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Home My WebLink Aboutgas.pdfIPUC Annual Report 2010 46 | P a g e Idaho Natural Gas Utilities All three natural gas distribution companies with operations in Idaho, Intermountain Gas, Avista Utilities, and Questar Gas, continued to experience reduced commodity costs. However these reductions were less than those experienced in 2009, when Intermountain Gas, Avista Utilities, and Questar Gas all decreased their Purchase Gas Cost Adjustment (PGA) portion of their rates by on average 30 percent. In 2010, Intermountain Gas, Avista Utilities, and Questar Gas decreased the Purchase Gas Cost Adjustment (PGA) portion of their rates by 0.8%, 6.7% and 1.9%, respectively. (See more detailed information below.) The primary reason for the continuing decline in natural gas prices is due to the weakness in the regional and national economy, which has reduced the weather‐adjusted demand for natural gas during a period when natural gas supplies have been plentiful. A national report issued by the Energy Information Administration (EIA) in August of this year, provides insight into the anticipated conditions of the natural gas industry through 2011: Natural Gas Consumption: Expected natural gas consumption is forecast to increase by 3.8 percent from the 2009 levels of 64.9 billion cubic feet per day (Bcf/d) in 2010 and remain flat in 2011. Growth in the use of natural gas in both the power and industrial sectors accounts for the bulk of the increase in consumption in 2010 over 2009. The majority of this increase in electric power industry consumption is attributed to increased demand for air‐conditioning as the 2010 summer was 36 percent warmer than last year as measured by population‐weighted cooling degree days. In addition, electric utilities with a mix of coal and natural gas plants have increased their utilization of their natural gas plants relative to prior years as coal prices have steadily increased between 2008 and 2010. Natural gas consumption in the industrial sector is projected to increase by 7 percent through 2010 and expected to increase by only 1 percent through 2011. Residential and commercial consumption through 2011 is projected to remain at levels comparable to those of 2009. Natural Gas Production: Production during 2010 should end the year 1.1 percent above 2009 levels with continued low gas prices suppressing drilling activity by 1.4 percent in 2011. Several issues that have contributed to increased production and associated high inventory levels focus on increased shale gas drilling activity and increased natural gas production associated with the drilling for oil, which has doubled over the past year. However, the recently imposed offshore drilling moratorium in the Gulf of Mexico should reduce future drilling activity for the remaining months of 2010 and through 2011. Natural Gas Pricing: The natural gas spot price averaged $0.463 per therm in July 2010 which $0.0017 per therm less than June 2010. EIA forecasts natural prices for the remainder of 2010 to average $0.4466 per therm. A small decline in production and slightly increased consumption is expected to lead to an average price of $0.498 per therm in 2011. The EIA estimates that continued high storage levels combined with enhanced domestic production capabilities and slow consumption growth are expected to keep prices from rising. Locally, the Northwest Gas Associations’ 2011 Gas Outlook predicts demand for natural gas across the region (Idaho, Oregon, Washington and British Columbia) growing by an average 1 percent through 2019. Climate change policies enacted by state and provincial legislatures across the region are IPUC Annual Report 2010 47 | P a g e expected to drive some of that growth. The network of gas pipelines and storage facilities linking the region’s consumers to natural gas supplies is currently sufficient to serve regional needs. System expansions are market driven and have historically occurred appropriately with regard to type, size and timing. A number of projects are currently under development that will enhance reliability and ensure the region has access to the supplies it needs to serve growing demand. Individual Utility Statistics Intermountain Gas Company Residential Commercial Industrial Transportation Total Customers 275,522 29,673 9 105 305,309 % of Total 90.24% 9.72% 0.00% 0.04% 100.00% Therms (millions) 212.53 106.54 25.59 221.84 566.50 % of Total 37.52% 18.81% 4.51% 39.16% 100.00% Revenue (millions) $214.32 $102.16 $2.00 $8.38 $326.86 % of Total 65.57% 31.25% 0.61% 2.56% 100.00% Avista Utilities Residential Commercial Industrial Transportation Total Customers 65,050 8,303 100 8 73,461 % of Total 88.55% 11.30% 0.14% 0.01% 100.00% Therms (millions) 48.00 27.69 1.89 48.78 126.33 % of Total 38.00% 21.92% 1.47% 38.61% 100.00% Revenue (millions) $53.62 $27.61 $1.80 $0.49 $83.54 % of Total 64.19% 33.05% 2.16% 0.60% 100.00% Questar Gas Residential Commercial Industrial Transportation Total Customers 1730 227 1 0 1958 % of Total 88.36% 11.59% 0.05% 0.00% 100.00% Therms (millions) 1.26 0.76 0.10 0.00 2.12 % of Total 59.52% 35.96% 4.52% 0.00% 100.00% Revenue (millions) $1.04 $0.57 $0.04 $0.00 $1.65 % of Total 63.11% 34.50% 2.39% 0.00% 100.00% IPUC Annual Report 2010 48 | P a g e 