Brief of Commission Staff Counsel under CP06-407 et.al.

UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Missouri Interstate Gas, LLC Docket No. CP06-407-007 Missouri Gas Company, LLC Missouri Pipeline Company, LLC REPLY BRIEF OF THE COMMISSION STAFF Irene E. Szopo Lorna Hadlock Commission Staff Counsel Washington, DC September 16, 2011 Docket No. CP06-407-007 ii TABLE OF CONTENTS Page I. INTRODUCTION . 1 II. ARGUMENT ....................................................................... 4 Issue I. How much of the purchase price paid by Gateway Pipeline Company, Inc. (Gateway), MoGas Predecessor, to UtiliCorp United, Inc. (UtiliCorp) should be included in FERC Account No. 101 as the cost of the TransMississippi Pipeline Facilities (TMP Facilities)? 7 A. The Original Cost of the TMP Facilities is not $1,232,381 as Claimed by the MoPSC, but is $10,088,925....................... 7 B. The MoPSC Erroneously Claims that Staff Argues its Original Cost Accounting Determination Dictates the Ratemaking Treatment of the Cost of the TMP Facilities...... 11 C. The Presiding Judge Can Rely on the Commissions 2002 Order to Establish the Original Cost of the TMP Facilities.............................................................................. 21 Issue II: Does any portion of the $10,088,925 currently included in Account No.101 as the original cost of the former TMP Facilities include an acquisition premium; if so, what is the amount?......................................... 22 Issue III: If the $10,088,925 currently included in Account No. 101 as the original cost of the TMP Facilities includes an acquisition premium, does the application of the Commissions benefits exception test permit the recovery of the acquisition premium in rates? If so, how much?..................................... 25 A. There is No Need to Apply the Commissions Benefits Exception Test in This Proceeding .......................................... 27 Docket No. CP06-407-007 iii B. The TMP Facilities were not Devoted to Public Service Prior to Being Acquired by Gateway in 2002.................................. 29 1. The costs of the TMP Facilities were not previously reflected in regulated rate base..................................... 29 2. The MoPSC wrongly claims the Staff took the position that devoted to public service requires that a facility must be subject to FERC jurisdiction.... 31 3. The used and useful standard is the appropriate standard for determining whether the costs of the TMP Facilities were in MPCs rate base in 1989..................................................................... 34 4. The TMP Facilities were not converted to natural gas service in 1989............................................................. 35 C. The 2002 Gateway/UtiliCorp Transaction was an Arms-Length Transaction............................................................................... 36 III. CONCLUSION 38 Docket No. CP06-407-007 iv TABLE OF AUTHORITIES Page COURT CASES Missouri Public Se