intg02.2fuss.pdf

LISA D. NORDSTROM
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5733

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF INTERMOUNTAIN GAS
COMPANY’S 2002 INTEGRATED RESOURCE
PLAN.
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CASE NO. INT-G-02-2

COMMENTS OF THE
COMMISSION STAFF

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Lisa D. Nordstrom, Deputy Attorney General, and in response to the Notice
of Filing, Notice of Modified Procedure and Notice of Comment Deadline issued in Order No.
29039 on May 30, 2002, submits the following comments.
On April 19, 2002, Intermountain Gas Company (IGC; Intermountain: Company)
submitted its 2002 Integrated Resource Plan (IRP) with the Idaho Public Utilities Commission
(Commission). The Company’s filing was made pursuant to the Commission’s directive in
Order No. 24342, Case No. GNR-G-93-2 (reference PURPA § 303(b)(3), Energy Policy Act of
1992). Intermountain Gas supplies natural gas to approximately 200,000 customers in southern
Idaho.

STAFF COMMENTS
Commission Order No. 25342 in Case No. GNR-G-93-2 initiated Integrated Resource
Plan (IRP) requirements for local gas distribution companies (LDC) in accordance with amended

STAFF COMMENTS 1 AUGUST 2, 2002

Section 303 of the Federal Public Utility Regulatory Policy Act of 1978 (PURPA). In its Order
the Commission listed the elements that the IRP should contain. The Commission twice
modified the requirements for Natural Gas Integrated Resource Plans in:

• Order No. 27024 allowed Natural Gas Utilities to shorten the planning horizon to 5 years
to match the Company’s planning horizon and available market products.

• Order No. 27098 stated, “It is no longer a requirement that gas IRPs include formal
evaluations of costs and benefits of potential DSM programs as they have been provided
for in previous IRPs under the previous guidelines set forth in Case No. GNR-G-93-2
Order No. 24981. Instead, a general explanation with each IRP filing of whether there
are cost effective DSM opportunities will be sufficient.”

Staff has listed these elements and policy requirements below, and commented on how
well the 2002 IRP filed by Intermountain Gas addresses each one.

01. Purpose and Process
No Staff Comments

02. Definition.
No Staff Comments

03. Elements of Plan. Each gas utility shall submit to the Commission on a biennial basis an
integrated resource plan that shall include:

a. A range of forecasts of future gas demand in firm and interruptible markets for each
customer class for one, five, and twenty years using methods that examine the effect of
economic forces on the consumption of gas and that address changes in the number, type and
efficiency of gas end-uses.

Intermountain Gas’ IRP includes an extensive 25-year economic forecast for Idaho and
the Company’s service territories (IRP Exhibit 2). The Company uses the economic forecast
information along with its Market Penetration Rates and Gas Market Conversion Rates to
develop its 5-Year New Customer Forecasts, Adjustments and Total Customer Forecasts
(IRP Exhibit 2, Appendices B, C, and D respectively). The following is a summary of the

STAFF COMMENTS 2 AUGUST 2, 2002

Company’s residential and small commercial customer growth projections:
Residential and Small Commercial 5-Year Customer Growth Projections

Customer
Projection 2003
Customer
Projection 2007
Average Annual
Customer Increase
Average Percentage
Increase
Low Growth 237,587 255,282 4,369 1.86%
Baseline 243,687 289,232 11,159 4.67%
High Growth 245,612 299,387 13,155 5.47%

Even though the Company’s conversion rate appears to be somewhat optimistic, Staff believes
the forecasted growth projections to be in the range of reasonableness.

b. An assessment for each customer class of the technically feasible improvements in the
efficient use of gas including load management, as well as the policies and programs needed
to obtain the efficiency improvements.

Intermountain Gas describes four specific energy efficiency programs that appear to
comply with this requirement: 1) The IGC High Efficiency Gas Equipment Finance Program;
2) The “Rebuild Idaho” program; 3) The Gas Technology Institute (GTI); and 4) SCADA access
for industrial customers.
While Staff believes these programs may be well intentioned, the amount of energy
efficiency improvement achieved or the extent of Intermountain’s participation therein appears
to be somewhat limited. Even though the name implies that only efficient equipment is financed,
the IGC High Efficiency Gas Equipment Finance Program does not require any minimum
efficiencies. In fact, lenders, vendors, and Intermountain Gas representatives have informed
Staff that the program would finance a minimally efficient appliance much the same as an
efficient one.
Even though the Company states it is an active participant in the “Rebuild Idaho”
program, Intermountain’s name is surprisingly absent from the list of partners and participants on
the program’s website. However, other energy providers such as Idaho Power and Avista are
listed.
Staff was able to verify the Company’s participation in the Gas Technology Institute.
Every year Staff audits the amount of revenues collected from customers for GTI. However,
Staff is unable to find any additional GTI funding by Intermountain other than that directly
collected from customers and passed through to GTI.

STAFF COMMENTS 3 AUGUST 2, 2002

One efficiency program the Company appears to be actively pursuing is the improvement
of the Company’s Supervisory Control and Data Acquisition (SCADA) system. This program
provides Industrial customers with improved real-time gas usage information so that they can
make more informed decisions regarding gas usage.
Intermountain also promotes the efficient use of natural gas through its mass media
marketing advertisements. The Company’s marketing efforts emphasize the overall heating
efficiencies of the direct use of natural gas versus other heating resources. For instance, the
Company emphasizes the greater efficiency of using a 96% efficient gas furnace to heat a house
versus using a 50-55% efficient combustion turbine generator to generate electricity, which the
customer then uses to heat an all-electric home.
The combination of Intermountain’s energy efficiency programs and activities appear to
minimally meet the IRP requirements. The IRP does not assess technically feasible
improvements by customer class nor does it evaluate the limited programs that are provided.

c. An analysis for each customer class of gas supply options, including: (1) a projection of spot
market versus long-term purchases for both firm and interruptible markets; (2) an evaluation
of the opportunities for using Company-owned or contracted storage or production; (3) an
analysis of prospects for Company participation in a gas futures market; and (4) an
assessment of opportunities for access to multiple pipeline suppliers or direct purchases from
producers.