2010 Gas Cases Case No. INTG0903, Order No. 31089 June 1, 2010 Commission OKs ‘snowmelt tariff’ for Intermountain Gas Intermountain Gas Company has been granted authority to temporarily interrupt service to new snowmelt customers during periods when natural gas is in short supply. Residential and commercial customers who have snowmelt equipment would receive a discounted rate in exchange for their service being interrupted. Natural‐gas fired snow‐melting equipment, installed under driveways and on rooftops, uses an inordinate amount of natural gas compared to more conventional uses. During days when natural gas is at peak use, snow‐melt use competes with other customers for the finite amount of available natural gas than can flow through Intermountain’s distribution system, potentially degrading service to other customers. System expansion to serve the increased load for snowmelt customers could substantially increase costs and, thus, rates for all customers. Last November, Intermountain Gas made an application to the Idaho Public Utilities Commission for authority to establish the new interruptible rate for new snowmelt customers. Existing customers who have snowmelt equipment can volunteer to be interrupted. After taking customer comments and also conducting a workshop, the commission is granting Intermountain Gas’ request. “By making snowmelt service interruptible, future system expansions to serve this load can be avoided and snowmelt service can occur when system capacity is available,” the commission said. The commission also said the company should “actively promote and market its interruptible tariffs as a conservation measure in order to maximize participation among existing snowmelt customers.” There should be a minimum of two hours’ notice before interrupting a snowmelt customer’s service, the commission said. In addition, the company must keep affected customers apprised of when service is expected to be restored. An on‐off switch will be located at an outdoor perimeter site that is easily accessible to Intermountain Gas personnel, which will negate the need to enter a customer’s home. In the future, remote technology should be available that would negate the need for the on‐off switch at each site. IPUC Annual Report 2010 49 | P a g e Case No. INTG1001, Order No. 32004 July 7, 2010 Commission won’t regulate resale of compressed natural gas Responding to a request by Intermountain Gas Company, the commission issued a declaratory order stating it does not have jurisdiction over the resale of natural gas by non‐utility third parties. Third‐party entities have asked Intermountain Gas to sell them natural gas so that the third parties can resale it for use as compressed natural gas (CNG) in vehicle fleets. Intermountain Gas sought assurance from the commission that it would not consider the utility in violation of state law or tariff provisions if it were to sell to third parties for resale to vehicle fleets. Intermountain anticipates other potential resale transactions may be proposed by other entities due to the price, availability and environmental benefits of using natural gas as a transportation fuel. Some Western states, including Washington, Utah and Wyoming, permit public CNG fueling stations. In response, the commission determined that the Energy Policy Act of 1992 preempts the commission’s authority over the resale of natural gas for transportation purposes. Consequently, the commission said it “will not exert rate‐setting jurisdiction over the resale of natural gas for use as a fuel in motor vehicles.” The Treasure Valley Clean Cities Coalition submitted comments supporting Intermountain Gas in its view that the commission not regulate the resale of compressed natural gas for transportation purposes. TVCCC supports greater use of CNG as a motor fuel that will reduce dependency on foreign oil, improve air quality and promote local economic development. Intermountain Gas also raised liability concerns regarding resellers. The company asked that the declaratory order include a statement that the commission will continue to regulate the safety of natural gas facilities operated by Intermountain, but only to the point where Intermountain’s facility or pipeline connects to a buying customer’s metering device. In this way, Intermountain Gas may not be held liable for what happens when its product is resold by third‐party entities. The commission said it will continue to enforce its safety rules and regulations up to the point that Intermountain’s facilities connect to a customer’s metering device. Beyond that point, the International Fire Code establishes the safety requirements for facilities dispensing CNG as a motor fuel. The State Fire Marshal, local fire departments and fire districts are primarily responsible for enforcing the International Fire Code. Intermountain proposes to sell natural gas to resellers using its existing tariff rates. IPUC Annual Report 2010 50 | P a g e Case Nos. AVUE1001, AVUG1001 September 21, 2010 Avista gas rates increase 2.6 percent over 3 years under settlement The commission adopted a settlement to the Avista Utilities electric and gas rate cases that increases electric rates an average 9.25 percent over three years and gas rates an average 2.6 percent over two years. The