BEFORE THE PUBLIC SERVICE COMMISSION
OF THE STATE OF MISSOURI

In the matter of Missouri Gas Energy		)
and its accounting for unrecognized net	)
gain/loss amounts related to pension and	)	Case No. G___-2003______
non-pension post-retirement benefits.		)	

STIPULATION AND AGREEMENT
	Come now the Staff of the Missouri Public Service Commission (“Staff”), the Office of the Public Counsel (“Public Counsel”), Midwest Gas User’s Association (“MGUA”), Jackson County and Riverside (“JACOMO/Riverside”) and Missouri Gas Energy (“MGE” or “Company”), all of the parties to Case No. GR-2001-292, pursuant to §393.140(8) RSMo, and stipulate and agree as follows:
	1.     By its Report and Order issued in MGE’s most recent general rate proceeding (Case No. GR-2001-292) on July 5, 2001, effective July 15, 2001, the Missouri Public Service Commission (“Commission”), among other things, approved a Second Revised Stipulation and Agreement.
	2.     Paragraph 3 of said Second Revised Stipulation and Agreement provides as follows:

The Staff, Public Counsel, and MGE agree, and MGUA and JACOMO/Riverside agree not to oppose, that, commencing during the fiscal year which began July 1, 1998, and continuing at least through the effective date of the new rates resulting from MGE’s next general rate proceeding, MGE will use a five-year average (when five years of information is available; prior to that time the average of the number of years of available information will be used) for determining the unrecognized net gain/loss to be amortized over five years in calculating MGE’s direct FAS 87 and FAS 106 costs for financial report purposes.  This paragraph concerns costs associated with post-retirement benefits, including pension and non-pension benefits (FAS 87 and FAS 106), and reflects MGE’s continued willingness to agree to the recommendation made by Staff witness Williams at page 28, line 17 through page 29, line 4 of his direct testimony in Case No. GR-98-140, et al., regarding the financial reporting of unrecognized net gains/losses.  The Staff, Public Counsel, and MGE also agree that in the event that in any given year the amount of the amortization of the unrecognized net gain/loss determined under the agreed-to methodology described above is less than the minimum amortization required under FAS 87 or FAS 106, then the amortization for such year shall be the minimum amortization required under FAS 87 and/or FAS 106.

	3.     This Stipulation and Agreement concerns the language of the last sentence of said paragraph 3 which is highlighted above in bold print.
	4.     At the time said Second Revised Stipulation and Agreement was entered into among the parties to Case No. GR-2001-292, the Staff, Public Counsel and MGE did not anticipate that this language would conflict with their intent to amortize (recognize) gains and losses under FAS 87 and FAS 106 by using a five (5) year average of the Unrecognized Net (Gain)/Loss balance and then amortizing the average balance over five (5) years for gain/loss recognition under FAS 87 and FAS 106.
	5.     Subsequently, MGE has been notified by its actuary that recognition of the minimum amortization, as described in FAS 87, requires that the “beginning of the year” balance of Unrecognized Net (Gain)/Loss be used in calculating the minimum amortization.  However, using the beginning of the year balance would be in direct conflict with the agreed-to method of using a five (5) year average balance for the most recent five (5) year period.  The Staff had proposed the five year average balance because, in the Staff’s opinion, it results in a significant reduction in the annual volatility (fluctuation in annual amounts) in FAS 87 and FAS 106 expense results.
	6.     MGE, like other Missouri utilities, has experienced a significant reduction in the market value of its pension fund assets as a result of the depressed stock prices in 2001 and 2002.  The reduction in the market value of the assets and lower investment earnings has resulted in a significant Unrecognized Net Loss balance for MGE as of January 1, 2002.  If MGE’s pension and OPEB’s cost for 2002 are calculated using this beginning of the year Unrecognized Net Loss balance, as would be required under the minimum amortization language identified above, MGE’s pension and OPEB’s expense will be significantly higher than if the agreed-to-method of using a five-year average of the Unrecognized Net (Gain)/Loss balance were used as intended by the Staff and other parties.
	7.     In order to remedy this situation the undersigned, parties stipulate and agree as follows:

