20210415INT to Staff 6-10.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
: - t.Li l!.:1'!;LJ r.,!ll.-U
Attomeys for Intermountain Gas Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN
GAS COMPAI\Y'S APPLICATION FOR
APPROVAL TO CHANGE DEPRECIATION
AI\ID AMORTIZATION RATES
CASE NO. INT.G.ZI-OI
RESPONSE OF INTERMOUNTAIN
GAS COMPAI\IY TO SECONI)
PRODUCTION REQUEST OF THE
COMMISSION STAFF
Intermountain Gas Company, in response to the Second Production Request of the Idaho
Public Utilities Commission Staff to lntermountain Gas Company dated March26,202l, submits
the information below.
REQUEST NO. 6: In Section 3.4 of its Depreciation Study, Concentric states that it
uses a residual measure based on a least squares solution of the difference between the stub curve
and the survivor curve. Please confirm that the following equation describes this residual
measure
resddrral ,neasrrre =
(datn; - curvei)z
,l
where datai is the ith data point, curvei is the corresponding point from the survivor curve, and n
is the number of data points used in the computation. If this equation does not correctly describe
the residual measure as described in Section 3.4, please provide a corrected equation with
explanation of the variables used in it.
RpspoNsp oF INTERMOUNTAIN GAS COUPENY TO SPCOT.TO
PRopucrrou Rseussr oF THE CotrtutsstoN Srarr - Pacs I
)
)
)
)
)
)
)
measure.
Reeord
RESPONSE TO REQTIEST N0.6:
The equation provided in Request No. 6 correctly desoribes the calculation of the residual
f .nrni Ellotfnpr,),0*,317-601\
SponsorlPreparer:Kim Ukestad.701-222-7771
Location:555 S Cole Rd^ID 83707
RsspoNse or hmxnaourrans Gls Colrewy ro SECor{D
PRopucnoN RgeuEsr oF TnE Cotvfl\,flssloN $16p - p66g 2
REQUEST NO. 7: In Section 3.4 of its Depreciation Study, Concentric states, "This
Residual Measure is based on a least squared solution of the differences between the stub curve
(or original data points) and smooth survivor curve, which also requires a balancing of the
differences above and below the stub curve." Please explain how this balancing is performed.
RESPONSE TO REQUEST NO.7:
The residual measure is a measure of the deviation of the observed data points to the
smoothed Iowa curve. The function of squaring the differences at each data point is to return a
positive integer for each data point. In this manner, a difference below the smoothed Iowa curve
is equally weighted to the difference of the observed data point above the smoothed Iowa curve.
ln the quote provided in Request No. 7, the term "balancing" is used to describe the equal impact
of observed data point below and above the smoothed Iowa curve.
Record Holder: Lori Blattner"208-377-6015
Sponsor/?reparer:Kim Ukestad.701-222-7771
Location:555 S Cole Rd.ID 8i707
RpspoNss oF INTERMoLTNTAIN Gas CotwaNv ro SECoND
PnopucuoN RseuEsr oF TgE ColvttssloN Su,rr-Pacu 3
REQUEST NO. 8: In its Depreciation Study, Concentric evaluates the fit of several
survivor curves using the residual measure. For example, when evaluating the curve fit for
account 367 (Transmission Mains) in Section 3.5.1, the Company states, "The recommended
retirement rate analysis provides a statistical residual measure of 1.842 which indicates a good
fit." Please answer the following questions:
a. What values of the residual measure does Concentric take to indicate a good fit?
b. What values of the residual measure does Concentric take to indicate a poor fit?
c. How did Concentric determine the criteria used to judge whether the fit is good or
poor?
RESPONSE TO REQUEST NO.8:
Concentric is not aware of any published scale regarding the quality of the goodness of
fit. Rather, the residual measure is used to provide a comparison of the quality of the statistical
fit of various curves. A curve with a lower residual measure is a better statistical fit than a curve
with a higher residual measure. Additionally, the usefulness of the residual measure on very
"sfubbed curves" (those with little observation of retirement experience or with percent surviving
ratios stopping at a high percentage) is more limited than with observed life tables with percent
surviving ratios well below 50%. As such, the qualifications of aoogood" or "poor" fit is unique
to each retirement rate analysis being performed.
In the circumstance of Account36T (Transmission Mains) discussed in Section 3.5.1 of
the Depreciation Study, the indication of a good fit specifically recognized the fit of the proposed
Iowa 58-R3 through the period of initial retirement activity at the ages 5 to 20.5. As compared
to the fit of the currently used Iowa 53-55 which assumes virtually no retirement activity through
the expected average age, the proposed Iowa 58-R3 reflects this expectation of this earlier
retirement activity. Additionally, the lower mode R3 Iowa curve better fits the overall historic
retirement profile.
