HomeMy WebLinkAboutgas.pdfIdaho Public Utilities Commission 2012
53 | P a g e
Idaho Natural Gas Utilities
Natural gas commodity costs have continued to decrease over the last couple years.
Breakthroughs in drilling technology such as horizontal drilling and hydraulic fracturing have unlocked
vast reserves of shale gas, making prices less sensitive to off‐shore hurricane activity.
Shale gas accounts for nearly 20 percent of the current U.S. natural gas supply and is expected
to make up 50 percent of U.S. natural gas supply by 2035.1
Supply in the Northwest is primarily split between two basins, the Western Canadian
Sedimentary Basin and the U.S. Rocky Mountain Basin. According to the Northwest Gas Association
(NWGA), both basins are expected to continue increasing production, particularly the Horn River and
Montney shale plays in northeast BC, and the Niobrara shale play in the Rockies.2
Nationally, the Energy Information Administration (EIA) expects overall natural gas consumption
to decrease slightly in 2013 when compared to the growth rate this year. Even though residential and
commercial consumption is expected to increase in 2013, the demand for natural gas by the electric
power industry is expected to decrease from this year’s record high.
The Northwest Gas Association (NWGA) expects eastern Washington and northern Idaho
residential, commercial, and industrial consumption to increase during 2012‐2013 when compared to
2011‐2012. However, overall consumption in the region is expected to decline during this same period
because of lower natural gas usage by the electric power industry.
Conversely, the NWGA expects overall demand for natural gas to increase in southern Idaho
because of increased consumption from industrial customers and the electric power industry. Over the
next 10 years, the NWGA expects demand in the Northwest region to increase at an average annual
growth rate of 0.9 percent, with most of the growth expected in the residential sector.
There are several changes that could impact natural gas prices moving forward, including: 1) the
impact of increased regulation on production practices, 2) the shifting of investment from dry gas
production to more economical natural gas liquids (NGL) production, 3) the pace of economic recovery,
4) the adoption of natural gas as a fuel for generating electricity, 5) the adoption of natural gas as an
alternative to petroleum based fuels in the transportation and industrial sectors, 6) the changing of
natural gas flows across regions; and 7) the benefits of exporting domestic liquid natural gas (LNG) to
overseas markets. – by Matt Elam, utilities analyst.
1 U.S. Energy Information Administration (EIA) – 2012 Annual Energy Outlook – Early Release Jan 23, 2012.
2 Northwest Gas Association – 2012 Gas Outlook
Idaho Public Utilities Commission 2012
54 | P a g e
Individual Utility Idaho Statistics – 9/30/2011 to 9/30/2012
Intermountain Gas Company
Residential Commercial Industrial Transportation Total
Customers 283,228 30,114 11 110 313,463
% of Total 90.35% 9.61% 0.00% 0.04% 100.00%
2011 Customers 280,072 29,836 10 107 310,025
Therms (millions) 202.29 100.97 3.46 277.13 583.85
% of Total 34.65% 17.29% 0.59% 47.47% 100.00%
2011 Therms (millions) 216.00 109.05 2.87 233.70 561.62
Revenue (millions) $162.14 $73.33 $1.80 $8.49 $245.76
% of Total 65.97% 29.84% 0.73% 3.45% 100.00%
2011 Revenue (millions) $184.30 $87.52 $1.64 $8.26 $281.72
Avista Utilities
Residential Commercial Industrial Transportation Total
Customers 66,731 8,489 94 8 75,322
% of Total 88.59% 11.27% 0.12% 0.01% 100.00%
2011 Customers 66,200 8,421 96 8 74,725
Therms (millions) 46.17 26.63 2.29 43.47 118.56
% of Total 38.94% 22.46% 1.93% 36.66% 100.00%
2011 Therms (millions) 48.16 27.92 2.04 45.56 123.68
Revenue (millions) $45.42 $21.75 $1.54 $0.41 $69.12
% of Total 65.71% 31.47% 2.23% 0.59% 100.00%
2011 Revenue (millions) $48.06 $23.57 $1.51 $0.44 $73.58
Questar Gas
Residential Commercial Industrial Transportation Total
Customers 1,773 227 0 0 2,000
% of Total 88.65% 11.35% 0.00% 0.00% 100.00%
2011 Customers 1,767 227 0 0 1,994
Therms (millions) 1.26 0.78 0.00 0.00 2.04
% of Total 61.79% 38.21% 0.00% 0.00% 100.00%
2011 Therms (millions) 1.35 0.81 0.00 0.00 2.17
Revenue (millions) $1.02 $0.53 $0.00 $0.00 $1.54
% of Total 65.94% 34.06% 0.00% 0.00% 100.00%
2011 Revenue (millions) $1.13 $0.58 $0.00 $0.00 $1.71
Idaho Public Utilities Commission 2012
55 | P a g e
Case No. INT‐G‐11‐03, Order No. 32450
February 2, 2012
Rates decline again for Intermountain Gas customers
The commission approved an Intermountain Gas Company application to decrease the variable portion
of it rates by an average 4.5 percent effective Feb. 1.