Staff comments included with section d.

d. A comparative evaluation of gas purchasing options and improvements in the efficient use of
gas based on a consistent method for calculating cost-effectiveness.

The Company’s IRP does not include a separate quantitative evaluation of market
opportunities other than the general input into its spreadsheet planning model. However, the
Company does provide a general narrative discussion of available supply basins, transportation
options, and storage resources. The IRP also discusses reliability constraints and general cost
causation factors involved in natural gas procurement. The Company discusses the many options
available for supply, transportation, and storage along with the general decision criteria
necessary to meet the supply needs of its customers.

STAFF COMMENTS 4 AUGUST 2, 2002

The only quantitative resource utilization analysis included in the IRP is the Company’s
resource optimization spreadsheet model. Even though this model appears to properly evaluate
the Company’s existing resources, it does not include an extensive analysis for alternative supply
basins, contract considerations, or market available instruments. Staff recognizes that the
shortened 5-year planning horizon would be biased toward existing contracts. However, the
planning horizon should not restrict the Company from considering multiple market alternatives.
The resulting spreadsheet model output (IRP Exhibit 5) is the basis of the Company’s 5-year
optimized integrated resource plan.

e. The integration of the demand forecast and resource evaluations into a long-range (e.g.,
twenty-year) integrated resource plan describing the strategies designed to meet current and
future needs at the lowest cost to the utility and its ratepayers.

Staff comments included with section f.

f. A short-term (e.g., two-year) plan outlining the specific actions to be taken by the utility in
implementing the integrated resource plan.

The Company’s IRP is based on the shorter 5-year plan for resource optimization. The
Company believes the dynamic and volatile nature of the natural gas industry does not lend itself
to the 20-year planning horizon and that the shortened planning horizon approaches the
maximum length that can provide reasonably accurate output. Therefore, the 5-year planning
period provides sufficient detail for short-run decisions and a reasonable planning length for
longer-term transactions available in the market place.
The IRP indicates that several pipeline construction projects are warranted. Pipeline
improvement projects are recommended on the Company’s two major laterals - the Idaho Falls
Lateral and the Sun Valley Lateral. Other projects may be necessary in the near future
depending on the specific nature of customer growth and whether the proposed gas-fired
generation plant will be constructed in the Company’s Canyon County region.
It appears that the Company recommends no changes to its supply portfolio because all
existing resources are utilized and assumes that any supply deficiencies will be available from
the wholesale market. The Company makes these assumptions even though the IRP does not
include a detailed analysis of long-term viability of the wholesale market.

STAFF COMMENTS 5 AUGUST 2, 2002

04. Relationship Between Plans. All plans following the initial integrated resource plan shall
include a progress report that relates the new plan to the previously filed plan.

Intermountain Gas’ previous IRP was filed in 1995. The Company did not provide a
comparison between the 1995 plan and the 2002 plan. When questioned by Staff, the Company
responded that because of the changes in the natural gas market and IRP filing requirements, the
data was not directly comparable and therefore no comparison was included. The Company
further stated that all subsequent IRP filings will include a progress report that relates the new
plan to the previously filed plan. Staff agrees that the Company should provide the comparison
in future plans. However, the Company could have included a comparison in this plan because
the previous plan included a ten-year planning horizon that ended in 2005.

05. Plans to Be Considered in Rate Cases.
Not applicable in this Case.

06. Public Participation. In formulating its plan, the gas utility must provide an opportunity for
public participation and comment and must provide methods that will be available to the
public of validating predicted performance.

Staff believes the Company met this criterion. It held two public workshops during the
development of the Integrated Resource Plan. The workshops were held on February 27, 2002 at
their offices in Boise and on March 1, 2002 at the Ameritel Inn in Pocatello.

07. Legal Effect of Plan.
No Staff comments on this Section.

ADDITIONAL COMMENTS
Resource Optimization
Staff is aware that the shortened 5-year planning horizon will skew resource decisions
toward the existing long-term contracts. However, the allowance of a shorter planning horizon
should not be used as an excuse for the Company to avoid exploring market available
alternatives. The Company is currently purchasing several financial hedging instruments that are

STAFF COMMENTS 6 AUGUST 2, 2002

STAFF COMMENTS 7 AUGUST 2, 2002
not included in the Company’s IRP. Staff would expect at a minimum that the Company would
consider market alternatives when it addresses resource optimization in future IRPs.

STAFF RECOMMENDATION
Staff believes that Intermountain’s 2002 IRP minimally satisfies the technical
requirements of Commission Order No. 25342 as modified by Order Nos. 27024 and 27098, and
recommends acceptance for filing. Staff’s recommendation should not be interpreted as
approval of the plan, or as a judgment of the prudence of any transactions under take as part of
the plan.

Dated at Boise, Idaho, this day of August 2002.

_________________________________
Lisa D. Nordstrom
Deputy Attorney General
Technical Staff: Michael Fuss

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