20200521INT to Staff 1-5.pdf

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;i Pl,i 2:31PrestonN. Carter,ISB No. 8462
Givens Pursley LLP
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Boise, Idaho 83702
Telephone: [phone]
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I5143490_l.docx [l4]68.14]
Attorneys for l:ntermountain Gas Company
BEFORE THE IDAHO PUBLIC UTILITIES COMIVtrSSION
IN THE MATTER OF INTERMOTJNTAIN
GAS COMPAIIY'S APPLICATION FOR
AUTHORITY TO FACILITATE
RENEWABLE NATI'RAL GAS ACCESS
CASE NO.INT.G.2O.O3
RESPONSE OF INTERMOUNTAIN
GAS COMPANY TO FIRST
PRODUCTION REQUEST OF THE
COMMISSION STAFF
Intermountain Gas Company, in response to the First Production Request of the
Commission Staff to lntermountain Gas Company dated May 13,2020, submits the following
information:
REQUEST NO. 1: Please describe the different configurations that are possible for
facilities that produce and sell Renewable Natural Gas (RNG) relative to the pipeline and
equipment infrastructure that the Company would install and maintain. In the description, please:
a. Provide a system map of different configurations identiffing all Company installed
infrastructure, dedicated ffiastructure needed to move gas sold to and consumed by
the facility, dedicated infrastructure needed to ffansport RNG out of the facility and
injected into the Company's pipeline, and common facilities shared by both.
b. Provide a narative describing the different configurations, including the purpose of
the major components.
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RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TTIE COMMISSION STAFF - PAGE I
c. Provide a cost breakdown of the facilities required for the different configurations
separating costs of dedicated infrastructure needed for gas sold to and consumed by
the facility, dedicated infrastructure needed to transport RNG out of the facility and
injected into the Company's pipeline, and common facilities shared by both.
RESPONSE TO RBQUEST NO. 1:
Intermountain is currently aware of nuo general RNG production configurations. In the
first configuration, the producer would inject NNG that meets Intermountain's quality standards
into the Company's existing distribution system to move the RNG to an interconnect with
Williams Northwest Pipeline (Williams). In the second configuration, the RNG producer would
bypass Intermountain's system and inject the RNG directly into Williams. Intermountain would
have no involvement in the construction of anyfocilities in the second configuration.
In either case, it would be possiblefor the producer to also be a customer of
Intermountain and have natural gas delivered to their facility under one of Intermountain's
existing tariffs to operate the production equipment. The infrastructure needed to deliver natural
gas to the productionfocility in either scenario would be completely separatefrom infrastructure
used to inject natural gas into either Intermountain's distribution system or Williams. Because
Intermountain would only be involved in thefirst configuration discussed above, the Company
will only be discussing information related to that scenario below.
a. A diagram of a current producer's Access/Receipt Facility is attached as
"CONFIDENTUL PR I 1_Diagram of Access (Receipt) Facility" and shows an
example of an RNG Access configuration. Each individual situation may require
some dffirences in the emct design of Intermountain'sfacilities, especially in
terms of length of the pipeline that must be constructed to tie in to an existing
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF - Pecs 2
pipeline, but this should serve as a good example of the basic equipment that will
be common to all projects. As illustrated in the diagram, there are dedicated
focilities that provide natural gas to the producer and dedicatedfacilities to
provide accessfor RNG into Intermountain's distribution system. Thefacilities
that provide natural gas to the producer (highlighted in purple on the diagram)
are installed under the Company's normal line extension policies as they would
be to any other customer. The section highlighted in blue on the diagram
represents facility costs that would be billed directly to the producer to ensure a
Contribution In Aid of Construction ("CIAC") that exactly offsets the cost of the
plant. No commonfacilities are shared between the producer and the Company's
infrastructure.
b. The Access/Receipt Facility (highlighted in blue in the diagram) provides the
custody transfer of RNG, analyzes the RNG quality, routes the RNG based on
quality analysis, pressure regulates the RNG and transports the RNG onto the
C ompany's distribution system.
