Nicor Gas’ proposed changes would only be magnified by the small pools. Id.

ICEA/RESA contend that Mr. Mehling rebutted Nicor Gas’ only counterargument in opposition to lifting the pool size, specifically Nicor Gas’ concern that larger pools would be harder to handle and would delay billing if there were errors. ICEA/RESA Ex. 3.0C at 12. ICEA/RESA highlight Mr. Mehling’s testimony that:

If Nicor Gas had very infrequent billing errors, I could at least see their logic, even if I disagree. However, in my experience, Nicor Gas has more billing errors than the average utility—while I have not done a study or rigorous analysis, I am aware of the impact of billing errors on my company’s portfolio. Thus, smaller pools do not necessarily lead to fewer cancel/rebills or other impacts or administrative costs on Nicor Gas. However, larger pools benefit suppliers by making portfolio-level balancing easier.

Id. ICEA/RESA conclude that Nicor Gas’ concerns are likely to be present whether pools are large or small, but larger pools will provide at least some mitigation of the drastic loss of flexibility suppliers will face under Nicor Gas’ proposal. Id. at 13.

ICEA/RESA note that Nicor Gas offered in surrebuttal testimony to increase pool size from 150 to 200 customers; however, ICEA/RESA contend that the increase is insufficient and the cap on pool size must instead be removed.

4. CNEG’s Position CNEG agrees with and supports all of the analysis by ICEA/RESA. In the

alternative, should the pool size limits remain, CNEG proposes that a supplier with multiple pools should be allowed to net and average those pools for purposes of measuring adherence to monthly and daily storage parameters and any reduction in Nomination charge. CNEG provides the example that if a supplier has five pools, three of which are within the acceptable parameters, while one is higher than the acceptable limits and one is lower than the acceptable limits, if the five pools when averaged fall within the acceptable parameters, the supplier should not be subject to cash-out penalties for either of the individually non-compliant pools. In that case, there is no harm to the utility and the stated goal of the parameters, “to have Transportation customers manage their storage activity and inventory balances within the parameters rather than incur daily or monthly cashouts,” is met. See Nicor Gas Ex. 1.0. For that reason, the supplier should not be doubly penalized for operating, on the whole, within the required parameters. CNEG provides another option, albeit less preferable than the example described above, which is to keep the reallocation window open until suppliers receive daily usage for that day from Nicor Gas. CNEG asserts that there would be no harm to Nicor Gas to keep that window open for a longer period of time to make net zero changes as there are no changes in any way to the total amount of gas on the system. CNEG Ex. 2.0.

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E. Rate 75 1. Nicor Gas’ Position

Although Nicor Gas did not propose changes to Rate 75 eligibility, Intervenors raised concerns that other aspects of the proposed tariff changes may cause currently eligible entities’ usage to fall outside the eligibility restriction that Rate 75 customers must have less than 5% of annual usage occurring during winter period of December 1 through the following March 31. In response to these concerns, the Company modified its proposed tariff changes to provide additional flexibility for Rate 75 customers that are slightly outside this range by allowing a customer whose winter period usage falls between 5%-6% of total annual usage to stay on Rate 75 and be re-evaluated the following year. Nicor Gas states that if the customer’s winter period usage falls between 5%-6% for two consecutive years, they will no longer be eligible for Rate 75 and will be placed on Rate 74. The Company explains that tariffs cannot be tailored to each customer’s individual usage for operational and practical purposes. However, Nicor Gas states that this proposal offers some additional flexibility to customers that may fall outside this range.

2. Staff’s Position There are two issues concerning Rate 75 in Nicor Gas’ proposed tariff

amendments. One is the storage allocation that Rate 75 customers are allowed to accept. Two, there is the strict limit on customers that are allowed on Rate 75. Since Rate 75 is a seasonal rate, the percentage of usage that falls in the summer for an individual customer can vary due to weather. Thus, a customer can be just above 5% one year for circumstances out of its control, while the next year it falls within the 5% threshold. Staff Ex. 4.0REV at 9.

Rate 75 is available for seasonal use Transportation customers. The Company, after consideration of the concerns raised by GFAI in its direct testimony, amended its proposed tariff changes to allow seasonal use customers to opt out from taking SBS capacity. Nicor Gas Ex. 4.0 at 5. In her rebuttal testimony, Ms. Harden supported the change proposed by the Company. Staff Ex. 6.0 at 4.

3. GFAI/IAPA’s Position Nicor Gas has failed to justify its proposed Rate 75 parameters, which are arbitrary

and fail to sufficiently address the seasonal issues raised by GFAI and IAPA. Rate 75 should be available to all seasonal users whose peak usage is outside the winter months, and customer notice should be given prior to any change in applicable rate.

Per Nicor Gas’ tariff, a customer qualifies for Rate 75 if not more than 5% of its annual gas consumption is used between December 1st and March 31st and annual use is less than 700,000 therms. The 5% threshold is arbitrary, since Nicor Gas’ system peaks typically occur in January. Nicor Gas did not consider its other seasonal customers, such as grain dryers and asphalt companies, on Rate 75 because their annual use exceeds 700,000 therms and/or may have been more than the arbitrary 5% usage limitation during December through March. Those customers do not significantly contribute to Nicor Gas’ system peak which is usually in January. GFAI/IAPA Ex. 4.0 at 6.

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Staff also noted the Rate 75 eligibility issue. Dr. Rearden stated Further, there appears to be an issue with eligibility: where a customer that just falls outside the 5% threshold in a given year is not eligible for Rate 75 for that year. If the customer is close to that threshold, there may be a random chance of weather or other factors that push the customer over the line. It may be a better approach to use more than one year’s data to calculate the relative usage of winter to summer, or a customer could remain eligible for Rate 75 after the first year in which the customer’s percentage falls between 5% and 6%.

Staff Ex. 4.0 at 10. In response to these concerns regarding Rate 75 eligibility, Nicor Gas later

proposed to allow additional flexibility by allowing a customer whose winter period usage falls between 5%-6% of total annual usage to stay on Rate 75 and be re-evaluated the following year. If the customer’s winter period usage falls between 5-6% for two consecutive years, then they will no longer be eligible for Rate 75 and will be placed on Rate 74. Nicor Gas Ex. 7.0 at 18.

GFAI and IAPA members, regardless of whether under Rates 74, 75, or 76, have similar usage profiles and do not peak during the wintertime period. Nicor Gas’ arbitrary Rate 75 availability limitations fail to address this issue. Further, the criteria are not cost based. GFAI/IAPA assert that all seasonal customers that have most of their usage outside of the peak winter months should be eligible for Rate 75, including those with usage over the 700,000 therms threshold. Nicor Gas should be required to conduct a study of how seasonal customers utilize Nicor Gas’ system based upon customer rate schedule. Additionally, for those Rate 74 customers that currently meet the threshold to be moved to Rate 75, Nicor Gas should provide notice to these customers of the availability of a more economical tariff offering. GFAI Ex. 3.0 at 6.