first year electric increase is 3.59 percent and the first year gas increase is 1.9 percent, both effective Oct. 1. The commission said the settlement “represents a reasonable compromise to the positions and we find it in the public interest.” “In particular, we note the Stipulation and Settlement represents a significant reduction in the request revenue increase. More specifically, the first year increase in electric rates contained in the Stipulation and Settlement is 3.59 percent rather than the 14 percent originally proposed by Avista,” the commission said. The commission said it recognized “that initial disputes among the parties were numerous and significant. This case has generated many customer comments opposed to the rate increases originally requested by the company.” Avista originally requested a $32.1 million increase in annual electric revenue and a $2.6 million increase in annual gas revenue. The settlement approved by the commission gives the company $21.2 million spread over three years in electric revenue and $1.85 million spread over two years in gas revenue. Helping to offset the increase was a $17.5 million deferred state income tax benefit. The three‐year phased rate increase effective dates are as follows: ‐‐ Oct. 1, 2010 ‐‐ 3.6 percent electric and 1.9 percent gas. ‐‐ Oct. 1, 2011 – 3.9 percent electric and 0.72 percent gas. ‐‐ Oct. 1, 2012 – 1.74 percent electric and 0 percent gas. Case AVU‐G‐10‐02 October 1, 2010 Avista PCA, gas efficiency charges increase The commission approved two increases, one to electric rates and another to natural gas rates for customers of Avista Utilities. Gas customers will pay an average 2.6 percent more for an increase to the gas energy efficiency rider. For a residential gas customer who uses the utility’s average of 66 therms per month, the IPUC Annual Report 2010 51 | P a g e increase is about $1.52 per month. Avista did not propose an increase to its existing tariff for energy efficiency programs for its electric customers. Neither of the rate adjustments increase or decrease company earnings. All the money collected in the PCA and in the efficiency rider must go directly to those programs. Natural gas efficiency rider, Case No. AVU‐G‐10‐02 Customer response to more than 30 Avista conservation programs to reduce natural gas consumption has been greater than anticipated, with customers in Idaho and Washington saving 2 million therms as a result of the programs, well above the targeted 1.6 million therms. When utilities propose increases in efficiency riders, the commission investigates the conservation programs funded by the rider for their cost‐effectiveness and approves them only if it has evidence demonstrating that lack of such programs would result in even higher rates for customers. In its comments, commission staff stated an increase in natural gas rates will not be viewed favorably by many customers, especially given the current economic climate. However, after a review of the programs, staff determined, and the commission agreed, that the total of all customers’ bills will be lower with the programs and the rider in place than without them. For example, the reduction of more than 2 million therms by customers during 2009 prevented Avista from having to buy or store those 2 million therms at greater cost to customers. Other than voluntary reduction, utility‐operated energy efficiency remains the lowest‐cost resource for all customers. Even those who do not directly participate in the programs benefit from them because of the lower consumption systemwide. The company’s most recent cost‐ benefit analysis (2008) indicates the net benefit to customers from the programs was more than $8.9 million. Avista’s conservation programs consist primarily of providing financial incentive or rebates for cost‐effective efficiency measures installed by customers with a simple payback of greater than one year. This includes more than 300 measures packaged into 30‐plus programs. Some of the measures include programs for appliances, compressed air and HVAC systems and motors. There are also industrial applications, maintenance strategies and sustainable building measures. Portions of rider revenue go toward low‐income weatherization, direct aid ($465,000) to Idaho electric and natural gas low‐income customers and $25,000 to Idaho Community Action Partnership agencies for low‐income outreach and conservation education. The per‐therm cost of the rider to residential customers increases from $0.034 cents per therm to $0.057 cents. IPUC Annual Report 2010 52 | P a g e Case No. INTG1003, Order No. 32077 October 6, 2010 Intermountain Gas PGA is a decrease for most customers Rates for most Intermountain Gas Company customers declined slightly October 1 as a result of Intermountain Gas’ annual Purchased Gas Cost Adjustment (PGA) mechanism. The commission approved a $2.2 million decrease in Intermountain Gas’ annual revenue due to a declining demand for natural gas, ample storage and lower than normal wholesale gas prices. This is the fourth time in five years that Intermountain’s annual PGA has resulted in a decrease for most customers. There are two major components to natural gas rates, a base rate and the PGA. Base rates cover fixed costs that rarely change. The PGA includes