Session of 1998
                   
HOUSE RESOLUTION No. 6016
         
By Committee on Utilities
         
3-12
            9             A RESOLUTION urging the State Corporation Commission to postpone
10             certain proceedings and conduct an investigation relating to a natural
11             gas contract (P-0802 contract).
12            
13                 WHEREAS, The State Corporation has reviewed and made certain
14             determinations with respect to a natural gas contract, identified as the P-
15             0802 contract; and
16                 WHEREAS, The State Corporation Commission made certain deter-
17             minations in its order of March 12, 1979, in Docket No. 113,421-U, where
18             the Commission found that the P-0802 contract was not used and useful
19             for the purpose of providing natural gas service to retail customers in
20             Kansas; and
21                 WHEREAS, The State Corporation Commission found as follows:
22             ``Furthermore, we are unconvinced that this contract relationship of ap-
23             plicant with its wholly owned subsidiary has been maintained strictly at
24             `arms length'. We are particularly concerned that applicant appears to
25             have sacrificed benefits of considerable importance by the amendments
26             negotiated subsequent to the original contract.'' (Order of March 12,
27             1979, at para. 41, page 28); and
28                 WHEREAS, Kansas ratepayers made contributions to develop oil and
29             gas leases in the Bowdoin Field in Montana, which were ultimately made
30             the subject of the P-0802 contract; and
31                 WHEREAS, The P-0802 contract was made the subject of a corporate
32             spin off, wherein utility stockholders were given one share of stock in the
33             company that retained the P-0802 contract for each share of utility stock
34             that was owned by the utility share owner; and
35                 WHEREAS, Ratepayers received no benefits from the spin off; and
36                 WHEREAS, The P-0802 contract was renegotiated as the spin off was
37             occurring in a transaction which was not at arm's length and which did
38             not permit marketing out of the contract if the price under the contract
39             was incompatible with current market conditions; and
40                 WHEREAS, The price of the P-0802 contract is well above current
41             market prices; and
42                 WHEREAS, Parties to a State Corporation Commission docket
43             (Docket No. 96-KNNG-700-TAR) entered into a settlement agreement

HR 6016

2

  1             to postpone a determination of the prudency of the P-0802 contract until
  2             after September 30, 1999, in exchange for rate relief which was to be
  3             effective through 1999 but, in accepting the agreement, the Commission
  4             nevertheless determined that there was evidence to support that the con-
  5             tract was prudent, even though the docket was not established for the
  6             purpose of determining the prudency of the contract, the determination
  7             was at odds with earlier rulings by the Commission concerning the con-
  8             tract and the Commission order had the effect of undermining the set-
  9             tlement agreement of the parties in Docket No. 96-KNNG-700-TAR; and
10                 WHEREAS, On December 19, 1996, approximately 200 ratepayers
11             appeared before the State Corporation Commission to request a pru-
12             dency review of the P-0802 contract; and
13                 WHEREAS, In a subsequent docket (Docket No. 97-KNNG-523-
14             GIG), the State Corporation Commission agreed to investigate the as-
15             signment of the contract as part of the gas realignment that was ordered
16             by the Federal Energy Regulatory Commission to determine if the as-
17             signment was proper, but the Commission refused to include the issue
18             of the P-0802 contract's prudency, even though such a review would
19             impact on the contract's assignment: Now, therefore,
20                 Be it resolved by the House of Representatives of the State of Kan-
21             sas: That the State Corporation Commission be urged to postpone its
22             current proceedings in Docket No. 97-KNNG-523-GIG until such time
23             that the prudency of all transactions involving the P-0802 contract can be
24             independently determined or after September 30, 1999; and
25                 Be it further resolved: That the State Corporation Commission be
26             urged to conduct an investigation of all aspects of the P-0802 contract,
27             including the earlier decision of the Commission which established that
28             the contract was not required for utility service in Kansas and was not
29             negotiated in an arm's length transaction.
30