Nicor Gas provides no evidence or analysis demonstrating a cost basis to support eligibility restrictions that deny other seasonal customers access to Rate 75. Rate 75 is a seasonal rate and other customers who have similar load patterns and are seasonal in nature are arbitrarily prevented from being able to benefit from the “Seasonal” Rate 75.

F. Storage Allocations 1. Nicor Gas’ Position

As part of its initial proposal, Nicor Gas proposes to require all customers to take the standard number of days (currently 30 days) of SBS, in the interest of treating customers equally since Customer Select customers currently are not able to elect less or request more storage capacity while Daily Read customers are able to exercise this option. In response to parties’ concerns, Nicor Gas modified that proposal to provide additional flexibility for customers such that all Daily Read customers, including Rate 75 customers, will continue to have the option to elect less or request more than the standard number of days of SBS capacity, while seasonal Rate 75 customers will have a new, additional option to select 0 days of capacity if so desired. Nicor Gas clarifies that the modified proposal does not seek to require all Daily Read customers to take the same

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number of storage days. Nicor Gas further states that the proposal still removes the additional 6 days of storage balancing capacity currently allotted to Customer Select customers, which no party opposed.

2. Staff’s Position Nicor Gas proposed to restrict all traditional Transportation customers (non-

Customer Select customers) to only 30 days of storage. That is, a customer is granted a total storage capacity equal to 30 days times the customer’s MDCQ. Staff argues that permitting Transportation customers to accept less storage capacity does not make it more difficult for Nicor Gas to balance its system. This is especially true the daily and monthly storage usage parameters are tightened. As long as Transportation customers are held to their storage decisions over a year, Nicor Gas should be able to take those decisions into account when making its storage plan; to the extent a customer opts into less storage, that seems to provide Nicor Gas more freedom to manage the system. Staff Ex. 1.0 at 15.

In its surrebuttal testimony, the Company agreed to permit traditional Transportation customers to select their number of days of bank. Nicor Gas Ex. 7.0 at 15.

With regard to the Customer Select program, Dr. Rearden testified that the reasoning for the additional six days of bank for Customer Select suppliers was unclear. Thus, while Staff did not oppose Nicor Gas’ proposal, Staff sought information to help the Commission resolve this issue. It does not appear to Staff that such information has been provided. Staff Ex. 1.0 at 14.

3. ICEA/RESA’s Position ICEA/RESA supports Nicor Gas’ withdrawal of its proposal to impose a 30-day

storage banking requirement, which would have required Transportation customers to inject 30 days’ worth of usage into storage without regard to whether that was the correct amount for the Transportation customer’s usage patterns. ICEA/RESA oppose Nicor Gas’ proposal that Customer Select customers be limited to storing 30 days of usage, instead of the 36 days to which they are entitled under the current tariffs. See id. According to ICEA/RESA, Nicor Gas has not demonstrated any reason for this elimination of Customer Select customers’ storage rights that have been a feature of Nicor Gas’ Customer Select since inception. ICEA/RESA conclude that Nicor Gas’ proposal should be rejected and Customer Select customers should continue to have the right to 36 days of storage capacity. See id.

4. CNEG’s Position CNEG agrees with and supports all the analysis from ICEA/RESA. G. System Balancing Charge

1. Nicor Gas’ Position Nicor Gas proposes a new System Balancing Charge (“SBC”), a gas cost recovery

charge that allocates a portion of pipeline storage and transportation costs to all customers. The Company states that currently Sales and Customer Select customers bear the costs of those services, effectively subsidizing Transportation customers. Mr.

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Sherwood states that approximately 86% of the total cost falls on Sales customers under the current tariffs. Nicor Gas asserts that the proposal provides a way to ensure that all customers are treated fairly with regard to their use of storage and system flexibility since all customers benefit from the balancing these pipeline contracts provide. Nicor Gas argues that in order to eliminate such subsidies there must be a reallocation of the cost of storage to more closely track the customers that benefit the most from the storage flexibility. The Company modified its proposal, resulting in an approximately 50% reduction in the proposed SBC costs allocated to Customer Select and Daily Read Transportation customers from the Company’s original proposed SBC. The Company notes that this does not completely eliminate the current subsidy borne by Sales customers, but it provides a first step in that direction. Mr. Sherwood further emphasizes that the modification to this charge does not provide any economic benefit to Nicor Gas.

2. ICEA/RESA’s Position ICEA/RESA state agreement with CNEG, IIEC, GFAI, and IAPA that the SBC is

an attempt to require Transportation customers to pay for costs Nicor Gas incurs in serving Sales Customers and thus should be rejected. According to ICEA/RESA, Nicor Gas’ willingness to cut the charge in half is not sufficient; the Commission should reject the charge.

3. IIEC’s Position IIEC’s position is that the Company’s proposal for an SBC should be rejected for

several reasons. First, in operating its system, Nicor Gas relies on both the upstream capacity and storage activity it procures to provide service to its Sales customers, but it also relies on the gas delivered to its system from its Transportation customers. IIEC Ex. 1.0 at 31. Nicor Gas did not dispute this finding. Second, the amount of upstream capacity and storage Nicor Gas procures is what it needs in order to provide firm reliable service to meet its Sales customers’ peak period demands. IIEC Ex. 1.0 at 31; IIEC Ex. 2.0R at 21-22.

IIEC says Nicor Gas does not procure additional upstream pipeline capacity and storage beyond what it needs to provide firm service to Sales customers to operate its system. IIEC Ex. 2.0R at 21. According to IIEC, Nicor Gas did not dispute this finding, even though IIEC addressed it in both direct and rebuttal testimony. For this reason, IIEC believes the Company’s proposal to implement an SBC charge simply creates an unjustified subsidy from Transportation customers to Sales customers for the cost of upstream capacity which is incurred specifically to allow Nicor Gas to be able to provide firm service to its Sales customers. Id. at 21; see, also GFAI/IAPA Ex. 4.0 at 6 (suggesting the SBC caused certain IAPA accounts with Nicor Gas to be over $1 million higher).

To emphasize this point, Mr. Gorman outlined that if the Company did not have any Transportation customers, it would still need to procure the same amount of upstream pipeline capacity and storage capacity in order to provide firm service to its Sales customers. IIEC Ex. 2.0R at 22. IIEC opines that Nicor Gas did not dispute this fact nor the fact that it only procures the amount of upstream pipeline capacity and storage capacity that is needed to provide reliable firm service to its Sales customers. Stated differently, IIEC notes Nicor Gas does not buy additional upstream pipeline/storage capacity for system balancing or storage cycling activities for its Transportation

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customers. It only procures the amount of pipeline capacity and storage capacity that it needs to reliably provide firm service to its Sales customers.

4. GFAI/IAPA’s Position Nicor Gas’ proposed SBC arbitrarily shifts costs from Sales customers to

Transportation customers; the record reflects that the bills of some Transportation customers could be increased by more than 20% under Nicor Gas’ proposed new charge, which should be rejected.

