20060821_1650.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEG AL
FROM:DONOVAN E. WALKER
DATE:AUGUST 24, 2006
SUBJECT:CASE NO. INT -06-4, INTERMOUNTAIN GAS COMPANY'S 2006 PGA
On August 16, 2006, Intermountain Gas Company filed its annual Purchased Gas
Cost Adjustment (PGA) Application with the Commission requesting authority to place new rate
schedules in effect as of October 1 , 2006 that will decrease its annualized revenues by $1.
million (.5%). Application at 2. The PGA mechanism is used to adjust rates to reflect changes
in costs for the purchase of natural gas from suppliers, including transportation, storage, and
other related costs of acquiring natural gas. See Order No. 26019. Intermountain s earnings will
not be decreased as a result of the proposed changes in prices and revenues. Application at 2.
The Company requests that its Application be processed by Modified Procedure. Application at
THE APPLICATION
With this Application, Intermountain Gas seeks to pass through to each of its
customer classes a change in gas related costs resulting from: (1) an increase in costs billed to
Intermountain pursuant to the general rate cases filed by Northwest Pipeline Corporation (NPC)
and Gas Transmission Northwest Corporation (GTN), (2) benefits included in Intermountain
firm transportation and storage costs resulting from the Company s management of its storage
and firm capacity rights on pipeline systems including NPC and GTN, (3) a decrease in
Intermountain s Weighted Average Cost of Gas (W ACOG), (4) an updated customer allocation
of gas related costs pursuant to the Company s PGA provisions, and (5) the inclusion of
temporary surcharges and credits for one year relating to gas and interstate transportation costs
from the Company s deferred gas cost account. Application at 3-
DECISION MEMORANDUM
According to its customer notice, if its Application is approved as filed, all residential
and commercial customer s unit prices will be essentially unchanged for natural gas used during
this next year and the Company s total net revenue will decrease by approximately $1.6 million
5%). The Company stated that despite increases in other energy prices, such as crude oil's 30%
increase during the past year, it expects to be able to manage its natural gas purchases such that it
will not need to raise customer prices for this next winter season.
Intermountain Gas proposes decreasing the W ACOG from the currently approved
$0.73219 per therm to $0.72400 per thermo Application at 5. The Company states that the
proposed W ACOG includes the benefits to Intermountain s customers generated by the
Company s management of significant natural gas storage assets whereby gas is procured during
the traditionally lower priced summer season for withdrawal and use during the winter when
prices would otherwise be substantially higher. Application at 6. The Company also reports that
natural gas prices have been moderated by: historically high levels of natural gas stored in the
nation s inventory; natural gas production which has come back online in the Gulf of Mexico
following Hurricane Katrina; the moderate outlook for the upcoming hurricane season; and price
induced increases in domestic natural gas rig counts and production. Application at 5-6. The
Company states that although current commodity futures prices dictate the use of $0.72400
W ACOG, it continues to remain vigilant in monitoring natural gas prices and is committed to
come before the Commission prior to this winter s heating season to amend these proposed
prices, if the forward prices materially deviate from the $0.72400 per thermo Application at 6.
The Company proposes to include various surcharges, credits, and adjustments in its
proposed prices. Application at 7-8. Intermountain has included the elimination of temporary
surcharges and credits pursuant to last year s PGA, Case No. INT-05-2. Application at 7
Exhibit 4, L. 29. The Company includes a fixed cost collection adjustment pursuant to the
provisions of its PGA tariff which provides that proposed prices will be adjusted for updated
customer class sales volumes and purchased gas cost allocations. Application at 7, Exhibit 5 , L.
24. The Company proposes to pass back to customers the benefits generated from its capacity
release agreements through the inclusion of a $3.5 million credit. Application at 7, Exhibit 7.
Further, the Company proposes to allocate deferred gas costs from its Account No. 186 balance
to customers through temporary price adjustments effective during the 12-month period ending
September 30, 2007 as follows: (1) fixed gas costs credit of $3.1 million attributable to
DECISION MEMORANDUM
collection of interstate pipeline capacity costs and the true-up of expense issues previously ruled
on by the Commission; and (2) deferred gas cost debits of $14.1 million attributable to variable
gas costs since September 1 , 2005. Application at 7-8. Intermountain proposed to collect the
balances via the per therm surcharges and credits. Id.
The Company states that a straight cents-per-therm price decrease was not utilized
for the T-l tariff. Absent Williams ' firm transportation TF-l commodity charge, the proposed
decrease in the T -1 tariff is fixed cost related, and since there are no fixed costs recovered in the
tail block of the T -1 tariff, a cents-per-therm decrease was made only to the first two blocks of
the tariff. Application at 8. Likewise, since the proposed increase to the T -2 tariff demand
charge is fixed cost related, a cents-per-therm increase was made to the T-2 demand charge. Id.
Additionally, the proposed decrease to the T-2 commodity charge incorporates the decrease in
the Williams' firm transportation TF-l commodity charge. Id.
The Company states that customers have been notified about the Application through
a customer notice and a press release. Id. Intermountain Gas requests that this matter be handled
under Modified Procedure pursuant to Rules 201-204 of the Commission s Rules of Procedure.
Id. at 9.
STAFF RECOMMENDATION
Since the Company s Application requests a nominal decrease in the W ACOG, with
relatively stable customer pricing relative to last season, Staff recommends that it would be
appropriate to process this case by Modified Procedure, as requested by the Company, with
comments due by September 20, 2006.
CO MMISSI ON D ECISI
1. Does the Commission preliminarily find that the public interest may not require a
hearing to consider the issues presented in this case, and that issues raised by the Company
filing may be processed by Modified Procedure?
2. Does the Commission wish to schedule a public hearing(s) for this matter?
(;)4
M:INT-O6-04 dw
DECISION MEMORANDUM