20261027Decision Memo.pdf

DECISION MEMORANDUM
TO: COMMISSIONER LODGE
COMMISSIONER HAMMOND
COMMISSIONER HARDIE
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM: SEUNGJAE LEE, COMMISSION STAFF
KELSEA E. ROSS,DEPUTY ATTORNEY GENERAL
DATE: OCTOBER 27, 2026
SUBJECT: IN THE MATTER OF INTERMOUNTAIN GAS COMPANY'S TARIFF
ADVICE REGARDING REVISIONS TO SECTION C OF GENERAL
SERVICE PROVISIONS; TARIFF ADVICE NO. INT-TAG-26-03.
On September 30, 2026, Intermountain Gas Company ("Company") filed Tariff Advice
No. INT-TAG-26-03 ("Tariff Advice") requesting to revise Section C of its General Service
Provisions, Installation and Extension of Natural Gas Mains, and Services for Residential and
Commercial Customers. Tariff Advice at 1. The Company's Tariff Advice proposes updating the
Allowable Investment Factors ("AIF") and the Service Line Cost per Foot ("SLCPF") and
removing the construction overhead rate. Id. at 1-2. The Company requests that these revisions
be approved by November 1, 2026, with an effective date of December 1, 2026. Id. at 2.
On October 14, 2026, after discussing the construction overhead rate with Staff, the
Company submitted an amended Tariff Advice("Amended Tariff Advice")to include the updated
construction overhead rate of 11.31% in accordance with Commission Order No. 34735.
Amended Tariff Advice at 1.
STAFF REVIEW
Staff reviewed the proposed updates in the Tariff Advice and the Amended Tariff Advice
and believes the methods used to update Section C are consistent with the methods approved in
Commission Order No. 34735 and that inputs driving the updated amounts are reasonable. Staff
recommends that the Commission approve the revised tariff sheet in the Amended Tariff Advice
reflecting updates to the AIF, the SLCPF, and the construction overhead rate, with an approval
date of November 1, 2026, and an effective date of December 1, 2026.
DECISION MEMORANDUM - 1 - OCTOBER 27, 2026

The Company is required by Commission Order No. 34735 to file an annual tariff advice
to update the AIF,the SLCPF,and the construction overhead rate by October 1,beginning in 2021.
Staff reviewed the Company's workpapers and examined the method and the changes in inputs
driving the change in the amounts for the three different factors. Staff believes that the Company's
methods for updating AIF and SLCPF in the Tariff Advice and the construction overhead rate in
the Amended Tariff Advice are consistent with the methods approved in Commission Order No.
34735.
As summarized in Table No. I below, Staff calculates that the Company's proposed AIFs
for both residential and commercial service line extensions increased by 16.1% and 7.2%,
respectively, when compared to current authorized rates. For residential and commercial main
line extensions, Staff calculates that the proposed AIF increased by 26.0% and 16.2%,
respectively. Staff believes the main driver of the increase is higher line extension embedded costs
in base rates. The embedded costs were updated with the base rates authorized in the last general
rate case through Order No. 36889. For residential and commercial service line extensions, Staff
calculates that the line extension embedded costs increased by 30.4% and 20.2%, respectively.
Regarding the residential and commercial main line extension, Staff calculates that the embedded
costs increased by 41.8% and 30.7%, respectively.
The proposed SLCPF is based on actual costs incurred over three years from 2022 through
2024. Amended Tariff Advice Attachement No. 3 at 5. Staff calculates that the cost increased by
16.9% from$19.75 to $23.08, as shown in Table No. 2 below. Staff believes that the major inputs
driving the increase were related to nationally rising inflation rate that began in 2022 and that this
inflation has led to the increase in contract service/consulting, and engineering and supervision
costs associated with capital additions due to growth. Specifically, the average cost per foot for
service lines in 2022 was $21.38, compared to $15.71 in 2021. Case No. INT-TAG-25-03 Tariff
Advice Attachment No. 3 at 5.
In the initial filing,the Company proposed removing the construction overhead rate, given
the time lag between the overhead rate's calculation date and its effective date. Tariff Advice at
2. The Company explained that it calculates the construction overhead rate at the beginning of the
calendar year; however, the approved overhead rate typically becomes effective at the end of the
year. Id. The Company indicated that it is able to use the most current construction overhead rate
in its line extension cost estimates by proposing the removal of the construction overhead rate. Id.
DECISION MEMORANDUM - 2 - OCTOBER 27, 2026

However, Staff believes the removal is not consistent with the methods approved in
Commission Order No. 34735. After discussing with Staff,the Company filed the Amended Tariff
Advice that included the 11.31% construction overhead rate. Amended Tariff Advice at 1. The
rate is based on actual costs incurred over the past year, as per the overhead rate workpaper
provided by the Company to Staff in email communications. Staff calculates that the inputs used
to determine the construction overhead rate resulted in the rate that is 2.8% lower, compared to
last year's annual update. Staff identified that the inputs used to determine all three factors are
reasonable and conform to Commission Order No. 34735. Additionally, the Company indicated
that it will file a new tariff advice to update the overhead rate during the Company's normal
schedule sometime after the beginning of 2027. Id.
Table No. 1: AIF Comparison
Allowable investment factors ($/therm)
Customer Service Main Combined
Type Current Proposed Change Current Proposed Change Current Proposed Change
Residential 0.694 0.806 16.1% 0.846 1.066 26.0% 1.540 1.872 21.6%
Commercial 0.516 0.553 7.2% 0.629 0.731 16.2% 1.145 1.284 12.1%
Table No. 2: SLCPF and Construction Overhead Rate Comparison
Current Proposed Change
Service Line Cost per Foot($) 19.75 23.08 16.9%
Construction Overhead Rate (%) 11.63 11.31 -2.8%
STAFF RECOMMENDATION
Staff recommends that the Commission approve the revised Section C tariff sheet
submitted in the Amended Tariff Advice reflecting updates to the AIF, the SLCPF, and the
construction overhead rate, as filed, with an approval date of November 1, 2026, and an effective
date of December 1, 2026 .
DECISION MEMORANDUM - 3 - OCTOBER 27, 2026

COMMISSION DECISION
Does the Commission wish to authorize the Company's proposed revisions and the revised
Section C tariff sheet submitted in the Amended Tariff Advice, as filed, with approval date of
November 1, 2026, and an effective date of December 1, 2026?
oi�q
Seungjae Lee
Commission Staff
I:\Utility\UDMEMOS\INT-TAG-26-03 Decision Memo.docx
DECISION MEMORANDUM - 4 - OCTOBER 27, 2026