Session of 1998
                   
SENATE RESOLUTION No. 1830
         
By Committee on Utilities
         
3-13
            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

SR 1830

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  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 Senate of the State of Kansas: That the State
21       Corporation Commission be urged to postpone its current proceedings
22       in Docket No. 97-KNNG-523-GIG until such time that the prudency of
23       all transactions involving the P-0802 contract can be independently de-
24       termined 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