Nicor Gas continues to claim that Sales customers are subsidizing Transportation customers, supported only by Mr. Yardley who claims that some Transportation customers benefit from not paying the full costs for the level of storage flexibility that they use. Nicor Gas admitted that it had not undertaken any study or performed any analysis to support that claim. Nicor-RESA Cross Ex. 1.0.

As described by other Intervenors, upstream pipeline capacity is purchased for Sales customers, not Transportation customers. Indeed, IIEC presented evidence that if there were no Transportation customers, Nicor Gas would still need to procure the same amount of upstream pipeline capacity and storage capacity in order to provide firm service to its Sales customers.

Nicor Gas’ testimony confirms IIEC’s evidence that even if no Transportation customers existed on January 30, 2019, a peak day, the Company would still have needed to buy the same amount of upstream pipeline and storage capacity in order to provide firm service to its Sales customers. Nicor Gas Ex. 4.0 at 7.

Nicor Gas retreated from its original proposal, reducing its original allocation of these costs to Transportation customers by nearly 50%. However, the rate impact is still significant. GFAI’s review of Nicor Gas’ claim of modest bill impacts revealed it was based upon unrealistic assumptions, which mask the true bill impacts. For example, Nicor Gas’ analysis included Gas Supply Cost factors, even though those are not applicable to these Transportation customers, as the Company does not purchase gas on behalf of Transportation customers. Nicor Gas Ex. 9.0 at 3; Nicor Gas Ex. 9.1. A closer review of bill impacts, and removing the incorrect assumptions, indicates that Nicor Gas’ billings to Transportation customers could increase as much as 20% simply due to the new SBC charge. GFAI Cross Exhibit 1.

GFAI/IAPA argue that costs should be allocated to those who cause the costs to be incurred. 220 ILCS 5/1-102(d)(iii)). No evidence has been provided demonstrating the cost causation or need as it pertains to Transportation customers. Nicor Gas has not provided any support for any percentage of these costs to be allocated to Transportation customers. The lack of support is further evidenced by Nicor Gas’ willingness to reduce this allocation by 50% in surrebuttal.

Moreover, shifting of upstream pipeline and storage costs from Sales customers to Transportation customers, especially seasonal customers, without justification creates an unreasonable difference in rates, in violation of Section 9-241 of the Act. 220 ILCS 5/9-241.

Nicor Gas acknowledges, according to GFAI/IAPA, that the SBC is merely a mechanism to shift costs from Sales customers to Transportation customers. Nicor Gas’

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definition of SBC provides that revenues from the SBC goes to offset a factor in the gas supply cost. Nicor Gas Ex. 8.2 at p. 34 of 51. This is essentially a credit to the PGA. While GFAI/IAPA acknowledge that revenues from cash-outs are permitted to be used to offset gas costs (83 Ill. Adm. Code 525.40 (f)), they are unaware of authorization for SBC revenues to be similarly used, and Nicor Gas has not pointed to such authority.

5. CNEG’s Position CNEG adopts the arguments and conclusions of ICEA/RESA as its own. H. Tariff Impacts on Transportation Customers

1. Nicor Gas’ Position Nicor Gas argues that a Transportation customer will incur no cash-out costs if

they do not exceed the proposed parameters for using storage. The Company states that Intervenors’ arguments related to the impacts of these tariff changes on Transportation customers are all predicated on the idea that customers will not modify their storage utilization behavior in response to the new tariffs, which is not a useful analysis. Nicor Gas explains that the cash-out terms linked to the proposed daily and monthly storage rules are intended to incentivize suppliers to deliver and withdraw volumes in a manner that supports system reliability, are not intended to be punitive, and do not result in any increased revenues for Nicor Gas. Nicor Gas asserts that it is reasonable for the Company to believe that Transportation customers will adhere to the new storage parameters, which will result in no cash-out cost to customers. Nicor Gas further explains that any change will become effective in May 2022 under the modified proposal, so Transportation customers’ currently planned 2021-2022 heating season activities will not be affected by these revisions and Transportation customers will have approximately one year to prepare to adapt to the new operating parameters, and to plan their injection and withdrawal strategy for the 2022-2023 winter heating season and thereafter. The delayed implementation of these changes, in addition to giving the Company time to implement the new tariffs, gives a substantial transition time so that customers will be fully prepared by the time the new tariffs go into effect.

As described earlier, Nicor Gas explains that Transportation customers will incur an increased cost related to the SBC, but that charge is the result of the elimination of a subsidy and therefore reasonable.

2. ICEA/RESA’s Position According to ICEA/RESA, Nicor Gas’ substantial tariff modifications harm

Transportation customers at least two ways: (1) direct financial impacts; and (2) harm from the narrowing market. The latter harm occurs when products and services that are currently available and benefit the Transportation customers that selected them are no longer available or economically viable due to tariff changes. Mr. Mehling explained this effect:

Furthermore, as Nicor Gas witness Mr. Yardley notes, some Transportation customers forced to bear additional costs will be unable to remain with their preferred supplier and product, instead becoming Sales customers—despite determining that

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sales service (despite always being available) was the inferior choice for them. See Nicor Gas Ex. 6.0 at 9 This is a bad outcome for customers. Customers who found value in the products and services available to them under the current, reasonable tariff structure would be deprived of those options if the Nicor Gas proposal is adopted.

ICEA/RESA Ex. 3.0C at 3. ICEA/RESA highlight that CNEG’s witness conducted an analysis of the potential

price impact of Nicor Gas’ proposed changes. Mr. Mehling concluded that “methodology appeared sound” based on his review of Mr. Bourget’s testimony. ICEA/RESA Ex. 3.0C at 15. According to ICEA/RESA, Mr. Mehling further testified that while all suppliers will have different impacts because “each different supplier has a different customer base with different characteristics; each supplier offers a different suite of products and services, and each supplier is likely to have its own hedging and operations strategy and utilize the storage flexibility (paid for by their customers) in different ways.” Id.

ICEA/RESA highlight that Nicor Gas did not present any quantitative analysis illustrating the costs or benefits to customers—in contrast to CNEG and GFAI/IAPA. ICEA/RESA juxtapose this with Nicor Gas’ concession that it cannot and will not even attempt to evaluate the effect of cash-outs on Transportation customers. ICEA/RESA analogize Nicor Gas’ argument to arguing that if a Sales customer wishes to avoid the usually high PGA charge that is likely coming due to winter storms (and that would not impact a Transportation customer on a fixed rate or fixed bill product and would have less impact on a customer on a hedged product or service), the customer should simply avoid using gas. According to ICEA/RESA, Nicor Gas is proposing a radical change to its tariff structure—specifically changes that restrict suppliers’ ability to use storage in a way that benefits Transportation customers. ICEA/RESA note that GFAI/IAPA provide extreme examples of this phenomenon because all or nearly all of their use is when Nicor Gas expects injections—not withdrawals—from storage. ICEA/RESA argue that GFAI/IAPA’s concern is shared by other customers as is ICEA/RESA’s concern that the radical tariff changes will eviscerate the value of transportation because of the lost flexibility.

