20250530Direct Blattner.pdf

Preston N. Carter, ISB No. 8462
Megann E. Meier, ISB No. H 948
GIVENS PURSLEY LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
Office: [phone]
Fax: [phone]
[e-mail]
[e-mail]
Attorneys for Intermountain Gas Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION Case No. INT-G-25-02
OF INTERMOUNTAIN GAS COMPANY
FOR THE AUTHORITY TO INCREASE
ITS RATES AND CHARGES FOR
NATURAL GAS SERVICE IN THE STATE
OF IDAHO
DIRECT TESTIMONY OF LORI BLATTNER
INTERMOUNTAIN GAS COMPANY
MAY 30,2025

INTRODUCTION
1 Q. Please state your name and business address.
2 A. My name is Lori Blattner, and my business address is 555 South Cole Road, Boise, ID
3 83707.
4 Q. What is your occupation?
5 A. I am the Director of Regulatory Affairs for Intermountain Gas Company ("Intermountain"
6 or"Company") and Cascade Natural Gas Corporation("Cascade").
STATEMENT OF QUALIFICATIONS
7 Q. Please summarize your educational and professional experience.
8 A. I graduated from the University of Idaho in 1993 with a Bachelor of Science degree in
9 Agricultural Economics. I joined Intermountain in 1997 as a Regulatory Analyst and was
10 responsible for cost of service, rate design, and weather normalizations, as well as other
11 regulatory issues. I was promoted to Manager, Energy Efficiency and Regulatory Process
12 in 2017. In that role, I was responsible for cost of service and weather normalization as
13 well as launching Intermountain's Energy Efficiency program. I was promoted to Director
14 Regulatory Affairs for Intermountain in 2019 and to my current position in 2021. In my
15 current role, I am responsible for all regulatory activity in Idaho, Oregon, and Washington,
16 as well as the Energy Efficiency programs for both Intermountain and Cascade.
PURPOSE OF TESTIMONY
17 Q. Please summarize your testimony.
18 A. I first discuss items the Company agreed to address as part of the Stipulation and
19 Settlement in its last general rate case. I then introduce the Company's capital additions
20 included in this proceeding. Next, I provide an explanation of the Company's proposals to
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I mitigate regulatory lag including pro forma plant additions and end of period rate base
2 treatment. Finally, I discuss House Bill 329 and the method the Company proposes to
3 comply with its terms.
4 Q. Are you sponsoring any exhibits to your direct testimony?
5 A. Yes.
6 Exhibit 22 Approval Authorization Policy- 2025
7 Exhibit 23 2023 through 2024 plant in service
8 Exhibit 24 2025 Pro Forma plant in service
9 Exhibit 25 HB 329
RESOLUTION OF ITEMS FROM LAST GENERAL RATE CASE
10 Q. Were there items the Company agreed to address prior to filing this case as part of
11 the Settlement and Stipulation in Case No. INT-G-22-07?
12 A. Yes. In the Stipulation and Settlement in Case No. INT-G-22-07 that was approved in
13 Order No. 35836, Intermountain agreed to address the following three items:
14 1) Provide information regarding allocation methodology
15 2) Discuss protocols for providing access to parent company or affiliate company
16 information
17 3) Conduct a workshop regarding weather normalization methodology
18 Q. What was the agreement regarding providing information regarding allocation
19 methodology?
20 A. On page 4 of the Stipulation and Settlement, Intermountain agreed to the following:
21 During the Company's next general rate case, the Company will provide
22 information regarding the allocation of costs and expenses from its parent company
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I to Intermountain, including testimony documenting and describing the
2 methodologies used to allocate expenses to the Company from the Company's
3 parent company or from any other affiliate. This information will be provided
4 through workpapers detailing the calculations for the allocation factors used, and
5 demonstrating the costs being allocated to the Company for each allocation factor.
6 Intermountain will provide this information to Staff within seven(7) days of filing
7 the Application and to any intervening Party, upon request, within seven (7) days of
8 a Commission order granting intervention to such Party.'
9 Q. How has the Company addressed this item?
10 A. The direct testimony of Niki Ogami outlines the allocation methodology of costs and
11 expenses from MDU Resources Group, Inc. ("MDU Resources") and the MDU Utilities
12 Group companies. In addition, workpapers will be submitted within seven days of filing of
13 this general rate case to support the allocations.