variable costs and is designed to more closely align actual rates with the variable portion of gas rates. The variable rates included in the PGA include: 1) the cost of purchased gas from suppliers, which is largely dependent on wholesale market prices; 2) the cost to transport natural gas and 3) the cost to store it. With this year’s PGA, rates decline by about 1.6 percent – about 90 cents a month – for the 77 percent of Intermountain Gas customers who use natural gas for water and space hearing. Customers who use natural gas for space heating only received a 0.2 percent increase, about 9 cents a month for an average customer. The growth in the customer class that uses natural gas for space heating only was not enough to offset the projected variable costs for this PGA year. Natural gas and electric utilities typically determine the rate each customer class pays based on the cost required to serve that class. Basing rates as closely as possible to cost of service eliminates one class of customers subsidizing another class of customers. With the Oct. 1 adjustment, the PGA portion of gas rates drops from 49.6 cents per therm to 49.2 cents per therm. That 49.2 cents represents slightly more than half of the total customer rate. For customers who use natural gas for both space and water rating, the new total rate is 76.2 cents per therm in the winter (December‐March) and 79.6 cents in the summer (April‐ November.) For customers who use natural for space heating only the total winter rate is 83.2 cents per therm and the total summer rate is 94.5 cents. The yearly PGA does not impact company earnings, whether the PGA is an increase or decrease. The amount collected in the PGA variable portion of rates can be used only to meet gas supply, transportation, storage and other related expenses and cannot go to increase company earnings. IPUC Annual Report 2010 53 | P a g e Case No. AVUG1003, Order No. 32102 October 28, 2010 Reductions in PGA credit mean increase for Avista customers The commission has approved a reduction in the size of the annual Purchased Gas Cost Adjustment (PGA) credit that will increase gas rates by an average 4.5 percent, or about $2.53 a month for a customer who uses the company average of 63 therms per month. Avista’s weighted average cost of gas is decreasing from about 49.1 cents per therm to 45.8 cents because of a continued decline in wholesale gas prices. However, the credit customers got last year – 22 percent – is substantially larger that the reduced WACOG this year, resulting in a net increase for customers. Avista’s annual Purchase Gas Cost Adjustment (PGA) goes up or down each year depending on the year’s wholesale gas and transportation prices. Case No. INTG1004, Order No. 32139 December 22, 2010 PUC accepts Intermountain Gas planning document State regulators have accepted a five‐year planning document submitted by Intermountain Gas Company that forecasts an annual increase of 1.75 percent in the company’s peak‐day gas loads through 2015. Intermountain Gas, like other regulated utilities, is required to file the plan, called an Integrated Resource Plan (IRP), with the commission. The plan anticipates conditions over the next five years and includes resource selections and the process for making resource decisions. The public is to be offered opportunities to provide input into the planning process. The commission accepted the plan, but said Intermountain Gas should make a greater effort at involving the public. The utility should provide “appropriate notice to city and county leaders as part of the process, especially in the Idaho Falls and Rexburg areas,” which are experiencing high growth, the commission said. The commission is concerned that a new portable Liquid Natural Gas facility near Rexburg is not sufficient to encourage and support new business ventures in that area. Rexburg is on the Idaho Falls Lateral that extends from north from Pocatello to St. Anthony and represents 15 percent of the company’s customer base. To meet customer demand during peak periods, the company said it can switch its industrial customers to fuel oil. During 2009, 41.2 percent of the throughput on Intermountain’s system was attributable to industrial sales and transportation. Peak‐day delivery deficits can also be managed, the company said, by bringing in gas from the new Rexburg Liquefied Natural Gas facility. IPUC Annual Report 2010 54 | P a g e The Sun Valley Lateral, which serves about 4 percent of Intermountain’s Idaho customers, will require a future upgrade to the existing pipeline system to meet growth in that area, the IRP states. The Idaho Conservation League filed comments, stating that Intermountain needs to encourage more conservation and efficiency programs to avoid building new infrastructure and to mitigate price volatility in natural gas markets. In its order, the commission said Intermountain should consider conservation programs that “have the potential to be cost‐effective in promoting and enticing energy savings.” Acceptance of the plan by the commission does not mean that the projects in the plan are approved, only that the company has met its obligation to file the document. Intermountain Gas serves about 305,000 residential, commercial and industrial customers throughout southern Idaho.