Natural gas prices continue to decline for various reasons, the commission said. “Supply is abundant
due to new drilling technologies and pipeline infrastructure. Record quantities of stored gas also exist,
and there has been no material hurricane activity that might otherwise interfere with delivery.” The
commission said it appreciates the company’s prompt application to decrease its rates in the face of
falling natural gas prices.
At least once each year, Idaho’s electric and gas utilities submit a cost adjustment that tracks the costs
of power and gas supply that vary from year to year. While base rates represent primarily fixed costs of
providing natural gas or electricity and do not change unless there is a rate case, the annual Purchased
Gas Cost Adjustment (PGA) for gas companies and Power Cost Adjustment (PCA) for electric companies
results in temporary surcharges or credits that reflect variable costs. Increases or decreases in the PGA
or PCA do not impact company earnings positively or negatively.
Effective Feb. 1, the portion of rates that covers natural gas supply and transportation would decline
from 45.35 cents per therm to 41.8 cents. That represents about half the total summer residential rate
of 86 cents per therm and winter residential rate of 75 cents.
This is Intermountain Gas Company’s fifth consecutive request for a reduction in natural gas rates. The
company serves about 312,000 customers in 74 communities across southern Idaho.
Case No. INT‐G‐12‐01, Order No. 32653
October 1, 2012
Customers will pay about 7.1 percent less in Intermountain Gas bills
Intermountain Gas Company customers received their sixth consecutive decrease in gas rates effective
today due to a decline in the cost of gas the company buys for its customers and increased gas supply.
The decrease will come in two components: a reduction in monthly bills effective today as a result of the
lower price of gas and a one‐time bill credit in December. Combined, those adjustments result in a
decrease of 7.1 percent for the average customer.
The yearly Purchased Gas Cost Adjustment (PGA) projects gas prices for the next 12 months and either
surcharges or credits customers the difference between the projection and the actual cost. Sometimes
the PGA is adjusted more than once a year if gas prices materially change.
Idaho Public Utilities Commission 2012
56 | P a g e
The variable portion of customer rates is based on the Weighted Average Cost of Gas or WACOG, which
makes up about half a customer bill. With this application, the WACOG drops from 41.8 cents per therm
to about 33.5 cents per therm, as low as it has been since 2002. The WACOG represents about half the
total customer bill, which is now about 66.8 cents per therm during the winter months and 70.2 cents
from April through November for a customer who uses natural gas for both space and water heating.
For that customer, the average bill will decrease by about $1.51 per month. A customer who uses
natural gas for just space heating will see a decrease of about 17 cents per month. A commercial
customer will see about a $6.46 per month decrease.
In addition to the $6 million price reduction as result of lower gas prices, a one‐time credit totaling $11.9
million will be included on customers’ December bill. For residential customers who use natural gas for
both space and water heating the one‐time credit will be about $29.85. Residential customers who use
natural gas for space heating only will receive a credit of about $19.40. The average December credit
for commercial customers is about $129.80.
The commission said the credit will help customers during a time of year when natural gas bills are
highest. “Instead of embedding the value of the credit in rates throughout the coming year, the single
credit method will allow customers more immediate rate relief during a time period when natural gas
usage is typically nearing its peak.”
The are several other significant factors in the overall reduction: 1) $3.7 million in benefits generated by
release of some pipeline transportation capacity, 2) $4.8 million attributable to the collection of pipeline
capacity costs, a true‐up of expenses from the 2011 PGA and capacity release credits and 3) a $1.3
million deferred credit balance, which is the difference from the commodity costs Intermountain
actually paid for natural gas and the WACOG that was included in rates.