According to ICEA/RESA, Nicor Gas can call its cash-out a penalty or behavioral incentive, but it acts as a use fee and one that is directly allocated to the benefit of Sales customers. ICEA/RESA argue that the utility must provide evidence of customer impact in order to make a prima facie showing of justness and reasonableness for such fees. According to ICEA/RESA, Nicor Gas admits that it cannot meet the legal threshold for showing justness and reasonableness.

3. IIEC’s Position It is IIEC’s position that the Company’s proposed tariff rate changes do not create

an equitable treatment between Transportation customers and Sales customers. Contrary to Nicor Gas’ assertion, its proposed change significantly enhances the economic attractiveness of Sales service, and significantly erodes the economic attractiveness of Transportation service. All of this will shift gas procurement in northern

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Illinois to favor Nicor Gas. The changes in the Transportation tariff, terms, and conditions are unjust and should be denied.

IIEC observes that Mr. Sherwood claims that the Company’s proposed Transportation tariffs changes will create equal treatment for tariff rate terms and conditions between Transportation customers and Sales customers. IIEC strongly disagrees. Mr. Gorman outlined the reasons why the Company’s modification for Transportation customers’ tariffs would create significant penalties and distort operating flexibility relative to that afforded to Sales customers. IIEC Ex. 2.0R at 4-9. Sales customers benefit from the diversity of many customers on the system, and only pay penalties to the Company in the event they actually incur a balancing penalty. In significant contrast, under Nicor Gas’ proposal, Transportation customers will lose the flexibility afforded by load diversity on the system and will pay the Company a potentially large penalty charge, regardless of whether or not Nicor Gas actually incurs a penalty for behavior of the Transportation customer. Id.

IIEC opines that Nicor Gas has failed to estimate the potential negative impact on Transportation customers through its proposed change in Transportation rates. Indeed, the Company has failed to make any estimate of the increased cost of Transportation service based on its proposed Transportation rates in this proceeding. IIEC Ex. 1.0 at 16; IIEC Ex. 1.1 at 5. Nicor Gas argues that because Transportation customers can modify behavior, they can avoid penalties and thus may not get an increase in Transportation rates, except for the implementation of SBC. IIEC says the Company’s failure to estimate the potential cost impact on Transportation customers due to its daily and monthly storage parameters and related significant penalties under these terms, is a material deficiency in the Company’s filing.

IIEC explains that the Company’s proposed total change in Transportation terms and conditions can create significant operating problems for Transportation customers, which may make it difficult, if not impossible to avoid storage penalties under the Company’s daily and monthly storage utilization parameters. IIEC Ex. 1.0 at 28. In its original filing, a significant component of this is the Company’s proposed change which requires all customers to take 30 days of storage capacity, where under current rates Transportation customers can choose the amount of storage they need. Though the Company has modified its proposal related to 30 days of storage capacity in surrebuttal, IIEC says its concerns regarding the Company’s original proposal remain. Nicor Ex 7.0 at 4. IIEC supports the withdrawal of this proposal; however, IIEC observes, this significant operational change as originally proposed demonstrates that Nicor Gas did not fully consider the cost impact of its proposed tariff rate modifications on its Transportation customers. This change in storage capacity would have required Transportation customers to modify nomination behavior to both balance their daily gas consumption with their storage requirements for their own system, but to also modify nominations in order to manage a 30-day storage capacity, which may be out of line with what they need to efficiently manage their system. According to IIEC, Nicor Gas’ failure to identify the operational constraints and difficulties placed on Transportation customers through the change in Transportation terms and conditions is significant and will likely have material negative impacts on the competitive nature of its Transportation service as it will no longer be an economic gas delivery supply option. IIEC Ex. 1.0 at 8-9. It is IIEC’s position that

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Nicor Gas’ failure in this case to thoroughly vet its proposed changes in transportation rates suggests the changes must be rejected until Nicor Gas meets with all stakeholders to fully and competently assess its operating constraints, player behaviors, and balanced remedies can be crafted to economically resolve identified problems.

4. GFAI/IAPA’s Position GFAI/IAPA state that Nicor Gas’ proposal arbitrarily and discriminatorily impacts

seasonal users more than regular users; the record does not support, nor is it just and reasonable, to find that seasonal users can sufficiently “alter their behavior” to eliminate Nicor Gas’ proposed charges.

Nicor Gas appears unconcerned about bill impacts to GFAI/IAPA. GFAI states that regardless of the rules and resulting financial penalties for storage usage, grain dryers must operate when grain comes out of the field, and they cannot modify their seasonal use pattern to adequately meet Nicor Gas’ proposed requirements. Similarly, IAPA members cannot modify their seasonal use patterns. GFAI/IAPA Ex. 4.0 at 7.

For example, to avoid cash-outs, Nicor Gas expects customers to alter their behavior and more closely follow Nicor Gas’ operational requirements. Nicor Gas Ex. 9.0 at 4. Because they are bound by the operational constraints associated with the timing of harvest and production of asphalt, primarily due to weather, GFAI and IAPA members cannot simply alter their behavior. Therefore, it would virtually be impossible for them not to be substantially impacted by the proposed tariff changes.

Section 9-101 of the Act requires that all rates shall be just and reasonable. 220 ILCS 5/9-101. GFAI/IPA consider these increases to impose rate shock and suggests the burden of showing that these charges are just and reasonable is on the utility. Nicor Gas has not provided evidence demonstrating such. Before Nicor Gas is permitted to impose such far-reaching and significant bill impacts, it should be required to investigate bill impacts, and show that they are just and reasonable.

There is no support or evidence for Nicor Gas’ claim that bill impacts to seasonal customers are similar to other customers. For example, Nicor Gas has failed to provide bill impacts for seasonal customers related to the proposed cash-out provisions. In fact, Nicor Gas’ prior cost studies indicated that seasonal customers are subsidizing other customer classes. Nicor Gas’ proposed revisions to its tariff do not solve this subsidy issue and Nicor Gas has not provided evidence to support the continued subsidy. Any additional subsidy, in GFAI/IAPA’s view, by seasonal Transportation customers would violate Section 9-241 of the Act, which prohibits any unreasonable differences as to rates or other charges between classes. 220 ILCS 5/9-241.

