20200313INT to Staff 1-9.pdf

Preston N. Carter, ISB No. 8462
Givens Pursley LLP
601 W. Bannock St.
Boise,Idaho 83702
Telephone: [phone]
Facsimile: (208) 388-l 300
prestoncarter(@ givenspursley. com
Attorneys for lntermountain Gas Company
BEFORE THE IDAHO PUBLIC UTILITES COMMISSION
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IN THE MATTER OF THE APPLICATION
OF INTERMOUNTAIN GAS COMPANY
FOR AUTHORITY TO REVISE ITS
GENERAL SERVICE PROYISIONS
RELATED TO TIIE INSTALLATION AND
EXTENSION OF NATURAL GAS MAINS
AND SERVICES
CASE NO.INT.G.2O.Ol
RESPONSE OF INTERMOUNTAIN
GAS COMPAI\"Y TO FIRST
PRODUCTION REQUEST OF THE
COMMISSION STAFF'
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Intermountain Gas Company, in response to the First Production Request of the
Commission Staffto lntermountain Gas Company dated February 21,2020, submits the following
information:
REQUEST NO. 1: Page 14 of ExhibitNo.2 describes vested interest and deposit
refunds. The Company explains that it will conduct annual reviews to determine if additional
customers have connected to the main and turned on gas service.
a. Please explain the processes the Company uses to manage and track refund eligibility.
b. Please explain when the annual reviews will occur.
c. Please explain why refunds are not issued immediately and a customer or developer must
wait for an annual review.
RESPONSE TO REQIIEST NO. 1:
The processes outlined below will continue to be a work in progress as the Company
4.rsesses the available tools and personnel it has to review line extension contracts.
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF, Page I
a. For each main extension project with costs exceeding the allowable investment, the
applicant will be required to sign a contract and make a payment to secure the main
extension. This payment is potentially refundable if more service lines are installed on
the main extension than originally included in the calculation of the upfront payment.
The Accounting group will track all customer advances and will revietv themfor refund
eligibility at the end of each of the first five years following the month in which the main
extension project was completed. Each project will be tracked in an Excel spreadsheet
maintained by the Accounting group. Additionally, the Company plans on modifying an
existing software program to help track the number of service lines which are installed
on a particular main extension. The Accounting group will use this program to
determine when a vested interest or a deposit refund is due.
b. Intermountain will conduct annual reviews at the end of each of thefirstfive years
following the month in which the main extension project was completed.
c. The Accounting group will oversee the tracking and potential refund of customer
advances. This allows the Company to keep its internal controls strong by separating the
refund process from the field employees that work with potential customers to extend the
Company's mains and services. To avoid placing an undue burden on the Accounting
group and to avoid adding personnel, the Accounting group will review each month all
projects with an annual review date in that month.
Record Lori Rlattner 208-177-6015
Sponsor/Preparer:JacobDarrineton. 208-377-6041
Location: 555 S Cole Rd. Boise. ID 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQLIEST OF TIIE COMMISSION STAFF, Page2
REQUEST NO. 2: Page 11 of Exhibit No. 2 describes two tlpes of Line Extension
Contracts (Type A and Type B). Please provide copies of Type A and Tlpe B contracts.
Additionally, please provide a copy of the General Agreement.
RESPONSE TO REQITEST NO.2:
Please see thefollowingfiles included with this response:
o PR l_2_Type A Controct - Deposit - Draft
o PR 1_2_Type A Controct - Multiple Service Points - Droft
o PR 7_2_Type A Controct - Single Seruice Point - Droft
o PR 1_2_Type B Controct - Multiple Service Points - Droft
o PR l_2_Type B Contract - Single Service Point - Drofi
o PR 1_2_Generol Agreement - Droft
Please note that these contracts were recently drafted to reflect the/iled tartffand are
still being reviqned by the Company and the Company's legal department. These
contracts are subject to change based on that revian as well as any revisions to the tariff
resulting from this case.
Record I-ori Blattner-208-377-601s
SponsorlPreparer:JacobDarrinston. 208-377-6041
Location: 555 S Cole Rd. Boise. D 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF, Page 3
REQUEST NO.3: Please provide all workpapers and assumptions used to determine
the I 1.92% Construction Overhead Charge described in Section C, 5.3(c) of the Company's
proposed tariff. Please describe the accounting treatrnent that will be applied to the 1192%
Construction Overhead Charge.
RESPONSE TO REQUEST NO.3:
Please see the attachedfile labeled "PR l_3_IGC ES GA Rate Calc 2019" for the
calculation of the I1.92% construction overhead rate.
The construction overhead rate is the combination of Engineer and Supervision (ES) and
General and Administrative (GA) overhead costs as a percentage of construction costs.
ES consists of employees' time in preparation of work orders, mapping, determining
feasibility, and other Engineering/construction based supervisory costs related to new
construction which are not identified with a specific project, along with the associated payroll
taxes and employee benefit costs.
GA overhead consists of employees' time in processing A/P, A/R, receiving orders, and
other administrativefunctions which are not identified with a specific project, along with the
associated payroll taxes and employee benefit costs.