Pur?ose qf Major Components
l. Lateral - This is a steel or plastic pipeline that transports RNGfrom the
Access/Receipt Facility to the Company's distribution system.
2. Regulator Station - The components of the Regulator Station are
responsiblefor pressure regulation of the delivered RNG to the operating
pressure of the Company's downstream distribution system. The Regulator
Station relief provides over-pre s sure prot e ction for the Company' s
downs tream distibution sys tem.
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAIIF - PAGE 3
3. Odorizer - In compltance with 49 CFR 192.625, the Company must inject
the un-odorized RNG with odorant.
4. Meter Set - This component measures the quantity of RNG delivered into
the Company's downstreom distribution system.
5. Gas Chromatograph (Gas Quality Analyzer Building) - Analyzers, sample
equipment, remote terminal unit and various other equipment used to assess
and respond to the quality of the RNG delivered to the Access/Receipt Facility
are included in the Gas Chromatograph/Gas Quality Analyzer Building. The
Gas Quality Analyzer Building provides a climate-controlled building to
house the analyzers and equipment.
6. Relief - This is an over-pt"essure facility used to protect the Company's
Acces s/Receip t Facility from ov er-pres sured KNG receiv ed from the RNG
producer.
c. As the Application outlines, gas delivered to an RNG producer to operate their
facilities will be billed at Intermountain's standard tarffid rates. Becouse the
producer is just like any other Intermountain customer for the gas they consume,
infrastructure required to deliver natural gas to theirfacility will be handled
under Intermountain's normal line extension policies.
The costs for any infrastructure needed to transport RNG out of thefacility and
inject it into the Company's distribution system (Access service) will be
separately tracked and handled according to the Maintenance Fee provisions
outlined in the Application. All of thefocilities identified on the
"CONFIDENTUL PR l_1_Diagram of Access (Receipt) Facility" file in the
RESPONSE OF IGC TO FIRST PRODUCTION REQI.IEST OF TIIE COMMISSION STAIT . PAGE 4
"Work Order Focilittes ldentiJication" legend can be cross referenced to thetile
"CONFIDENTUL PR 1_5_RNG CUC" which slrows the costsfor each group of
components identified in the diagram.
There are no commonfacilities between gas sold to and conswned by the
producer andfocilities used to provide Access service.
Rmord Irri Blathrer- 208-377 -6015
SponsorlPreparer:Josh Fife.20R-777l,0s1
[.ocation:555 S Cole Rd-se- II) fl1707
RESPONSE OF IGC TO FIRST PRODUCTION REQLJEST OF TIIE COMMISSION STAFF - Pacr 5
REQUEST NO. 2: If common infrastructure can be used to both provide gas to the
facility and take RNG from the facility, how does the Companypropose to allocate Operations
and Maintenance cost? Please explain.
RESPONSE TO REQTIEST NO.2:
Intermountain has not, nor does it intend to install infrastructure that is common to
providing gas to thefocility and taking RNGfrom thefacility. Any Operations and Maintenance
cost incurred to provide Access service will be separately trackcd using a business unit
Intermountain has es tablis hed for this purpos e.
Record I-ori Blattner-208-377-6015
SponsorlPreparer:Dave Swenson. 208-377-6118
Location:555 S Cole Rd.rD 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQI.]EST OF TIIE COMMISSION STAIT - PAGE 6
REQUEST NO. 3: The Company states in its Application that Idatro has the necessary
biomass to produce and transport a "significant" amount of RNG. Application at 4. Please define
significant in terms of potential and technically feasible volumes.