The Staff, Public Counsel, and MGE agree, and MGUA and JACOMO/Riverside agree not to oppose, that, commencing during the fiscal year which began July 1, 1998, and continuing at least through the effective date of the new rates resulting from MGE’s next general rate proceeding, MGE will use a five-year average (when five years of information is available; prior to that time the average of the number of years of available information will be used) for determining the unrecognized net gain/loss to be amortized over five years in calculating MGE’s direct FAS 87 and FAS 106 costs for financial report purposes.  This paragraph concerns costs associated with post-retirement benefits, including pension and non-pension benefits (FAS 87 and FAS 106), and reflects MGE’s continued willingness to agree to the recommendation made by Staff witness Williams at page 28, line 17 through page 29, line 4 of his direct testimony in Case No. GR-98-140, et al., regarding the financial reporting of unrecognized net gains/losses.  
	8.	In effect, by this Stipulation and Agreement, the undersigned parties have agreed, subject to Commission approval, to eliminate the last sentence from paragraph 3 of the Second Revised Stipulation and Agreement in Case No. GR-2001-292.  In all other respects, the undersigned parties affirm and ratify said Second Revised Stipulation and Agreement.  In addition, MGE agrees to follow FAS 71 by recognizing as current year expense the amount calculated in accordance with specified regulatory treatment.
	WHEREFORE, the undersigned parties respectfully request the Commission to issue its order approving this Stipulation and Agreement pursuant to §393.140(8), thereby conforming MGE’s prescribed accounting treatment for unrecognized net gain/loss amounts related to pension and non-pension post-retirement benefits with the intent of the Staff, Public Counsel and 

MGE in Case No. GR-2001-292.
				
		Respectfully submitted,

/s/ Douglas E. Micheel_________________		/s/ Thomas R. Schwarz, Jr._____________
Douglas E. Micheel 	MBE#38371			Thomas R. Schwarz, Jr.     MBE#29645
Senior Public Counsel					Deputy General Counsel
Office of the Public Counsel				Missouri Public Service Commission
P.O. Box 7800						P.O. Box 360
Jefferson City, MO 65102				Jefferson City, MO 65102
573/751-5560						573/751-5239
FAX: 573/751-5562					FAX: 573/751-9285
e-mail: dmicheel@services.state.mo.us		e-mail: tschwarz@mail.state.mo.us

ATTORNEY FOR THE OFFICE			ATTORNEY FOR THE STAFF OF THE
OF THE PUBLIC COUNSEL			MISSOURI PUBLIC SERVICE COMMISSION

/s/ Stuart Conrad by RJH_______________		/s/ Robert J. Hack____________________
Stuart Conrad		MBE#23966			Robert J. Hack		MBE#36496
1209 Penntower Center				3420 Broadway
3100 Broadway					Kansas City, MO 64111
Kansas City, MO 64111				816/360-5755
816/753‑1122						FAX: 816/360‑5536
FAX: 816/756‑0373					e-mail: 
e-mail: 

ATTORNEY FOR MIDWEST GAS			ATTORNEY FOR 
USERS’ ASSOCIATION				MISSOURI GAS ENERGY

/s/ Jeremiah Finnegan by RJH____________
Jeremiah Finnegan	MBE#18416
1209 Penntower Center
3100 Broadway
Kansas City, MO 64111
816/753-1122
FAX: 816/756-0373

ATTORNEY FOR JACKSON
COUNTY AND RIVERSIDE

CERTIFICATE OF SERVICE

I hereby certify that copies of the foregoing have been mailed, hand-delivered, transmitted by facsimile or emailed to all counsel of record this 25th day of July, 2002.

							/s/ Thomas R. Schwarz, Jr.

							_______________________________