# Gas Performance Incentive Mechanism

- **operation:** document
- **citation:** 4 CCR 723-4 Rule 4607
- **title:** Gas Performance Incentive Mechanism
- **source type:** regulation
- **agency:** Colorado Public Utilities Commission
- **status:** current
- **official:** true
- **published on:** Not available
- **effective on:** Not available
- **summary:** In conjunction with its GPRMP, the utility shall implement a GPIM in accordance with this rule and the specific terms set forth in its GCA tariff sheets. The utility shall implement a GPIM for each GCA rate area with more than 50,000 full service customers or each purchasing region as specified in t
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- **source url:** https://www.sos.state.co.us/CCR/DisplayRule.do?action=ruleinfo&ruleId=2260&deptID=18&agencyID=96&deptName=Department%20of%20Regulatory%20Agencies&agencyName=Public%20Utilities%20Commission&seriesNum=4%20CCR%20723-4
**body:**

In conjunction with its GPRMP, the utility shall implement a GPIM in accordance with
this rule and the specific terms set forth in its GCA tariff sheets. The utility shall
implement a GPIM for each GCA rate area with more than 50,000 full service customers
or each purchasing region as specified in the utility’s GPP.
(a) An application to establish a GPIM for a utility with more than 50,000 but less
than 500,000 full service customers shall contain the following elements. The
utility shall specifically reference and respond to the requirements of
subparagraphs (I) through (IV) of this rule and shall provide cross-references and
footnoted work-papers in executable format with all cell formulas intact, using
spreadsheet software that is compatible with software used by Commission staff.
(I) GPIM benchmark. Methodology to establish the GPIM benchmark for
commodity gas purchases based on verifiable, reported market indices,
with a reasonable adjustment, and for appropriate locations.
(II) GPIM commodity gas volumes. Description and explanation of all gas
volumes to be included in the GPIM.
(A) The volumes and costs associated with fixed-price, long-term
supply contracts may be excluded from the GPIM and risk sharing
calculation.
(B) The volumes and costs associated with storage injections and
withdrawals, including both physical and contract storage, may be
excluded from the GPIM and risk sharing calculation. Utilities shall
provide a description of storage assets to be either included or
excluded from the GPIM.
(C) The volumes and costs associated with associated with financial
hedging shall be excluded from the GPIM and risk sharing
calculation.

(D) All other actual gas volumes and costs shall be subject to the GPIM
with consideration of reasonable adjustments as determined by the
Commission.
(III) Upstream supply costs. Description and explanation of upstream costs
included in the GPIM risk sharing mechanism, including the methodology
for developing an appropriate benchmark for such costs, if appropriate.
(IV) Risk sharing amount. Methodology for calculating the risk sharing amount.
(A) A formula will calculate a percentage of the difference between the
actual gas costs and the benchmark formula for applicable gas
volumes, either positive or negative, borne or retained by the utility,
subject to applicable limitations.
(B) The utility shall explain:
(i) any proposed deadband around the GPIM benchmark
whereby price variation within the deadband is excluded
from risk sharing formula;
(ii) any proposed cap or floor on the results of the risk sharing;
and
(iii) any proposed methodology for applying force majeure or
similar provisions to the risk sharing mechanism.
(C) Backcasting analysis, based on a minimum of the most recent three
years of historical data, will demonstrate how the proposed GPIM
benchmark would have been calculated and how the proposed risk
sharing mechanism would have performed over the historical
period. This analysis shall assume the utility made no changes to
its actions in response to the mechanism and ignore any force
majeure or similar events. The utility may, in its discretion, present
additional analysis.

(b) An application to establish a GPIM for a utility with more than 500,000 full service
customers shall contain the following elements. The utility shall specifically
reference and respond to the requirements of subparagraphs (I) through (IV) of
this rule and shall provide cross-references and footnoted work-papers in
executable format with all cell formulas intact, using spreadsheet software that is
compatible with software used by Commission staff.
(I) GPIM benchmark gas rate. The GPIM benchmark gas rate for the
completed calendar quarter preceding the GCA filing will be calculated as
the average of the GPIM total gas cost for that same quarter in the
previous three years divided by the GPIM total gas quantity for the same
quarters in the previous three years.
(II) GPIM actual gas rate. The GPIM actual gas rate for the completed
calendar quarter preceding the GCA filing will be calculated as the GPIM
total gas cost for that quarter divided by the GPIM total gas quantity for
that same quarter.
(III) GPIM sharing amount. The GPIM sharing amount will be calculated as
four percent of the difference between the GPIM benchmark gas rate and
the GPIM actual gas rate, either positive or negative, multiplied by the
GPIM total gas quantity for the completed calendar quarter preceding the
GCA filing, subject to the following limitations:
(A) the GPIM sharing amount for a quarter shall be zero if the
difference between the GPIM benchmark gas rate and the GPIM
actual gas rate is less than $0.50 per Mcf or Dth;
(B) the GPIM sharing amount for a quarter shall be the difference
between the GPIM benchmark gas rate and the GPIM actual gas
rate that is above or below the $0.50 per Mcf or Dth threshold in
subparagraph 4607(b)(III)(A); and
(C) the utility’s cumulative quarterly GPIM sharing amounts summed
across all GCA rate areas or purchasing regions, positive or
negative, shall be capped over a rolling twelve-month period at an
amount equal to a 30 basis point return on the utility’s rate base as
established by the Commission in the utility’s most recent base rate
proceeding, set solely on the equity share of the utility’s capital
structure.

(IV) The utility may request, and the Commission may grant, a force majeure
exception upon good cause shown after such an event has occurred. The
force majeure exception may allow the utility to exclude costs from the
GPIM that are deemed to be either associated with the force majeure
event as defined by the utility’s tariffs on file with the Commission or
associated with force majeure events as defined in the utility’s upstream
gas supply, storage, and transportation agreements and tariffs.
(c) Unless subject to the limitations in subparagraph 4607(a)(IV)(B)(ii) or
subparagraph 4607(b)(III)(C), the GPIM sharing amount shall be accounted for in
the utility’s deferred gas cost calculation for the quarterly GCA filing.
(I) To the extent a GCA calculation is subject to a maximum cap specified in
a utility’s GPRMP, any new positive GPIM sharing amount will not be
accounted for in the deferred gas cost calculation but instead be subject to
a carryforward into subsequent GCA quarterly filings. The carried forward
GPIM amount shall be eligible to offset incurred negative GPIM sharing
amounts.
(II) To the extent a GCA calculation is subject to a minimum threshold
specified in a utility’s GPRMP, any new negative GPIM sharing amount
will not be accounted for in the deferred gas cost calculation but instead
be accounted for in the deferred gas cost calculation in subsequent
quarterly GCA filings in which the GCA calculation is above the minimum
threshold.
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