RESPONSE TO REQITEST NO.3:
Intermountain is not qware of any studies that would identrfu ldaho's biomass in terms of
potential and technicallyfeasible volumes. The term "significant" was based upon thefoct that
Idaho is thefourth largest milkproducing state in the nation. The number of cows required to
produce that much milk will also produce a large, but unquantified, amount of biomass. Since
Intermountain is not involved in the production of RNG, it has no way to speculate on an exact
amount of RNG that could be produced. The discussion this comment was part of was meant to
help demonstrate that there is potential demandfor the service outlined in this application.
Record I-ori Blattner- 2O8-177-60l 5
SponsorlPreparer:Lori Blattrer. 208-377 -6015Location: 555 S Cole Rd. Boise. lD 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF THE COMMISSION STAIT - Pecs 7
REQUEST NO. 4: The Company states in its Application that is has executed contracts
with three RNG producers and plans to bring the contacts into alignment with the plan
ultimately approved by the Commission. Application at 9. Please describe steps the Company
intends to take to achieve alignment, including expected completion dates.
RESPONSE TO REQUEST NO.4:
The existing contracts the Company has executed do not address the Access Fee and they
allow the Company to directly bill the RNG producers each quarterfor actual O&M expenses
relating to each RNGfacility, rather thanfollowing the Maintenance Fee process outlined in the
Application. Intermountain has already contacted the counterparties to the contracts for each
facility to l) notifu them of the Company's RNGfiling, 2) clanfu what terms Intermountain
proposes to adjust or revise to bring these agreements into alignment with terms outlined in the
filing, 3) remind the counterparties that the Company cannot arbitrarily change existing
contractual terms without mutual agreement, and 4) explain the specifics regarding the Access
Fee and Maintenance Fee that Intermountain proposes to incorporate. If the Commission issues
an Order in this proceeding, with an effective date of June i,5, 2020, that is substantially similar
to Intermountain's proposal, the Company is hopeful it can conclude these negotiations by
August l, 2020.
Record Holder: Lori Blatfrrer. 208-377-6015
Sponsor/Preparer: Dave Swenson. 208-377-6118
Location: 555 S Cole Rd. Boise. ID 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TI{E COMMISSION STAFF - Pecn 8
REQUEST NO. 5: Please provide work papers showing a sample of calculations of the
following items: maintenance fee, access fee, annual payment adjustrnent, startup and
extraordinary O&M expenses, the gross up of Contribution In Aid of Construction (CIAC), and
the overhead loading rate.
RESPONSE TO REQUEST NO.5:
Maintenance Fee
Pleose see the attachedfile "PR I _5_RNG Maintenance Fee" for the calculation of the
Monthly Maintenance Fee. The Fee proposed in this filing is based on the average actual
expenses of the single existing customer that has been utilizing RNG Access service since
November 2019. Because this is such a new project, Intermountain has not seen all of the
possible expenses that were itemized in thefiling.
The Company has also not been applying an overhead loading rate up until now. As the
case outlines, Intermountain proposes to marhtp the labor required to serve RNG Access
producers by the Company's standard ES & GA Rate to account for overhead loading. The
Company's overhead rate was discussed in Production Request Nos. 3 and 4 in the Line
Extension Case No. INT-G-20-01. The rate is calculated by the Accounting department and
represents Engineering and Supervision (ES) and General and Administrative (GA) overhead
costs. An example of the overhead rate calculation is included here in the/ile labeled "PR
l_S_IGC ES GA Rate Calc 2019". Intermountain believes this is a good starting point rate to
capture overhead related to RNG Access until something more specific can be developed based
on actual participation in this service. Intermountain is also in the process of developing nan HR
software. Once implemented, the new soft'ware will allowfield staffto charge vehicle mileage to
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAIT - Pecp 9
specific business units in the same way they are able to charge their time today. This will allow
for a more accurate allocation of that particular piece of overhead goingforward.
Please note the credits in the labor accounts in the "PR 1_S_RNG Maintenance Fee" file
(see the "March 2020" tabfor on example). When an employee works at the end of one month,
and the paycheckfor the time worked does not process until thefollowing month, the Payroll
department boolcs an accrualfor the amount of pay to record the expense related to the prior
month in the prior month. That amount is then reversed in the current month when the paycheck
is processed. Those automatic entries are the source of the labor expense credits.
