State regulators approve Puget Sound Energy’s request to recover certain LNG facility costs

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Docket number: UG-230393

LACEY, Wash. – Today, state regulators allowed Puget Sound Energy (PSE) to recover certain costs associated with its Tacoma liquefied natural gas (LNG) facility. The commission rejected recovery in rates of costs associated with marine shipping services since the services do not benefit the company’s gas customers.

In the final order, the commission found that PSE’s decision to build the plant was prudent but expressed concern that PSE received violation notices from the Puget Sound Clean Air Agency and noted this could impact the company’s return on investment in the facility in the future. The commission also rejected PSE’s request to recover certain costs from customers, such as the costs of redesigning gas treatment equipment.

On May 25, 2023, PSE filed revisions to its currently effective natural gas tariff to recover the costs of constructing and operating the Tacoma LNG facility. PSE proposed $47.6 million of additional revenue to include recovery of depreciation expense, return on investment, and operating and maintenance expenses associated with the regulated portion of the facility. The request also proposed recovery of PSE’s deferred capital costs, including deferred return on investment and operating expenses since the facility began commercial operation in February 2022. Additionally, PSE proposed an allocation of the costs of constructing the four-mile distribution line used to supply gas to the facility between PSE’s regulated and non-regulated customers.

PSE proposed to apply the rate of return approved in its recent general rate case to the total rate base associated with the facility, including its deferrals.

The commission agreed with UTC staff’s position and rejected PSE’s request to recover a portion of its deferred return on investment. Additionally, the commission agreed with staff’s proposed allocation of the four-mile distribution line between PSE customers and non-regulated customers and directed PSE to refund the amount its regulated customers overpaid. The reduced allocation percentage decreases the regulated customers’ share of the $27.4 million distribution line from 62%, as proposed by PSE, to 30%.

The amount of refund to be returned to PSE’s regulated customers will be determined in PSE’s subsequent compliance filing.

Background Information

On Dec. 22, 2022, the commission approved a settlement concerning the Tacoma LNG Plant, which determined that PSE acted prudently in authorizing the construction of the facility and allowed PSE to record Tacoma LNG facility costs in a tracker. The settlement permitted PSE to seek recovery of these costs and allowed other parties to contest recovery of costs in a subsequent filing.

The commission modified a portion of the settlement and allowed PSE to recover costs provisionally, subject to refund, for the four-mile distribution line through rates. The order required PSE to allocate these costs between regulated and non-regulated customers in its Tacoma LNG tracker filing.

The commission is not responsible for siting or permitting the LNG facility, and its 2022 order focused primarily on whether it was prudent for PSE to begin construction of the facility.

Bellevue-based Puget Sound Energy provides natural gas service to more than 800,000 customers in six Washington counties: King, Kittitas, Lewis, Pierce, Snohomish, and Thurston.

The UTC is the state agency that regulates private, investor-owned electric and natural gas utilities in Washington. It is the commission’s responsibility to ensure regulated companies provide safe and reliable service to customers at reasonable rates, while allowing them the opportunity to earn a fair profit.