20030210_385.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:LISA NORDSTROM
DATE:FEBRUARY 6, 2003
RE:IN THE MATTER OF THE INVESTIGATION INTO THE PURCHASE GAS
ADJUSTMENT (PGA) MECHANISM AND THE NATURAL GAS
PURCHASING POLICIES OF INTERMOUNTAIN GAS COMPANY. CASE
NO. INT-01-
In the year 2000, Intermountain Gas Company filed two Purchase Gas Adjustment
(PGA) increases. Intermountain customers observed their winter rates increase by 60% in one
year. While a PGA increase is not uncommon, two increases in less than a year are unusual and
the total increase to customers was unprecedented. On February 7, 2001 , the Commission issued
a Notice of Investigation in Order No. 28632 directing Staff to investigate Intermountain Gas
PGA mechanism and purchasing policies. Staff s investigation found that the PGA should be
maintained - a conclusion endorsed by Intermountain in its reply comments filed June 1 , 200l.
At its January 21 , 2003 decision meeting, the Commission requested that the Company and Staff
update their comments on this investigation. These updated comments are discussed in further
detail below.
UPDATED STAFF INVESTIGATION COMMENTS
Staffs Investigative Report filed May 22, 2001 included seven recommendations
with which Intermountain s reply comments generally agreed. Listed below are Staffs original
recommendations (underlined) and a brief analysis of the current situation.
Recommendation #1:Maintain the existing purchase gas cost adjustment
mechanism.Staff continues to recommend that the current purchase gas cost adjustment
mechanism be used.
DECISION MEMORANDUM
Recommendation #2: Improve documentation and increase communication between
the Company, the Commission, and Staff.Intermountain Gas maintained all the items specified
by Staff for review. In the past year improved communication enabled Staff and the Company to
uncover "questionable capacity release activity" by the Company s current marketer, IGI
Resources. Staff believes the issues are resolved on a going-forward basis but will continue to
monitor the situation.
Recommendation #3: Staffwill also review the initial documentation retained in the
next several months to informally discuss the process and make additional recommendations for
the Company to consider.Staff reviewed the documentation retained by the Company during the
last two PGA periods and noted that the Company worked well with Staff to improve the
Company s documentation of purchase decisions.
Recommendation #4:The Company should document and report all new
contracting arrangements and initiate a bidding process for new gas contracts as existing
contracts expire.Staff indicated that the Company has documented and reported all its new gas
purchase agreements, which were awarded to the lowest bidder meeting certain requirements.
The Company kept the documents used to select a provider.
Recommendation #5:The Company should be directed to file its required
Integrated Resource Plan immediatelv and provide additional annual updates in addition to the
required biannual filing.Staff indicated that the Company filed its 2002 Natural Gas Integrated
Resource Plan on April 19, 2002. The Commission accepted and acknowledged the Company
2002 IRP filing on September 9 2002.
Recommendation #6: The Company should be directed to provide to Staff: 1) a
complete statement of qualifications for IGI Resources: 2) a complete list of the services that IGI
Resources provides to Intermountain Gas Company: 3) a complete list of other available services
offered by IGI Resources not currently utilized by Intermountain Gas Company: and 4) a
complete list of services and qualifications the Company finds necessary in a marketing service
provider.According to Staff, the three-year term of the Procurement, Asset Management and
Administrative Service Agreement between IGI Resources and Intermountain Gas will be
completed on March 31 2003. Even though the contract includes annual extension language and
a 12-month termination notification requirement, Staff believes that completion of the 3-year
primary contract provides the Company with a realistic opportunity to evaluate other marketers.
DECISION MEMORANDUM
While the Company provided some of the requested information in the past, Staff believes that
the Company should update this information plus add any other information from IGI or its
competitors that the Company will use to evaluate contract renewal options.
Recommendation #7:The Company should investigate all conservation
opportunities and develop cost-effective programs that could be offered to customers. A
deadline should be set prior to the 2001-02 heating season to institute demand side management
programs that will offer cost-effective measures to all customer classes.Because natural gas
prices have declined considerably since the initiation of the investigation, Staff noted that the
cost/benefit considerations have changed significantly. While Staff recognized that cost-
effective opportunities will be more difficult to identify, Staff encouraged the Company to
diligently investigate conservation opportunities and report its findings in the ongoing IRP
process.
INTERMOUNTAIN'S UPDATED REPLY
On February 5 , 2003 , Intermountain filed a reply indicating that the Company
continues to support use of the PGA mechanism as an efficient tool in managing the natural gas
cost component of our customers' rates.Intermountain restated its commitment to continue
documenting and maintaining its natural gas purchasing policies and practices for Staff. Noting
that measures promoting the efficient use of natural gas for Intermountain s residential
commercial and industrial customers were included in its 2002 Natural Gas Integrated Resource
Plan, the Company stated that it will continue to endorse and encourage wise and efficient
energy use.
COMMISSION DECISION
Based on the comments filed by Staff and the Company in 2001 and 2003 , does the
Commission wish to take any further action and/or close out the case?
Jl,
Lisa D. Nordstrom
M:INTGOIOI Jn2
DECISION MEMORANDUM