Both ES & GA costs are accumulated in poolsfrom which a portion is capitalized to
applicable work orders each month. The allocation of ES & GA costs to applicable work orders
is based on the estimated construction overhead rate which is calculated each January by the
Fixed Asset Accounting group and approved by the Controller. The process of capitalizing the
ES & GA costs to applicable work orders is accomplished via a PowerPlan batch operation.
The estimated construction overhead charges impact each of the Company's plant
accounts. The rate is reviewed each quarter to determine if any adjustments should be made. In
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF THE COMMISSION STAIF, Page4
December each year, the true constntction overhead rate is calculated and retroactively applied
to adjust all current year construction overhead charges.
Intermountain includes this rate in the project cost estimate used to calculate any
advances requiredfor projects. The process of capitalizing ES and GA overhead costs to
applicable work orders is not a new process introduced in this line extensionfiling. The
construction overhead rate has only been included in the proposed line extension tariffto
provide transparency in the way project costs are calculated. If the tariffis approved asfiled,
customers would now be aware that the project cost consists of both direct project costs as well
as the overhead necessary to construct the project.
Record Inri Blattner-208-777-6015
Sponsor/Preparer:JacobDarrineton. 208-377-6041
Location: 555 S Cole Rd. Boise. ID 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMSSION STAFF, Page 5
REQUEST NO. 4: On page 7 of its Application, the Company states that it anticipates
filing an annual tariffadvice. Please explain the following:
a. How the Allowable lnvestment Factors will be updated.
b. How the Construction Overhead Charge will be updated.
RESPONSE TO REQITEST NO.4:
a. Each year, the Company anticipates updating the inflationfoctors listed in Exhibit No. 4,
page 4 to determine a new three-year compound inJlationfactor which is applied to the
Service and Main line allowable investmentfactors on Exhibit No. 4, page l, lines 6 and
24. The Company also anticipates changing the depreciation lives on Exhibit No. 4, page
3, column (b) and the asset lives on Exhibit No. 4, page l, lines 9, 12, i,5, 27, 30, 33, and
36 each time the Company receives an Order updating its depreciation rates. Other
aspects of the allowable investmentfactors calculation will be changed when the
Company receives an Order in a general rate case.
b. As part of its annual update, the Company will change the construction overhead charge
listed in section 5.3(c) of Section C of the General Service Provisions to reJlect the
curuently calculated rate used in the project costs estimates provided to line extension
applicants. As mentioned in the response to Request No. 3 above, the construction
overhead rate is calculated each January by the Fixed Asset Accounting group.
Record Inri Rlatfner 20R-777-6015
Sponsor/Pre,parer:JacobDarrinston. 208-377-6041
Location: 555 S Cole Rd. Boise. ID 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQLIEST OF TIIE COMMISSION STAFF, Page 6
REQUEST NO.5: Please provide workpapers showing how the refunds described on
page 7 of the Company's Application will be computed. Please provide all workpapers in
electonic format with links and formulae enabled.
RESPONSE TO REQITEST NO.5:
As stated on pdge 7 of the Company's Application, the proposed refundwill be calculoted
as the dffirence between the original customer advance made by an applicant and the customer
advance that would have been calculated under the Company's proposed tariff, less any refunds
previously remitted. The attachedfile labeled "PR l_s_Customer Advance Refunds" shows the
proposed refund calculationfor projects initiated between May 1, 2017 and November 30, 2019
which required a customer advance. After the tariffhas become effective, the Company proposes
to use the same method outlined in these worlqapers to expand this spreadsheet and analyze all
projects initiated between May I, 2017 and the effective date of the proposed turtff.
Record Holder: Lori Blatrrer.208-377-6015
Sponsor/Preparer:JacobDarrinpton. 208-377-604ILocation: 555 S Cole Rd. Boise. ID 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF, PaseT
REQUEST NO. 6: Please describe the accounting ffeatnent that refunds proposed by
the Company will receive.
RESPONSE TO REQTTEST NO.6:
All customer advances are tracked in FERC account 252 - Customer Advances for
Constraction. This is a liability account. At the time an applicant makes a payment to the
Companyfor a line extensionproject, the Company debits cash and credits the Customer
Advances account. Wen refunds are issued to the applicant, the Company debits the Customer
Advances account and credits cash.
Record Inri Rlattner 208-177-6015
SponsorlPreparer:JacobDarrinston. 208-377-6041Location: 555 S Cole Rd. Boise. ID 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF, Page 8
REQUEST NO. 7: Please provide the following:
a. The numbers of Residential and Commercial customers who have hooked up since the
May l, 2017 effective date of Order No. 33757.
b. The numbers of Residential and Commercial customers who have paid an advance since
the May 1,2017 effective date of Order No. 33757.
c. If the proposed vested interest policies were in place since May 1, 2017, please provide
estimates of the numbers of Residential and Commercial customers whom the Company
expects could have received refunds. Please also provide the dollar value of refunds that
the Company expects will be received by Residential and Commercial customers.
