1. Gas Hedging – Do Low Natural Gas Prices Support Scaling Back Hedging Programs at Local Distribution Companies?
Kara Brighton, Commissioner
Wyoming Public Service Commission
November 14, 2016

2. Today’s Presentation Wexpro I Wexpro II
Property 2
Cost of Service Gas vs. The Market

3. Wexpro Cost of Service Gas
Wexpro I Stipulation – October 14, 1981
Resolved a dispute regarding the proceeds derived from oil production and provided a framework for cost of service gas production.
Wexpro II Stipulation – September 12, 2012
Includes new production to replace depleting resources in the Wexpro I Stipulation
Property 1 added in March 2014
Property 2 added in February 2016
Guideline letters - Parties to the Stipulations engage in a Guideline letter process to address emerging operational and accounting issues.

4. Guideline Letter Examples
May 29, 1992 – Replacement Index Methodology for Determining Base Rate of Return
February 20, 2004 – Adoption of Financial Accounting Standards Board Statement No. 43, Accounting for Asset Retirement Obligations
July 20, 2016 – Letter Governing Commercial Well Designations

5. Wexpro II Property Acquisition
Wexpro acquires properties at its own risk
Must file with WPSC/UPSC to include all properties in the Development Drilling Areas of the Wexpro I Stipulation
Right of First Refusal alleviates the concern that Wexpro wouldn’t offer best performing properties under Wexpro II
The applications are processed in 60 days

6. Wexpro II Properties
A party may petition the Commission to re-examine the current terms of the Stipulations and request modification.
The Commission may open an investigation to re-assess the Stipulations.

7. Manage to 65% of the Questar Portfolio
If the market price for natural gas is less than the cost-of- service gas on a per Dth basis, the amount of gas produced above 65% of the annual demand of Questar is credited back to customers through the 191 Account.
The credit back to customers is calculated at the higher of market price or cost-of-service price to hold customers harmless for the gas produced above the 65% threshold.
Wexpro may sell cost-of-service production at any time during the year to manage to the 65% threshold.
The credit is recorded in the 191 Account annually.

8. Manage to 65% of the Questar Portfolio
If Wexpro's production volumes exceed the amount Questar can use or put into storage in a cost-effective manner, Questar will minimize costs to customers by evaluating whether to sell cost-of-service production or to shut-in cost- of-service production.
If the estimated sales price is greater than the estimated of cost-of-service gas, Questar will direct Wexpro to sell cost-of-service production.
If the sales price is less than the estimated cost-of-service gas minus shut-in cost, Questar will shut in the cost-of- service production.

10. Wexpro I
Wexpro II
Wexpro I – Since inception through 2012 had provided a total of $1.3 billion in customer benefits.

11. Wexpro II
Prop1
Prop2

12. Wexpro Agreement Documents

13. Questions?
Kara Brighton, Commissioner Wyoming Public Service Commission (307)