14 Q. What was the agreement regarding parent company/affiliate company information?
15 A. On Page 4 of the Stipulation and Settlement, Intermountain agreed to the following:
16 Prior to filing the Company's next general rate case, the Company and Staff agree
17 to meet to discuss protocols for providing access to relevant information of the
18 Company's parent company, or any affiliate that engages directly in any transaction
19 with the Company which results in expenses being incurred, allocated, or otherwise
20 attributed to the Company as provided by Idaho Code § 61-610(1).2
'Stipulation and Settlement,INT-G-22-07
2 Ibid.
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I Q. How has the Company addressed this item?
2 A. The Company met with Staff on May 19, 2025 to discuss protocols for providing access to
3 parent company/affiliate company information.
4 Q. What was the agreement regarding a weather normalization methodology workshop?
5 A. On Page 5 of the Stipulation and Settlement, Intermountain agreed to the following:
6 Prior to filing the Company's next general rate case, the Company and Staff agree
7 to hold a workshop to discuss methodology for weather normalization to be used in
8 the Company's next general rate case.3
9 Q. How has Intermountain addressed this item?
10 A. As outlined in the direct testimony of Min Park, the Company and Staff met on several
11 occasions to discuss weather normalization. The final models that resulted from that
12 collaborative process were used for weather normalization in this case.
CAPITAL ADDITIONS PRESENTED IN THIS PROCEEDING
13 Q. What is the approval process for Funding Projects?
14 A. Capital additions and changes are planned through the annual budget process using
15 PowerPlan("PP"). The budget process begins with an individual (originator) creating
16 specific funding projects in PP for all new projects to be included in the five-year capital
17 budget. Funding projects are used to hold the capital budget estimates and will be linked to
18 the capital work orders to be created when actual costs commence. A Fixed Asset
19 Financial Analyst reviews the funding projects for proper setup. If the project is not
20 considered a capital expenditure as it was submitted, it is rejected and sent back to the
3 Ibid.
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I originator for revision, cancelled, or it is moved to O&M Expense. After the review has
2 been completed for all projects, another Fixed Asset Financial Analyst will add appropriate
3 overheads.
4 Once all the funding projects have been updated with expenditures, various
5 Company operating managers generate reports to show estimated expenditures and
6 justification for each project. The managers perform the review of funding projects and see
7 that any necessary changes are made to the estimate and that the project is supported.
8 Reports are then generated by the budgeting personnel for review and approval by the
9 Directors and Vice Presidents of the MDU Utilities Group. Any final budget changes are
10 made, and the budgets are then presented to the Utility Group's Chief Utility Officer for
11 review and approval. The final Utility Group budget is then presented to the MDU
12 Resources CEO for review and approval. If the budget is approved by the MDU Resources
13 CEO, the final review and approval of the total budget amount occurs with the
14 Intermountain Board of Directors. At each stage of the review and approval process a
15 project(or projects) can be challenged for appropriateness and removed from the capital
16 budget or moved to another year within the five-year budget. The addition or removal of
17 projects can also be impacted by other factors such as available capital and/or borrowing
18 capacity.
19 After final approval, an approved budget version is created in PP and locked for
20 entry. Project managers are notified that the budget has been approved and the funding
21 projects are open for work order creation. Prior to incurring any capital expenditures, a
22 capital work order is created and must be approved in PP. Projects are monitored and
23 updated throughout the year as part of the review process and to monitor that projects are
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I completed on time and within the approved budget. Please see Exhibit No. 22 for
2 Intermountain's Approval Authorization Policy. All work orders undergo such
3 authorization process.
4 Q. Please provide a summary of the other witnesses who provide supporting testimony
5 related to capital additions in this proceeding.
6 A. Patrick Darras and Eric Martuscelli provide detailed discussions of actual major plant
7 projects placed in service since the 2022 test year in the Company's last general rate case.
8 A complete list of all plant that has been placed in service in 2023 and 2024 is included as
9 Exhibit No. 23. Patrick Darras, Eric Martuscelli, and Tammy Nygard describe the major
10 pro forma plant projects that are planned to be placed in service in 2025. A complete list of
11 all plant that is planned to be placed in service in 2025 is included as Exhibit No. 24. The
12 list included in Exhibit No. 24 provides the estimated in service date for each funding
13 project that will be placed in service during 2025. The in service dates demonstrate that the
14 plant is planned to be in service and used and useful prior to the time that rates are planned
15 to be effective on January 1, 2026. Table 1 below summarizes the plant additions described
16 throughout testimony.
