SNEED.docx

September 11, 1997
Anne Sneed
Creative Process Engineering
315 W. Center Street, Suite 200
Pocatello, ID 83204-3243
RE:  Intermountain Gas Company
       ACME Manufacturing Co., Inc. & Allison Mills, Inc. - Filer, Idaho
Dear Anne:
Pursuant to our conversations and based on the information you provided by facsimile transmission dated July 28, 1997, Commission Staff met with Intermountain Gas Company (Skip Worthan, Dan McCallister, Mike McGrath) on Wednesday, August 13, 1997.  The information provided by you in relevant portion was as follows:
The clients. . .are two industrial firms in Idaho.  One is a manufacturer and the other a feedmill.  They are located across the street from each other. . .it is proposed that the feedmill and the manufacturer create a third business which is a partnership between the two firms.
[Based on our conversation it is my understanding that cogeneration is no longer being pursued but that the third business may function in the following manner:]
Purchase natural gas from IGI Resources by aggregating their natural gas requirements for their plant processes.  Together the two plants will meet the 200,000 therms per year minimum purchase requirements.  This business will simply purchase the gas and distribute the costs between the two plants.  There will be no mark-up nor profit made by the third business.  Transport of gas to the two plants will be done by Intermountain Gas using their current system of lines and meters.  Currently the manufacturer has five (5) separate gas meters providing gas to their processes.  Intermountain Gas already aggregates the gas distributed to these meters.  The feedmill has one meter which serves their processes.
Staff’s discussion with Intermountain Gas Company was focused on what impediments (if any) existed (IPUC Rule, Idaho statute or Company policy) to prevent the future aggregation of natural gas loads by ACME Mfg., a present Schedule T-1 customer, and Allison Feedmill, a Schedule GS-1 customer.  It is the understanding of Staff that ACME Mfg. because of changes in gas requirements may  may no longer be able to satisfy the 200,000 minimum therm requirements for the Schedule LV-1/T-1 tariff rates.  Aggregation of loads, if permitted, would allow ACME and Allison to qualify for the more favorable rates and supply opportunities available to LV-1/T-1 customers.  As reflected in your July 28 communique, it is your understanding that IGC objects to the aggregation of the mill and manufacturer’s natural gas requirements by the partnership on the basis that it is considered “submetering” and is not allowed.
IGC maintains that the proposed aggregation requires its explicit consent under Commission approved IGC General Service Provisions.  See attached IGC General Service Provisions Section A ¶¶ 6.3, 6.5.
As the two businesses are physically situated, the identified General Service Provisions are applicable and the Company may indeed withhold its consent.  It is the Company’s contention that under present cost of service allocations, studies which are used to allocate costs between customer classes and establish respective rates, the Company would fail to recover its full distribution costs if aggregation were permitted.  The Company’s position is therefore not without basis.  It remains to be seen, however, whether equity or fairness considerations in a time of natural gas industry restructuring would dictate that cost of service and service provisions be reviewed.  Certainly the benefits and advantages of competition were foreseen by some as inuring to customers as well as the utility.  Any impediment to competition, it can be argued, should be examined.
Perhaps this matter can be addressed in the Company’s “unbundling” presentation to the Commission on September 18, 1997.  I have already provided you with a copy of the notice.
Please contact me if I can be of any further assistance.
Sincerely,
Scott D. Woodbury
Deputy Attorney General
Enclosure
bls/L-sneed.sw
cc:Stephanie Miller—Administrator—Utility Division IPUC
Russell L.  Worthan—Governmental Affairs and Resource Planning
Intermountain Gas Company
ANNE SNEED
CREATIVE PROCESS ENGINEERING
315 W.  CENTER STREET, SUITE 200
POCATELLO, ID 83204-3243