5. CNEG’s Position CNEG adopts the arguments and conclusions of ICEA/RESA.

6. Nucor’s Position Nucor states that Nicor Gas has failed to adequately demonstrate how its proposal

will change Transportation customers’ use of Nicor Gas’ storage assets. Nicor Gas has proposed drastic changes to the cost structure for storage utilization by Transportation customers, but it has failed to show that these proposed changes will impact the way that

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Transportation customers actually use Nicor Gas’ system. Nicor Gas did not conduct any study on the extent to which any daily or monthly customer imbalances were due to gamification of the gas rates, as Nicor Gas claims, versus unavoidable differences between predicted and actual use by Transportation customers. In fact, CNEG performed its own analysis and determined that, even including perfect foresight of its load, it “could be subject to cash-out on many days throughout the year.” CNEG Ex. 2.0 at 4. Mr. Mehling additionally states that “following Nicor Gas’s proposed operational parameters day in and day out would be a difficult balancing act that may not be possible to repeat reliably.” ICEA/RESA Ex. 3.0 at 8. Without any analysis, it is impossible to evaluate Nicor Gas’ claims that the proposal will in fact assist the Company in maintaining the operational integrity and reliability of its storage assets. Thus, Nucor supports the position of other Intervenors that the Commission should reject any changes that will increase costs for Transportation customers over utilization issues over which customers may have very little control.

Nucor argues that Nicor Gas has provided no estimates of the financial impacts of its proposals on Transportation customers. Nicor Gas did not perform any financial analysis or bill impacts of most of the proposed tariff modifications, including its proposed daily and monthly storage utilization provisions and resulting cash-out provisions. Despite being repeatedly asked for such analysis in discovery requests in this proceeding, Nicor refused. Nicor Gas wrongly claims that such analysis would not be “a good indicator of what the actual impact of the new parameters will be” because “[a] bill impact analysis using old data merely reflects what would happen if the customer made no attempt to comply with the new parameters . . .” Nicor Gas Ex. 4.0 at 27. As Mr.Mehling demonstrates, however, Nicor Gas’ “conclusion appears to be predicated on an incorrect assumption that suppliers’ schedulers are making no effort to accurately balance today under the tariffs as they exist today.” ICEA/RESA Ex. 3.0 at 10. Nicor Gas uses this excuse to abdicate its responsibility to indicate in any way what the proposed impacts of its proposal will be. Under Section 9-201 of the Act, Nicor Gas bears the burden of proof “to establish the justness and reasonableness of the proposed rates or other charges . . .” 220 ILCS 5/9-201. Intervenors have a right to know how their bills may be impacted by any proposal in this proceeding, and the Commission should have sufficient information before it to make an informed decision regarding any changes to Nicor Gas’ tariff.

I. Tariff Impacts on Sales Customers (PGA) 1. Nicor Gas’ Position

Nicor Gas presents evidence that its proposed tariff changes will benefit customers in two ways. First, in tightening the rules regarding the Transportation customers’ use of storage serves to protect the storage assets, which benefits Sales customers. Second, the Company asserts that Sales customers also benefit from a cost allocation related to storage use that reduces the subsidy Sales customers currently bear, for the benefit of certain Transportation customers. The Company considered the tariff impacts on Sales customers, dating back to the Storage Study first prepared in 2018. Nicor Gas explains that under the current Transportation tariffs, the high level of flexibility afforded to Transportation customers means that the Company must adjust its gas supply purchases for Sales customers to provide for the unpredictability of volumes of gas received into the

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system for Transportation customers. Nicor Gas states that maintaining the status quo negatively impacts Sales customers, the majority of which are residential.

Nicor Gas contends that the tariff changes protect Nicor Gas’ storage assets, which Sales customers (and all customers) benefit from. The Company further asserts that the tariff changes also, through the SBC, reduce the amount that Sales customers are subsidizing Transportation customers through the cost of storage contracts. Therefore, the Company urges the Commission to consider the impact of the tariffs on Sales customers.

2. ICEA/RESA’s Position According to ICEA/RESA, Nicor Gas has not provided an estimate of the impact

of the status quo on Sales customers, and thus cannot estimate the impact of changes in the tariff. Nicor Gas Ex. 4.0 at 24; Nicor Gas Cross Ex. 1.0; RESA-Nicor Gas Cross Exhibit 1.0.

ICEA/RESA state Nicor Gas alleges that it may make uneconomic decisions on behalf of its Sales customers but has not identified a single example of such decisions in direct, rebuttal, or surrebuttal testimony. Thus, while ICEA/RESA state they do not dispute that Nicor Gas may have made uneconomic decisions on behalf of Sales customers, there is no evidence in the record that Nicor Gas is doing so on a broad scale, that the decisions have a non-trivial impact, or that such decisions are caused (or even primarily caused by) supplier behavior.

ICEA/RESA highlight that the Appellate Court has explicitly required an analysis of ratepayer impacts of tariff changes for the utility to carry its burden to establish justness and reasonableness. According to ICEA/RESA, the primary case cited by ICEA/RESA involved inter-customer group allocation, akin to the massive transportation-sales reallocation of rights and responsibilities under Nicor Gas proposed tariff changes. ICEA/RESA conclude that as a matter of law, Nicor Gas has not met its burden and the Commission must reject the tariff changes.

ICEA/RESA state that Nicor Gas argues that substantial fixed costs associated with storage resources are recovered from Sales customers through the Company’s PGA mechanism. ICEA/RESA aver that while Nicor Gas claimed that Sales customers were subsidizing Transportation customers’ current use of Nicor Gas’ storage assets, the Company admitted that it had not undertaken any study or performed any analysis to support that claim. Nicor-RESA Cross Ex. 1.0. Other than Nicor Gas’ bald assertion that the costs are “substantial,” ICEA/RESA argue they are unaware of any evidence in the record that attempts to quantify those costs—a point that even Staff has raised in testimony: “Nicor Gas has not estimated the increase in gas costs caused by counteracting this behavior, either by individual transaction or collectively.” Staff Ex. 4.0 at 6.

3. IIEC’s Position IIEC states Nicor Gas has not provided any evidence that its efforts to balance its

system and cycle its storage assets in response to uncertain nominations, or failure of some suppliers to deliver gas in line with nominations, have caused any detrimental impact on Sales customers. IIEC Ex. 1.0 at 12, 13. Nicor Gas’ claim that it may expose

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them to suboptimal gas procurement or operational risk may have limited merit. But IIEC says Nicor Gas’ proposed change in Transportation rates is not the correct or economic remedy to the alleged problem. The Company’s proposed change in Transportation rates does not specifically address its alleged operational problem and does not correct the behavior the Company alleges is the cause of its difficulty in managing its storage cycling and its daily operational concerns. According to IIEC, the Company’s approach is overkill.

4. CNEG’s Position CNEG supports ICEA/RESA’s arguments. J. Procedural Issues

1. Revenue-Neutral Filing a. Nicor Gas’ Position

Consistent with the Commission’s directive to make this filing revenue-neutral, Nicor Gas presents evidence showing that the proposed change to its Transportation tariffs would not increase the Company’s Commission-approved revenue requirement determined in Docket No. 18-1775. Nicor Gas asserts that Intervenors’ arguments misconstrue the definition of revenue-neutral and instead focus on potential impacts to their bills.