RESPONSE TO REQUEST NO.7:
a. From May 1, 2017 through December 31, 2019, 28,143 Residential and 2,007
Commercial customers hove hooked up to the Company's system.
b. From May I, 2017 through November 30, 2019, 388 Residential and 65 Commercial
customers/developments have paid a customer advance.
c. The Company would like to make it clear that it does not intend to make the proposed
vested interest policies retroactive to May l, 2017. The Company's carrent tariff and
line extension contracts already providefor refunds to customersfor advances paid
related to main lines. When customers not included in the original project calculation
connect to a main within 5 years, the Company is currently refunding the original
customer 1.5 times the revenue of the new customer up to the amount of the original
customer advance. This results in a more generous refund than the new tariffproposes.
The Company will honor all line extension contracts, which includes the Compony's
current refund policy, entered into before the effective date of the proposed tariff.
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF, Page 9
The attachedfile labeled "PR 1_7_Yested Interest Refund Estimate" attempts to
determine the number of vested interest recipients and the total vested interest refund had
the Company's proposed vested interest policy been in place since Mqt l, 2017. The
Company estimates that 124 dffirent main extension projects would have vested interest
refunds amounting to approximately $513K. The Company analyzed projects initiated
between May I, 2017 and November 30, 2019. Based on available data, the Company
attempted to isolate all main extension projects that had additional service lines not
originally used in the allowance calculation. The refund calanlation is based on the
annual therm usage estimate muhiplied by the Allowable Investment Factorfor Mains.
Record T.ori Rleftner ?nR-?77-601 {
Sponsor/Preparer:Jacob )oR-777-6041
Location:555 S Cole Rd-lD 8i707
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF, Page l0
REQUEST NO.8: Since May 1,2017, has the Company made any representations to
Residential and Commercial customers who have paid a Service/IVlains extension advance that
they might receive a refund? If so, please provide copies of any information about refunds that
the Company has provided to its customers.
RESPONSE TO REQUEST NO.8:
The Company has not made any representations to Residential and Commercial
customers that have paid a customer advance that they might receive a potential refund based on
proposed chonges to the Company's line extension policy.
Record Tnri Blattner 208-177-6015
Sponsor/Preparer:JacobDarrinston. 208-377-6041Location: 555 S Cole Rd. Boise. ID 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF, Page I I
REQUEST NO. 9: On page 3 of Exhibit 4, the Company shows the proxy calculation it
used to determine the allocation of distribution related FERC accounts to the Residential and
Commercial Classes. Please explain the steps that the Company is taking that will allow it to
directly assign the costs of services and mains to each of the Company's classes in future updates
to the Company's services and mains extension policies.
RESPONSE TO REQUEST NO.9:
The Company has begun internal conversations with its Fixed Asset Accounting group to
identifu the possibilities and limitations of the Company's fixed asset system in direct assignment
of service and moin costs to the Company's rate classes. Through these discussions, the
Company has learned that its current Fixed Asset system is not capable of directly assigning
main and service costs to each rate class. One of the biggest problems is that almost all
distribution plant is or can be utilized by more than one rate class. Service lines, house meters,
and regulators may be the only types of assets capable of being directly assigned to a rate class,
however, the Company's curuent system only tracks these types of assets by size, vintage, and
location at the district or total company level. Determining how to handle premises that switch
rate classes would be an additional dfficulty in direct assignment of costs. Currently, thefixed
asset records and the customer records are housed in separate computer programs. An
information technologt solution to bridge the programs would be expensive, and a manual
solution would require additional personnel to complete the added work.
In Order No. 33757 in Case No. INT-G-16-02, the Commission "strongly encourage[d]
the Company [...J to participate with Staffand other interested parties in determining the best
way forward as it relates to class cost-of-service acquisition of appropriate cost causation and
load data." As this case is wrapped up, the Company plans to begin those discussions related to
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMSSION STAFF, Page 12
class cost of service. The Company believes the issues raised in this question can be morefully
addressed in these discussions.
Record f nri Ellaffnpr )0**777-6015
Sponsor/?reparer:Jacoh f)arri 208-377-6041
Location:555 S Cole Rd ID 83707
Dated: March 13,2020
GTVENS PURSLEY LLP
2 2-A--
Preston N. Carter
Attorneys for Intermountain Gas Company
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF, Page 13
CERTIHCATE OF SERVICE
I certiff that on Marc,h 13,2020, a tnre and correct copy of INTERMOLTNTAIN GAS
coMpANy's RESPoNSE TO FIRST PRODUCTION REQLTEST OF THE COMMISSION
STAFF was served upon all parties of record in this proceeding via the manner indicated below:
Commi$ion Strff
Diane Hanian, Commission Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg.8, Suite 201-A
Boise,lD 83714
Diane.holt@Fuc. idaho. gov
Matt Hunter
Deputy Auorney General
Idatro Public Utilities Commission
I l33l W. Chinden Blvd., Bldg. 8, Suite 201-A
Boise,lD 83714
matt.hunter@.ouc. idaho. sov
Electronic mail
Electrcnic Mail
Lori
RESPONSE OF ICC TO FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF, Page 14