17 Table 1: Plant Additions
18
2023 -2024 Historic Projects Specific Projects Programmatic Total
Projects
2023-2024 Major Projects over$1M
Testimony of Patrick C Darras $ 43,285,106 $ 28,691,913 $ 71,977,018
Testimony of Eric P Martuscelli 9,226,924 50,604,597 59,831,521
Total 2023-2024 Major Projects 52,512,030 79,296,510 131,808,539
2023-2024 Minor Projects
Total 2023-2024 Minor Projects 18,982,993 5,560,610 24,543,603
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Total 2023-2024 Historic Projects $ 71,495,023 $ 84,857,120 $ 156,352,142
2025 Pro Forma Projects Specific Projects Programmatic Total
Projects
2025 Major Projects over$1M
Testimony of Patrick C Darras $ 31,925,725 $ 13,251,580 $ 45,177,305
Testimony of Eric P Martuscelli 2,655,048 25,259,183 27,914,231
Total 2025 Major Projects over$1M 34,580,773 38,510,763 73,091,536
2025 Major Projects over$200K
Testimony of Patrick C Darras $ 10,662,516 $ 3,422,267 $ 14,084,783
Testimony of Eric P Martuscelli 2,147,266 2,447,866 4,595,132
Testimony of Tammy J Nygard 1,310,679 - 1,310,679
Total 2025 Major Projects over$200K 14,120,461 5,870,133 19,990,594
2025 Minor Projects
Total 2025 Minor Projects 3,980,479 1,325,029 5,305,509
Total 2025 Pro Forma Projects $ 52,681,713 $ 45,705,925 $ 98,387,638
1 Q. How are capital additions grouped?
2 A. In all of the testimony related to plant in service, the Company has grouped the projects
3 into consistent categories for ease of review. The witnesses identified above discuss 1)
4 Specific projects, which are clearly defined, identifiable, or discrete investments, and 2)
5 Programmatic projects which are made according to a schedule,plan, or method and are
6 generally investments that are necessary to provide safe,reliable service to Idaho
7 customers.
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MITIGATION OF REGULATORY LAG
1 Q. Why has the Company included pro forma plant additions in this case?
2 A. As outlined in the direct testimony of Nicole Kivisto, the Company has struggled to earn
3 its allowed rate of return since 2019. The Company's ongoing significant capital
4 investments that are necessary to offer safe and reliable service to both existing customers
5 and those seeking natural gas service, and the associated increase in depreciation expense
6 has put downward pressure on the Company's actual rate of return. As added customers
7 have maximized capacity on the system, Intermountain is increasingly making investments
8 to guarantee reliability of service. These reliability investments do not generate added
9 revenue but are essential to the safe and reliable operation of the system.
10 The rates that went into effect on July 1, 2023, at the conclusion of the Company's
11 last general rate case (Case No. INT-G-22-07), did not slow the erosion in the Company's
12 actual rate of return because of the impact of rapid rate base growth coupled with the
13 traditional average of monthly averages ("AMA")rate base method. Using a traditional
14 AMA approach to rate base in a time of rapid plant growth means that a significant portion
15 of the plant that goes into service in the test year is not fully embedded in rates until the
16 next general rate case. This perpetual regulatory lag makes it impossible for a utility to
17 earn its authorized rate of return in a cycle of rapid rate base growth.
18 Q. How does the Company propose to mitigate this issue of regulatory lag?
19 A. Intermountain is proposing the use of end of period("EOP")treatment for the test year rate
20 base through December 31, 2024. In addition, the Company is seeking approval of pro
21 forma plant placed in service through year-end 2025 and the use of EOP treatment for that
22 resulting rate base as well. This proposal will ensure that plant placed in service up until
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1 the time that rates go into effect will be included in those rates. It will also embed all of the
2 plant that is determined to be prudent in base rates,unlike the AMA method which
3 requires a significant portion of plant to be held until the next general rate case for
4 collection, even though the plant investments were deemed prudent. The Company's
5 proposal provides a method to stem the precipitous decline in realized returns experienced
6 by the Company since 2019.
7 Q. Please provide an example of the difference between the average of monthly average
8 and end of period rate base treatments.