The commission did give the company authority to surcharge customers for Lost and Unaccounted for
Gas, which reduced the total credit allowed customers by $2 million.
Case No. AVU‐G‐12‐01, Order No. 32471
February 29, 2012
Avista gas rates decline March 1 with WACOG adjustment
The commission accepted an application by Avista Utilities to adjust the variable portion of its natural
gas tariff from 41.8 cents per therm to 36.2 cents, reducing an average residential customer’s bill by
about $3.46 per month, or about 5.7 percent. Large commercial customers’ rates will decrease by about
7.3 percent. The rate change becomes effective March 1.
Avista serves about 120,000 electric and natural gas customers in northern Idaho.
The commission approved the application without the full 30‐days’ notice required for rate changes and
accompanying public comment period so that customers may more immediately benefit from the
decrease.
Idaho Public Utilities Commission 2012
57 | P a g e
Natural gas utilities file a Purchased Gas Cost adjustment (PGA) at least once a year. The PGA varies
largely due to market conditions. (Electric utilities annually file a similar Power Cost Adjustment (PCA)
that reflects the variable component of power supply costs.) Increases or decreases to rates as a result
of the PGA or PCA do not impact company earnings.
The commodity portion of a natural gas bill is called the WACOG, or Weighted Average Cost of Gas. The
commission directs the gas utilities it regulates to amend their WACOG if gas prices materially deviate
from the currently approved commodity price. Commission staff compared Avista’s proposed WACOG
to the Natural Gas Exchange and New York Market Exchange’s futures prices for basins from which
Avista gets its gas and believes lowering the WACOG is reasonable.
The WACOG is a significant portion of a customer’s total bill. Beginning March 1, the WACOG will be
36.2 cents of a residential customer’s rate of 85.9 cents per therm. The non‐WACOG portion of the 85.9
cents per therm represents costs that are fixed, such as capital investment in infrastructure and
operations and maintenance. An Avista residential and small commercial customer uses an average 62
therms per month.
The commission commended the company for promptly seeking to amend its WACOG as market
conditions changed.
September 27, 2012
Case No. AVU‐G‐12‐05, Order No. 32651
Case No. AVU‐G‐12‐03 and ‐06, Order No. 32650
Gas decreases effective for Avista customers on Oct. 1
Northern Idaho customers of Avista Utilities are getting reductions to their natural gas bills effective Oct.
1.
The commission approved three Avista applications that reduce rates largely due to declining natural gas
prices. Combined, rates for natural gas customers decrease by about 5.6 percent.
The largest decrease (about 3 percent) comes from Avista’s annual Purchased Gas Cost Adjustment
(PGA). Costs associated with providing gas supply for customers vary from year to year as the wholesale
price of natural gas and transportation‐related expenses change. Natural gas utilities in Idaho file a PGA
at least yearly to account for those changing prices. Overall, prices today are lower than they were in
2011. Consequently, the company will reduce by $2.14 million the amount it collects in its PGA account.
Another $1.55 million of an un‐refunded credit balance will be used to offset a potential rate increase
next April. Avista has filed a notice with the commission to file a combined electric and natural gas base
rate case on or after Oct. 10 for proposed new rates that, if adopted, would be effective in April.
A second gas rate decrease (2.6 percent) is attributable to the temporary suspension of programs to
fund natural gas efficiency programs.
Lower natural gas prices due to changing gas supply now make it cost ineffective for Avista customers to
invest in natural gas energy efficiency programs. Consequently, the commission has approved Avista’s
Idaho Public Utilities Commission 2012
58 | P a g e
application to temporarily suspend its gas efficiency programs while still meeting its contractual
obligations for agreements executed before Sept. 1, 2012. Customers who qualify for rebates associated
with the programs will have until Nov. 1 to send all required rebate forms to the company.
As a result of the company’s proposal to temporarily suspend gas efficiency programs, the company will
zero‐out the rider that funds those programs. Residential and small‐commercial customers now pay
about 2.7 cents per therm for gas efficiency programs. There will still be about $390,000 in the account
to fund the efficiency programs and the rider will continue to be collected through Oct. 1. Avista will
work with commission staff to determine the most appropriate method to refund customers the
remaining $390,000.