Record Holder: Lori Blattner.208-377-6015
Kim I Tlrcctorl 't01-T)-77',t1
Location: 555 S Cole Rd. Boise" ID 83707
RpspoNsr oF INTERMoUNTATN Gas ColvpaNy ro SscoNu
PRopucuoN REeUEST oF THE CotvnvussroN Sr,q.rr - Pace 4
REQUEST NO. 9: Pages 6-23 through 6-26 of Concentric's Depreciation Study provide
the data and survivor curve for Account 367 .00, Transmission Mains. For this account,
Concentric chose a 58-R3 survivor curve. According to Section 5.2,the first numeral (58)
indicates the average life estimated from curve fitting. Please explain how, given that92.79o/o of
the plant in account 367 .00 was still in service at 58 years Concentric chose the 58-R3 curve.
RESPONSE TO REQUEST NO. 9:
As noted in the Response to Request No. 8, the usefulness of statistical fits to very
stubbed observed life tables is limited as compared to more complete life tables. However, this
account has experienced over $1.6 million of retirement activity that has indicated large
retirement activity occurring at ages 5 to 20.5, and ages 47.5 to 54.5. This activity is more
reflective of a low mode R shaped curve than the high mode 55 lowa curve. However, the
indications of over 92 percent surviving led to a less conclusive indication of the average age.
As such, Concentric reviewed the average service life characteristics for similar accounts of a
number of industry peers, to provide a more complete assessment of the average experienced life
for this asset group. Concentric's review indicated peer life estimates ranging from 50 to 75
years. Based on the industry information and the experience of Concentric, a life extension from
53 years to 58 years appears appropriate. As such the lower mode Iowa 58-R3 is proposed for
this account.
Record Lori Blattner.208-377-6015
Sponsor/Preparer:Kim Ukestad.701-222-7771
Location: 555 S Cole Rd.Boise.ID 83707
RespoNsp oF INTERMoUNTAIN Gas CotveaNy ro SpcoNp
PRopucrroN REeuEsr oF THE CouiratsstoN SrAFF - Pace 5
REQIIEST NO. l0: Pages 6-30 through6-32 of Concentric's Depreciation Study
provide the data and survivor curve for Account 370.00, Transmission-Communication
Equipment. According to this data,l00o/o of the equipment in this account was still in service at
47.5 years. Please explain how Concentic fit this data to a curve with a 35-year average life.
RESPONSE TO REQUEST NO. 10:
The current investment in this account is fully depreciated (including the provision for
net salvage), therefore a depreciation rate of 0.00% was proposed as indicated on page 8-15 in
the Depreciation Study. The recommended life estimate remains unchanged from the previous
study due to the absence of any retirement transactions or additional investment since 1998.
Record Holder: Lori Blatfirer.208-377-60t5
Sponsor/Preparen KimUkestad. 701-222-7771
Location: 555 S Cole Rd- Boise- ID 83707
RnspONSe oF INTERMoI.JNTAIN Gas CoIvpeNy To SECoND
PnonucuoN Rreursr oF THE CorvrvnssroN Srerr'- PacB 6
DATED: April 15,2021
GTVENS PURSLEY LLP
/1 #
PrestonN. Cartcr
Attorneys for Iutcrnrountain Gas Compar-ry
Rsspo!,rsn oF hurxuomnaw Gas Courartv ro Sncolo
PnooucnoN RgQuesr or mlE Col\,fiiflssloN Sr*rr - Pacn 7
CERTIFICATE OF SERVICE
I certiff that on April 15, 2021, a true and correct copy of INTERMOLTNTAIN GAS
coMpANy's RESPoNSE TO SECOND PRODUCTION REQLJEST OF THE COMMISSION
STAFF was served upon all parties of record in this proceeding via electronic mail as indicated
below:
Commission Staff
Jan Noriyuki, Commission Secretary
Idaho Public Utilities Commission
I l33l W. Chinden Blvd., Bldg. 8, Suite 201-4'
Boise,ID 83714
Dayn Hardie
Deputy Attorney General
Idaho Public Utilities Commission
I l33l W. Chinden Blvd., Bldg. 8, Suite 201-A
Boise,ID 83714
Via Electronic Mail
j [e-mail]. gov
Dayn.Hardie@puc. idaho. gov
flnLBLM
Lori A. Blattner
RpspoNsp or IurBnuouNTArN Ges CorweNv ro SECoND
PRonucnoN Rrqursr oF THE CoruvrssroN Srarr - Pacs 8