9 A. Certainly. To use 2024 as an example, the Company had approximately $74.5 million in
10 additions to plant in service. The AMA rate base treatment would result in an ending plant
11 rate base of approximately $971 million at December 31, 2024. Alternatively, EOP
12 treatment would result in $1.013 billion. Use of the traditional AMA rate base treatment
13 would mean that roughly $42 million in plant that was placed in service and used and
14 useful would not be included in rates until the Company's next general rate case.
15 Q. Were offsetting factors related to capital additions included in this proposal?
16 A. Yes. As described more fully in the testimony of Jacob Darrington, the Company included
17 new revenues related to customer growth, updated depreciation, and forecast retirements.
18 In addition, where plant investments may result in O&M savings, Intermountain has
19 included those savings as an offset to O&M expenses. All of these adjustments ensure that
20 an increase in base rates resulting from EOP treatment will be offset by the increase in
21 revenues due to customer growth and that potential cost reductions are considered and
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I included as an offset as well. These adjustments that the Company has made ensure that
2 the important matching principle is satisfied.
3 Q. Has Intermountain considered Commission Order No. 36438 issued in IPC-E-24-07
4 in formulating this proposal?
5 A. Yes, Intermountain did consider Order No. 36438 issued in Idaho Power's Case No. IPC-
6 E-24-07. The Company agrees with the Commission's inclusion of forecasted rate base in
7 that case and believes that it applies with equal force to Intermountain. The Company has
8 similarly requested EOP rate base treatment to offset the effects of regulatory lag.
9 Although the Company realizes the Commission did not approve the EOP request in Idaho
10 Power's most recent case, Intermountain believes that the impacts of regulatory lag, as
11 outlined above, are real, pressing, and should be addressed by the Commission. In
12 addition, the Commission noted that, "[a]s always," it was "open to considering requests
13 for additional riders, or other cost-recovery mechanisms as may be appropriate."4
14 Intermountain is open to the concept of a rider to address regulatory lag; however,
15 Intermountain's attempt to implement an infrastructure integrity management mechanism
16 was rejected by the Commission.5
17 Intermountain recognizes that the Commission has declined to address EOP rate
18 base as a mechanism to address regulatory lag. However, Intermountain submits that
19 regulatory lag is real and severe, and should be addressed either by moving to EOP rate
20 base treatment or through other mechanisms. Intermountain's history of under-earning
4 Order No.36438 at 6,IPC-E-24-07
5 Order No.34090,INT-G-17-07
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I provides persuasive evidence that regulatory lag should be addressed in the context of this
2 rate case.
3 Q. Does the use of EOP and matching revenues and expenses, fully remove regulatory
4 lag from this proceeding?
5 A. No. The Company is only proposing to include plant investments prior to the effective date
6 of this case. The Company must still control costs during the year rates are effective to try
7 and combat the regulatory lag associated with investments in 2026 and general inflation
8 that will occur. The Company's proposal only helps minimize regulatory lag in order to
9 give the Company a reasonable opportunity to earn its authorized rate of return.
PROPERTY TAX TREATMENT
10 Q. Please explain changes to Idaho state law regarding property tax collections by rate-
11 regulated utilities.
12 A. On March 27, 2025, the Governor signed into law House Bill 329. House Bill 329 is
13 provided as Exhibit No. 25. The bill changes the way rate-regulated gas companies, such
14 as Intermountain, are assessed property tax. Under the new law, a thermal energy tax of
15 $0.00329 per therm of natural gas sold to retail customers and$0.00041 per therm of
16 natural gas delivered to transport customers will be levied on the rate-regulated gas
17 company.
18 It also requires that by January 1, 2027, rate-regulated gas companies include the
19 billing for this tax as a line item on customer bills and that the Public Utilities Commission
20 "shall adjust the base tariff rates for customers to the extent those rates include recovery of
21 property taxes".
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I Q. Is Intermountain proposing an adjustment to property taxes in this case?
2 A. Yes. Because the Company's base rates include property taxes, to comply with this new
3 law Intermountain must remove the property taxes from base rates and include them as a
4 line item on bills by January 1, 2027. The Company has included an adjustment, detailed
5 in the direct testimony of Jacob Darrington, to remove test year property tax from base
6 rates. Intermountain is then proposing to include a new line item on customer bills going
7 forward that shows the statutory thermal energy tax as outlined in statute. The direct
8 testimony of Zachary Harris discusses the proposed tariffs including this revision.
CONCLUDING REMARKS
9 Q. Does this conclude your testimony?
10 A. Yes.
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