Access Fee
Intermountain is planning to charge an Access Fee of $8,000 per month to each
producer. This number was set using the best information available on what the market would
perceive to be a foir rate for this type of service given the risk profile of the RNG industry.
Annual P ayment Adjus tment
The annual payment adjustment, referred to in the Company's Application as the Annual
Maintenance Fee Update, will be calculated ss illustrated in the file " PR I _5 _RNG Accounting
Plan".
Startup and Extraordinary O&M Expenses
As demonstrated in the attached "PR l_S_RNG Maintenance Fee" file, the costs related
to providing Access service to the producer are declining over time. Intermountain believes this
pattern may continue as other producers come on-line. In the interest offoirness, Intermountain
believes the startup costs in thefirst month or two of production should be charged directly to
the producer generating those costs as they have been to the current producer. After the startup
phase, the costs should become more standard across all participating producers. The same
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF - Pecs 10
would be true for any costs that are for a spectfic incident or problem (extraordinary expenses)
at a single producer's facility.
CAC
Thefile, "CONFIDENTAL PR 1_S_RNG CUC", outlines thefacility costs related to the
single existing RNG producer that has a completed project and is currently producing RNG.
Each component of thefacilities installed is traclced by a work order number. Once that portion
of the installation is complete, the project manager changes the work order status to in-service
and thefacilities are closed to FERC Account l0I, Plant in Service. A CUC is collectedfrom
the producer before work begins based on the estimated cost of the project. The CUC is invoiced
and recorded in account 48.0946, Tamble CUC. Once a project is completed, the CUC is then
trued-up to actuals and any variance is billed to the customer and recorded in account 48.0946.
The "Facility Costs" summary tab of the ottachedfile demonstrates that all segments
related to the installation of the producer'sfacilities have been closed out and invoiced to the
producer as all entries net to zero. This accounting treatment ensures no rate base impact to the
rest of the utility customers.
Income Tax
The attachedfile "PR l_S_IGC RNG Tax Gross-Up Calculation" demonstrates the
method Intermountain would employ to calculate the income tax gross-up on the CUC. It also
illustrates the Accounting entries that would be used to ensure there is no financial impact to
utility customers resultingfrom the CIAC.
Record Inri Blattner-208-377-601s
Sponsor/Preparer:RavceeThompson. 208-377-6046
Location: 555 S Cole Rd. Boise. ID 83707
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIIE COMMISSION STAFF - PAcE I I
Dated: Mray21,2020
GWENS PURSLEY LLP
."A.->
PrestonN. Caner
Attomeys for Intermountain Gas Company
RESPONSE OF IGC TO FIRST PRODUCTION REQITEST OF TIIE COMMISSION STAITF - PAGE 12
CERTIFICATE OF SERVICE
I certiff that on May 21, 2020, a tue and correct copy of INTERMOUNTAIN GAS
COMPANY'S RESPONSE TO FIRST PRODUCTION REQUEST OF THE COMMISSION
STAFF was served upon all parties of record in this proceeding via the manner indicated below:
Commission Staff
Diane Hanian, Commission Secretary
Idaho Public Utilities Commission
I1331 W. Chinden Blvd., Bldg. 8, Suite 201-A
Boise, lD 83714
Diane. H ani an(d,puc. idaha.gav
Matt Hunter
Deputy Attorney General
Idaho Public Utilities Commission
I1331 W. Chinden Blvd., Bldg. 8, Suite 201-A
Boise,ID 83714
matt.hunter@nuc. idaho. gov
Electronic Mail
Electronic Mail
dnftBltM
Lori A. Blattner
RESPONSE OF IGC TO FIRST PRODUCTION REQUEST OF TIm COMMISSION STAFF - PAGE 13