20090824_2683.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF

FROM: KRISTINE SASSER
DEPUTY ATTORNEY GENERAL

DATE: AUGUST 21, 2009

SUBJECT: INTERMOUNTAIN GAS COMPANY’S 2009 PGA,
CASE NO. INT-G-09-02

On August 19, 2009, Intermountain Gas Company filed its annual Purchased Gas
Cost Adjustment (PGA) Application requesting authority to decrease its annualized revenues by
$72.4 million. Application at 2. The PGA mechanism is used to adjust rates to reflect annual
changes in Intermountain’s costs for the purchase of natural gas from suppliers – including
transportation, storage, and other related costs. See Order No. 26019. Intermountain’s earnings
will not be decreased as a result of the proposed changes in prices and revenues. The Company
requests that its Application be processed by Modified Procedure and that its rates become
effective on October 1, 2009.
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
Intermountain due to higher prices charged by Northwest Pipeline GP (“Northwest” or
“Northwest Pipeline”) offset by a small decline in contract volumes on Northwest; (2) an
increase in costs from Intermountain’s “upstream” Canadian pipeline suppliers; (3) a decrease in
the Company’s projected costs relating to its storage contracts; (4) a decrease in Intermountain’s
Weighted Average Cost of Gas, or “WACOG”; (5) an updated customer allocation of gas-
related costs pursuant to the Company’s Purchased Gas Cost Adjustment provision; (6) the
inclusion of temporary surcharges and credits for one year relating to gas and interstate
transportation costs from Intermountain’s deferred gas cost accounts; and (7) benefits included
DECISION MEMORANDUM 2
in Intermountain’s firm transportation and storage costs resulting from Intermountain’s
management of its storage and firm capacity rights on pipeline systems. Application at 3-4.
Intermountain also seeks with this Application to eliminate the temporary surcharges
and credits included in its current prices during the past 12 months, pursuant to Order Nos.
30649 and 30676. The aforementioned changes would result in an overall price decrease to
Intermountain’s customers.
Intermountain Gas proposes decreasing the WACOG from the currently approved
$0.67482 per therm to $0.49600 per therm. The Application maintains that weather adjusted
demand for natural gas has diminished, driven by the downturn in our regional and national
economy. At the same time, natural gas supplies are plentiful. This current imbalance between
supply and demand has driven down the near term prices for natural gas. Application at 6.
The Company asserts that the proposed WACOG includes the benefits resulting from
Intermountain’s storage of significant amounts of natural gas procured during the summer season
for use during the winter when market prices are normally higher. Additionally, and in an effort
to further stabilize prices paid by customers during the upcoming winter period, Intermountain
has entered into various hedging agreements to lock-in the price for significant portions of its
underground storage and other winter “flowing” supplies. Application at 6.
Although current commodity futures prices dictate the use of a $0.49600 per therm
WACOG, the Company continues to remain vigilant in monitoring natural gas prices. If forward
prices for natural gas materially deviate from $0.49600 per therm, the Company is committed to
return to the Commission prior to this winter’s heating season to amend these proposed rates.
Pursuant to Order No. 30649, Intermountain included temporary surcharges and
credits in its October 1, 2008, and November 15, 2008, prices for the principal reason of
collecting or passing back to its customers deferred gas cost charges and benefits. Exhibit No. 4,
Line 26 reflects the elimination of these temporary surcharges and credits.
The Company proposes to allocate deferred gas costs from its Account No. 186
balance to its customers through temporary price adjustments to be effective during the 12-
month period ending September 30, 2010, as follows: (1) fixed-gas costs credit of $741,556
attributable to the collection of interstate pipeline capacity costs, the true-up of expense issues
previously ruled on by the Commission, and mitigating capacity release credits generated from
the release of Intermountain’s pipeline capacity; (2) deferred gas cost amounts of $12.7 million
DECISION MEMORANDUM 3
attributable to variable gas costs since October 1, 2008; and (3) deferred gas costs related to Lost
and Unaccounted for Gas which results in a net per therm decrease to both sales and
transportation customers. Application at 8.
Intermountain states that a straight cents-per-therm price decrease was not utilized for
the LV-1 tariff. The proposed decrease is fixed-cost related and, because there are no fixed costs
recovered in the tail block of the LV-1 tariff, a cent per therm increase relating to fixed costs was
made only to the first two blocks of the LV-1 tariff. Each block of the proposed T-3 and T-4
tariffs include a uniform cents-per-therm decrease for unaccounted for gas recovery. Id.
Intermountain asserts that customers have been notified regarding Intermountain’s
Application through a customer notice and press release. Id. Intermountain states that the
proposed overall price changes reflect a just, fair, and equitable pass-through of changes in gas-
related costs to Intermountain’s customers. Finally, the Company requests that this matter be
handled under Modified Procedure pursuant to Rules 201-204 of the Commission’s Rules of
Procedure and that its rates become effective on October 1, 2009.
STAFF RECOMMENDATION
Staff recommends that the case be processed by Modified Procedure with a 14-day
comment period.
COMMISSION DECISION
1. Does the Commission wish to process this case under Modified Procedure?
2. Does the Commission wish to implement a 14-day comment period?

M-INT-G-09-02_ks