Nicor Gas explains that revenue-neutral, in a ratemaking context, means that the proposed changes do not affect the Company’s revenues. The courts have made this clear, stating that “[a]ny changes in allocation are called ‘revenue-neutral’ because the total revenue requirement remains the same.” Coalition to Request Equitable Allocation of Costs Together (REACT) v. Ill. Commerce Comm'n, 2015 IL App (2d) 140202, ¶ 3, 28 N.E.3d 223. In response to RESA’s argument that the filing is not revenue-neutral between Sales customers and Transportation customers, Nicor Gas states that a tariff change can be revenue-neutral even if it shifts costs between classes. In doing so, the Company points to the fact that the Commission describes Commonwealth Edison Company’s (“ComEd”) revenue-neutral rate design proceedings, which are required by statute to be revenue-neutral, as “revenue-neutral tariff changes to the allocation of delivery service costs among ComEd's rate classes.” Commonwealth Edison Co., Docket No. 17-0049, Order (Jul. 26, 2017); see also 220 ILCS 5/16-108.5(e).

b. ICEA/RESA’s Position ICEA/RESA assert that there is a policy question in this proceeding as to what

constitutes a “revenue-neutral” tariff filing. According to ICEA/RESA, Nicor Gas takes the position that it does not matter if its proposal would result in massive revenue shifts from Transportation customers to Sales customers, so long as Nicor’s base rates were not affected. ICEA/RESA point out at length that Nicor Gas has done no analysis or study to determine what the impact will be.

c. IIEC’s Position IIEC states that Nicor Gas asserts that its proposal to eliminate Rider 25 and record

lost revenues to a regulatory asset would constitute revenue-neutral impacts on costs in this proceeding. IIEC argues the Company’s claims are without merit. To the extent the

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Company defers lost revenues through eliminating Rate 25 in this case, and recovers them in a subsequent case, customers in the subsequent case could pick up additional costs that are currently paid by Rate 25 customers during the deferral period. This creates a significant increase in economic responsibility to non-Rate 25 customers. The Company has not provided evidence that no customer would be harmed by its proposals.

IIEC notes the Company is voluntarily proposing to eliminate Rate 25 customers outside of a rate case. To the extent this reduces its revenue recovery, then the Company should be held responsible for its own recommendation. Because other customers could be detrimentally impacted by its proposal to include a regulatory deferral, with recovery in a subsequent rate case, the Commission cannot find that the Company’s proposal in this case does not create economic harm to non-Rate 25 customers. For this reason, the Company’s proposal should be rejected.

d. GFAI/IAPA’s Position Nicor Gas’ proposal arbitrarily and unfairly shifts costs from Sales customers to

Transportation customers according to GFAI/IAPA. Nicor Gas is dismissive of the concerns of GFAI/IAPA and Staff regarding revenue neutrality, claiming that the only factor is the Company’s overall revenue requirement. However, as demonstrated by Mr. Vognsen, several other factors should be examined, none of which were considered by the Company:

1) There is no change in a company’s overall revenue requirement; any change in revenues is directly related to the change in costs;

2) There is no shifting of total costs or total revenues between customer classes. The proposed tariff change maintains the existing customer class revenue requirements relationships based upon the rates established in the most recent revenue requirements rate case proceeding;

3) Total bill impacts by customer (or a sample of customers) within a customer class identify large percentage changes related to the change in pricing and tariff structures. A gradualism approach is established to phase in the change for customers within a class over a number of years capping the maximum change in any customer’s bill to less than a specific percentage, such as 20%; and

4) Changes to specific rate elements or provisions within a tariff are supported by cost causation. The proposed tariff changes need to reflect the cost to provide a particular service. GFAI Ex. 1.0 at 5.

Nicor Gas further claimed that GFAI/IAPA focused on potential bill impacts and not on Nicor Gas’ authorized revenue requirement; that claim is incorrect. Nicor Gas has proposed shifting cost responsibilities from Sales customers to Transportation customers based upon claims not supported by evidence. Such allocation issues are appropriately determined via a class cost of service study, and compliance with Section 9-241 of the Act.

e. CNEG’s Position CNEG agrees with and supports all the analysis set out by ICEA/RESA.

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f. Nucor’s Position The lack of financial analysis in Nicor Gas’ filing calls into question its claim that its

proposal is revenue-neutral. The Commission ordered the Company to file a revenue-neutral tariff filing in this proceeding. Nicor apparently interpreted that to mean that the filing could not affect base rates. See Nicor Gas Ex. 9.0 at 9. Nicor Gas’ proposed changes, however, would increase Transportation customers’ storage rates and costs. Additionally, the Company admits that its proposal is not actually revenue-neutral, as the elimination of Rider 25 and Electronic Bulletin Board fees creates a $2.2 million revenue deficit which Nicor Gas will address in Docket No. 21-0098. Nicor Gas Ex. 3.0 at 6. Ignoring these impacts, even if the Commission determines that the proposal is revenue-neutral for Nicor Gas, the Company’s proposal will dramatically and unjustifiably increase costs for Transportation customers for the benefit of Sales customers.

2. Notice of Proposal a. Nicor Gas’ Position

Nicor Gas maintains that it has complied with all applicable notice requirements. The Company notes that Intervenors failed to cite to any statutory provision, Commission rule, or other authority to support the allegation that the Company failed to meet its obligations. Nicor Gas emphasizes that the parties making such claims have fully participated in this docket, including successfully intervening, conducting discovery, filing testimony, having the opportunity to cross-examine witnesses at the evidentiary hearing, and filing briefs. Furthermore, the Company modified its position on certain issues specifically based on the parties’ claims, including the SBS, SBC, and storage parameters and cash-out structure.

Nicor Gas asserts that Intervenors’ notice claims find no support in the law or the facts, and they cannot allege any harm, as they have had the opportunity to participate fully and contest the Company’s proposal.

b. ICEA/RESA’s Position According to ICEA/RESA, Nicor Gas takes the position that interested

stakeholders had sufficient notice because Nicor Gas made its tariff filing with the Commission. See Nicor Gas Ex. 4.0 at 35-36. However, ICEA/RESA argue that Nicor Gas is ignoring the point of providing notice to interested parties; it is not enough to publicly make a filing. ICEA/RESA contend that real notice gives parties the chance to review proposals and to express their concerns to Nicor Gas, which hopefully, in turn, would attempt to address those concerns and, possibly even, come to some compromise that satisfies everyone. ICEA/RESA note Nicor Gas had approximately nine months between the Commission’s Order in Docket No. 18-1775 and its June 30, 2020 filing to discuss its proposals with those stakeholders who would be most affected by it. According to ICEA/RESA, Nicor Gas chose not to do so apparently because it did not plan to make any changes to its proposal, regardless of impacts to others.

c. GFAI/IAPA’s Position Nicor Gas failed to give adequate notice to its potentially-impacted customers.

