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DECISION MEMORANDUM TO: COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RON LAW LOU ANN WESTERFIELD RANDY LOBB DON HOWELL TERRI CARLOCK DAVE SCHUNKE DAN GRAVES ALDEN HOLM MICHAEL FUSS TONYA CLARK BEVERLY BARKER GENE FADNESS WORKING FILE FROM: LISA NORDSTROM DATE: MAY 24, 2001 RE: IN THE MATTER OF THE APPLICATION OF INTERMOUNTAIN GAS COMPANY FOR AUTHORITY TO DECREASE ITS RATES FOR SERVICE. CASE NO. INT-G-02-3. On May 23, 2002, Intermountain Gas Company filed its annual Purchased Gas Cost Adjustment (PGA) Application with the Commission for authority to place into effect on July 1, 2002, new rate schedules that will decrease its annualized revenues by $52.2 million. If its Application is approved, Intermountain states that customer rates will decrease on average by 24%. Because of changes in Intermountain's gas-related costs, Intermountain states that its earnings will not be affected as a result of the proposed decrease in prices and revenues. THE APPLICATON With its Application, Intermountain Gas seeks to pass through to each of its customer classes a decrease in gas-related costs resulting from: 1) a net decrease in costs for Intermountain's natural gas interstate transportation, 2) an updated customer allocation of gas-related costs pursuant to the Company's Purchased Gas Cost Adjustment provision, and 3) the inclusion of temporary surcharges and credits for one year relating to gas and interstate transportation costs from Intermountain's deferred gas cost account. Application at 3-4. According to its bill stuffer, Intermountain states that residential customers using natural gas for both space and water heating could experience an average annual decrease of $188 (24.2%). Those residential customers using natural gas for space heating only could experience an average annual decrease of $128 (21.8%). Moreover, commercial customers could experience an average annual decrease of $795 (25.6%). Intermountain proposes leaving the weighted average cost of gas (WACOG) at $0.35295 per therm, which is the same WACOG approved by the Commission last year in Case No. INT-G-01-3. Order No. 28783. The Company states that current market-based commodity prices support the continuance of the $0.35295 per therm WACOG to Intermountain's customers. However, due to the Company's vigilant management and participation in hedging transactions, customers will receive savings over the next 12-month period as compared to the $0.35295 per therm WAGOG. Application at 4-5. That said, natural gas future prices portend an upward trend for future PGA periods even though Intermountain does not believe that market fundamentals will support the high future prices now predicted. Id. at 5. Therefore, Intermountain believes that by allowing the WACOG to remain at the $0.35295 per therm level, a future price increase can be avoided or mitigated during the July 2003 PGA period (one year from now) by offsetting future increases with the savings generated by Intermountain's currently hedged supplies. Id. If circumstances so warrant, Intermountain would file an "out of period" PGA if natural gas prices decline substantially to a level that facilitates price stability for the future with the pass through of any deferred gas cost credits that may exist at the time. Id. The Company requests that this matter be handled under Modified Procedure pursuant to Rules 201-204 of the Commission's Rules of Procedure. Id. at 9. CUSTOMER NOTIFICTION & EFFECTIVE DATE The Company has informed Staff that all of its customers will have received individual notice (i.e., bill stuffers) of the proposed rate decrease by June 25, 2002. The Commission currently has decision meetings scheduled for June 24 and July 1, 2002 - the latter being the date requested by the Company for rates to become effective. Given these dates, it is difficult to envision a scenario where all customers will have received bill stuffers and had an opportunity to comment while still allowing time for the Commission to issue an order by the July 1, 2002 effective date requested by the Company. Rule 102 of the Information to Customers of Gas, Electric and Water Public Utilities Rules applies to customer notices of proposed rate changes. IDAPA 31.21.02.102. Subsection 102.01 states that each gas utility that applies for a tracker rate change "shall give to each customer a statement (customer notice) announcing the utility's application." These customer notices may be mailed to customers as bill stuffers over the course of a billing cycle or may be contained in additional comment pages to the customer's monthly bill. IDAPA 31.21.02.102.03. The purpose of Rule 102 is to encourage wide dissemination to customers of information concerning proposed rate changes for utility services, but not to create individual procedural rights for notice that would give rise to a due process or other procedural claim cognizable by the Commission. IDAPA 31.21.02.102.05. Procedural due process is satisfied when individuals are provided with notice and an opportunity to be heard. State v. Rhoades, 121 Idaho 63, 72 (1991). The opportunity to be heard must occur "at a meaningful time and in a meaningful manner" to satisfy the due process requirement. Sweitzer v. Dean, 118 Idaho 586, 573 (1990). The Company estimates that approximately 84% of customers will receive individual notice via bill stuffers as of June 19, 2002. Intermountain Gas further notes that customers have also received notice of the proposed rate increase through media outlets (newspaper, radio and television) and the Company's website. The Company has indicated that since a substantial portion of its customers will have received individual and media notice before the June 24th decision meeting, the Commission could set a comment deadline before that date to facilitate an order by July 1, 2002. Likewise, the Commission could establish a June 26th comment deadline and (re)schedule a decision meeting for June 27th so that an Order could be issued by July 1, 2002. To allow all customers an opportunity to receive individual notice and respond accordingly, the Commission could choose to suspend the Application through July 12, 2002 and establish a comment deadline on Thursday, June 24, 2002. The Commission may also wish to set an Intermountain Gas Reply Comment deadline of Wednesday, July 3, 2002 in anticipation of the July 8th decision meeting. If the Commission suspends the Application, Intermountain Gas requests that the Commission allow the Company to backdate its billing to collect the rates authorized in this proceeding effective July 1, 2002. COMMISSION DECISION 1. Does the Commission wish to process this case under Modified Procedure ? 2. How does the Commission wish to balance the need to provide an adequate comment period with the requested July 1, 2002 effective date? Some options available are: a. Set a comment deadline before the June 24th decision meeting to facilitate an order by July 1, 2002, even though some customers will not have received their bill stuffers yet. b. Establish a June 26th comment deadline and (re)schedule a decision meeting for June 27th so that an Order could be issued by July 1, 2002. c. Suspend the Application through July 12, 2002 and allow the Company to backdate its billing to collect the rates authorized in this proceeding effective July 1, 2002. The Commission could then establish a comment deadline on Thursday, June 24, 2002 and set an Intermountain Gas Reply Comment deadline of Wednesday, July 3, 2002 in anticipation of the July 8th decision meeting. d. As was done last year, suspend the Application and establish July 16, 2002 as the effective date of the order. Consistent with last year's PGA order, the Commission could then allow for meters read on or after that date to be pro-rated back to July 16th. In anticipation of the July 8th decision meeting, this would facilitate a comment deadline on Thursday, June 24, 2002 and an Intermountain Gas Reply Comment deadline of Wednesday, July 3, 2002. ___________________________ Lisa Nordstrom M: INTG0203_ln