IAPA did not have the opportunity to fully participate – it missed the critical round of direct testimony and had limited time to gather information for rebuttal testimony. With

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additional time, IAPA could have analyzed the full bill impact on all IAPA accounts on the Nicor Gas system. However, IAPA account data was only collected and analyzed for about 30 accounts, leaving more than 20 IAPA plants omitted from the analysis. It is likely that cost impact for IAPA accounts would be significantly higher than demonstrated in rebuttal testimony if all IAPA plants were considered. The prejudice to IAPA might have been reduced had Nicor Gas endeavored to assess bill impacts.

While IAPA was fortunate to have participated in this docket, there are likely other customers that will be similarly adversely impacted who have not appeared in this proceeding because Nicor Gas’ notice to its customers was insufficient.

d. CNEG’s Position CNEG adopts the arguments and conclusions of ICEA/RESA. K. Other

1. Nicor Gas’ Position Nicor Gas points out that Intervenors provide new alternative proposals in briefing.

The Company emphasizes that these suppliers chose not offer alternatives in testimony and now propose that the Commission should delay these necessary changes in order to give them a chance to negotiate tariff provisions. Nicor Gas asserts that these tariff changes are necessary, appropriate, and require time to implement without further delay.

2. ICEA/RESA’s Position According to ICEA/RESA, recent winter weather events have demonstrated the

importance of storage flexibility to providing customers with value. Some customers—including Sales customers—bear varying degrees of wholesale market risk. ICEA/RESA observe that Nicor Gas touted the value of storage to customers, both during the recent winter weather and during the Polar Vortex.

ICEA/RESA note that Transportation customers have the ability in the current retail market to purchase products that more fully hedge against wholesale market risk, including fully fixed rate or fixed bill products. ICEA/RESA aver that these fixed rate and fixed bill products are only possible to the extent that the supplier is able to execute a hedging strategy on behalf of their customer base.

ICEA/RESA argue that if Nicor Gas’ proposed tariffs had been in place prior to this heating season, fewer customers would have access to competitively priced fixed rate and fixed bill products. Instead, those customers would be forced to accept a less hedged product, such as what Sales customers are offered.

3. GFAI/IAPA’s Position GFAI/IAPA assert that the record contains insufficient data to address a

reasonable approach to impacts on seasonal users. Other parties suggest that a better approach is to compel Nicor Gas to conduct meetings or workshops to discuss proposals that would allow the Company to fix operational issues while maintaining tariffs that are fair and reasonable to customers. While GFAI/IAPA remain willing to work toward a fair and reasonable solution, a starting point for those discussions is solid data analysis of the problem to be solved and the impacts to customers of any proposed solutions.

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4. CNEG’s Position CNEG agrees with ICEA/RESA’s position.

V. COMMISSION ANALYSIS AND CONCLUSION The record in this docket demonstrates the importance of maintaining proper

pressure in Nicor Gas’ storage aquifers. Additionally, the record indicates that the cycling process in the aquifers must be maintained to ensure that the Company can deliver gas to its customers and need not acquire gas elsewhere. Nicor Gas, Staff and the Intervenors all agree that the ability to access stored gas in the Company’s own aquifers is critical during winter months, during severe weather changes, and in response to unexpected usage changes. Moreover, storing gas on-site allows Nicor Gas to provide more consistent gas prices to its customers.

The Commission finds that Nicor Gas has provided substantial evidence to show that the storage rules for Transportation customers have remained unchanged for years, despite changing market conditions the Company has had to adapt to. Nicor Gas’ Storage Study addressed how Transportation customers’ storage usage imposes risks to the Company. The Commission must determine whether the proposed tariff changes are responsive to the Storage Study, whether the changes are necessary, whether the modifications are just and reasonable, whether the proposals are revenue-neutral, and whether the parties had sufficient notice of these changes.

The Commission finds that Nicor Gas has shown several of its proposed changes are warranted. Nicor Gas’ expert testimony demonstrated that if there are no adjustments to the current transportation tariffs, there will be a degradation in the Company’s storage assets. Nicor Gas needs to be able to deliver gas during the colder months. Transportation customers do not cycle gas out of storage at the end of the withdrawal season, and what is not cycled by customers must be done by the Company in order to meet targets.

The Commission points out that Staff agrees that Nicor Gas’ usage parameters must be tightened, though disagrees to what extent. However, Staff admits that it is imperative that storage fields be fully filled in summer and emptied in winter to prevent the degradation Nicor Gas seeks to avoid. While Staff states the existing tariffs provide for some of the flexibility that Nicor Gas needs, the Commission agrees with Nicor Gas that the modifications it proposes will ultimately prevent the degradation of its assets.

The Commission disagrees with ICEA/RESA that the Company has not met the required burden of proof set out in Section 9-201. ICEA/RESA rely on Nicor Gas’ admission that the Company has never failed to withdraw a sufficient volume of gas at the end of the withdrawal period or reached an appropriate level of inventory at each of its storage fields by the end of each injection period. Simply because thus far, Nicor Gas has been able to adequately cycle its aquifer fields does not refute the concerns Mr. Sherwood describes and the risk to the Company’s storage system.

The Commission finds the tariff modifications just and reasonable. Nicor Gas claims that the current tariffs allow too much variance between nominating and delivery amounts which do not appear to correlate with weather or regular usage. This unpredictability makes it difficult for the Company to properly predict use of its storage

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assets. All parties appear to concede that the problems are caused by a small group of suppliers. Staff proposes amendments aimed at making the nomination changes too expensive for the suppliers that seem to be making those changes as part of their business strategy, as well as the addition of daily and monthly storage parameters. The Commission approves the changes to the tariff as modified by Staff Cross Exhibit 1 which address Daily Cash-outs, Monthly Cash-outs and the Nomination Change Charge and are accepted by the Company. As to the storage parameters themselves, this issue appears to be uncontested by all parties except for ICEA/RESA.

The Commission adopts the cash-out procedures modified by Staff in Staff Cross Exhibit 1.0. The Commission agrees that Dr. Rearden’s modifications more appropriately respond to differences between actual storage usage and tariff requirements.

The Commission agrees with Nicor Gas’ proposal, supported by Staff, to eliminate Rider 25. Because of Nicor Gas’ usage of Advanced Metering Infrastructure, Rider 25 is not necessary since the Company can read meters daily. Nicor Gas’ other tariffs provide several alternatives to those customers which are reasonable, and current Rider 25 customers have almost a year to make a new selection. The parties also appear to agree that the revenue impacts of eliminating this rider can be addressed in Nicor Gas’ new rate case.

The Commission approves Nicor Gas’ proposal to increase the group size limit for Daily Read accounts. The Commission acknowledges Nicor Gas’ contention that eliminating a group size limit could lead to delays in billing. Nicor Gas also committed to evaluate an optimal group size that balances the interests of the need for timely billing and supplier nomination efficiencies. The Commission finds this proposal reasonable.

In response to Staff and Intervenors, Nicor Gas modified eligibility for Rate 75 customers to allow for more flexibility in customers’ percentage of winter usage. The Commission rejects GFAI/IAPA’s recommendation to conduct a study on how seasonal customers use Nicor Gas’ system – this Storage Study already does that, and the Company altered Rate 75 accordingly.

The Commission approves Nicor Gas’ modified proposal to provide additional flexibility for customers such that all Daily Read customers, including Rate 75 customers, will continue to have the option to elect less or request more than the standard number of days of SBS capacity, while seasonal Rate 75 customers will have a new, additional option to select 0 days of capacity if so desired. Nicor Gas clarifies that the modified proposal does not seek to require all Daily Read customers to take the same number of storage days. The Commission rejects Nicor Gas’ proposal to remove 6 days of Customer Select storage banking capacity; the Company provides no rationale for this change. The Commission agrees with Staff and ICEA/RESA that this modification is unsupported.

As to the SBC proposed by the Company and later modified, the Commission does not agree with Nicor Gas that all customers benefit from pipeline storage and transportation. The Commission agrees with Intervenors that pipeline capacity is purchased for Sales customers, not Transportation customers. Nicor Gas does not deny that if the Company did not have any Transportation customers, it would still need to procure the same amount of upstream pipeline capacity and storage capacity in order to

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provide firm service to its Sales customers. The Commission also agrees that principles of cost-causation require these costs to be borne by the Sales customers. Citizens Utility Bd. V. Ill. Commerce Comm’n, 166 lll.2d 111, 121 (1995). The proposed SBC is not adopted. In rejecting the SBC, Nicor Gas is directed to retain the existing Customer Select Balancing Charge as part of its Transportation tariffs.

The Commission finds, to the extent they have been adopted above, Nicor Gas’ proposed modifications are just and reasonable and benefit all customers. The Intervenors argue that Nicor Gas did not perform any analysis to show that Transportation customers and Sales customers will not be harmed by these changes. The Commission disagrees. The Storage Study identified certain flaws in Nicor Gas’ current storage system, and the Company proposed various modifications to address those flaws. The evidence in the record demonstrates that all customers benefit from protected storage fields, and these modifications treat all storage users in a similar fashion.

The Commission agrees with Nicor Gas that changes to the Transportation tariffs will benefit Sales customers by protecting storage assets and through a cost allocation. The Commission also agrees with the Company that maintaining the status quo negatively impacts Sales customers, who are mostly residential.

Regarding the issue of revenue neutrality, the Commission finds the issue is moot. Nicor Gas has initiated a base rate case, Docket No. 21-0098, where the effects of these tariff changes will be accounted for.

The Commission finds the parties had sufficient notice of Nicor Gas’ proposed tariff modifications. Nicor Gas was instructed to prepare a Storage Study in its 2017 Rate Case, “assessing the implications of how Transportation customers and Customer Select suppliers use the Company’s on-system storage under current terms and conditions of service” and present the Storage Study in its next rate case. 2018 Rate Case, Order at 150-51. In the 2018 Rate Case, Nicor Gas presented the Study, which concluded that its Transportation and Customer Select customers use the storage system in a way that impacts the reliability of the system and that “action is needed.” Id. The parties, which included IIEC and RESA, unanimously agreed to address these issues in a future proceeding to be filed before June 30, 2020. The parties therefore had notice at least since 2017 that this docket would occur. ICEA/RESA and GFAI/IAPA appear to be concerned about other unnamed parties participating in this docket. Once the utility complies with the 9-201(a) filing and notice requirements, its duties are met. This proceeding included discovery, testimony, an evidentiary hearing, and all parties’ positions were fully briefed. The Commission finds sufficient notice was provided in this case.

Finally, the Commission agrees with Nicor Gas that the issues in this matter have been fully briefed and addressed by the Company, Staff and Intervenors at length. The Commission does not see a benefit in ordering additional workshops, as recommended by GFAI/IAPA. The Commission disagrees that a solid data analysis is needed on this topic – the Storage Study, and the evidence in the record in this case already provide such analysis.

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VI. FINDINGS AND ORDERING PARAGRAPHS The Commission, having considered the entire record herein and being fully

advised in the premises, is of the opinion and finds that: (1) Northern Illinois Gas Company d/b/a Nicor Gas Company is an Illinois

corporation engaged in the distribution of natural gas to the public at retail in the State of Illinois and as such is a “public utility” as defined in Section 3-105 of the Act;

(2) the Commission has jurisdiction over the parties hereto and the subject matter herein;

(3) the statements of fact set forth in the prefatory portion of this Order are supported by the evidence and the record and are hereby adopted as findings of fact;

(4) the testimony and exhibits admitted into the record provided substantial evidence that some of Northern Illinois Gas Company d/b/a Nicor Gas Company’s proposed tariff changes should be approved and implemented, as modified above, effective May 1, 2022; and

(5) consistent with the Company’s commitment to evaluate an optimal group size limit for Daily Read accounts that balances the interests of the need for timely billing and supplier nomination efficiencies, the Commission finds the Company shall complete, with the input of stakeholders, that evaluation and file the result of that evaluation in this docket within 90 days of the date of this Order.

IT IS THEREFORE ORDERED by the Illinois Commerce Commission that certain proposed tariff changes are approved, consistent with the conclusions contained herein, and Northern Illinois Gas Company d/b/a Nicor Gas Company is authorized to file new tariff sheets in accordance with the Commission’s conclusions and Finding (4).

IT IS FURTHER ORDERED that Northern Illinois Gas Company d/b/a Nicor Gas Company shall complete with the input of stakeholders an evaluation of an optimal group size limit for Daily Read accounts that balances the interests of the need for timely billing and supplier nomination efficiencies and file the result of that review in this docket within 90 days of the date of this Order.

IT IS FURTHER ORDERED that the subject tariff sheets presently in effect rendered by Northern Illinois Gas Company d/b/a Nicor Gas Company are hereby permanently canceled and annulled, effective at such time as the new tariff sheets approved herein become effective by virtue of this Order.

IT IS FURTHER ORDERED that the tariffs filed by Northern Illinois Gas Company d/b/a Nicor Gas Company on June 30, 2020 are permanently cancelled and annulled.

IT IS FURTHER ORDERED that the Company is directed to submit compliance tariffs to Commission Staff at least four days before they become effective.

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IT IS FURTHER ORDERED that any objections, motions or petitions filed in this proceeding that remain unresolved should be disposed of in a manner consistent with the ultimate conclusions contained in this Order.

IT IS FURTHER ORDERED that pursuant to Section 10-113(a) of the Public Utilities Act and 83 Ill. Adm. Code 200.880, any application for rehearing shall be filed within 30 days after service of the Order on the party.

IT IS FURTHER ORDERED that subject to the provisions of Section 10-113 of the Public Utilities Act and 83 Ill. Adm. Code 200.880, this Order is final; it is not subject to the Administrative Review Law.

By Order of the Commission this 13th day of May, 2021. (SIGNED) CARRIE ZALEWSKI

Chairman