HomeMy WebLinkAboutSection III Natural Gas.pdfIdaho Public Utilities Commission
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NATURAL GAS
Consumption increased, prices were stable in FY2018
In Idaho, natural gas is supplied to customers by Avista Corporation, Dominion Questar Gas and Intermountain Gas
Company. Idaho is fortunate to be located between two large natural gas basins: The Rocky Mountain Basin (Rockies)
and the Western Canadian Sedimentary Basin (WCSB). These basins are connected through the Williams Northwest
Pipeline and the TransCanada Gas Transmission Northwest pipelines allowing the utility companies serving Idaho to
take advantage of capacity and pricing at both basins.
Utility Profiles
FY 2018 Statistics Total Residential Commercial Industrial Transportation
Intermountain Gas
Customers 357,401 324,451 32,824 20 106
% of Total 100% 90.78% 9.18% 0.01% 0.03%
Therms (millions) 710 235 120 8 348
% of Total 100% 33.05% 16.89% 1.06% 49.00%
Revenue (millions) $245.69 $160.01 $72.81 $3.00 $9.87
% of Total 100% 65.13% 29.63% 1.22% 4.02%
Avista Corporation
Customers 83,516 74,417 8,999 92 8
% of Total 100% 89.11% 10.78% 0.11% 0.01%
Therms (millions) 133.39 51.75 30.32 1.93 36.55
% of Total 100% 38.80% 22.73% 1.71% 41.06%
Revenue (millions) $64.6 $43.57 $19.13 $1.29 $0.58
% of Total 100% 67.48% 29.63% 2.00% 0.90%
Questar Gas
Customers 2,200 1,950 250 0 0
% of Total 100% 88.64% 11.36% N/A N/A
Therms (millions) 2.43 1.37 1.06 N/A N/A
% of Total 100% 56.21% 43.79% N/A N/A
Revenue (millions) $2.0 $1.24 $0.79 N/A N/A
% of Total 100% 61.08% 38.92% N/A N/A
The Idaho Public Utilities Commission’s fiscal year is July 1st through June 30th.
Transportation is non-utility owned gas transported for another party under contractual agreement.
Idaho Public Utilities Commission
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NATURAL GAS
Consumption
Overall consumption of natural gas in Idaho increased by 3.5 percent. All segments consumed more natural gas than
the previous year with the exception of gas for electric generation, which declined by approximately 16 percent.
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Idaho Natural Gas Consumption by End Use 8 Year View Source EIA Oct. 31, 2018
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Idaho Public Utilities Commission
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NATURAL GAS
Demand
The Northwest Gas Association (NWGA) forecasts demand for natural gas in the Northwest to grow at a Compound
Annual Growth Rate (CAGR) of approximately 0.8% per year over the next 10 years.
A number of factors could impact demand for natural gas:
- Coal replacement
- Natural gas used for generating electricity
- Significant incremental industrial loads
- The potential for natural gas as a transportation fuel
- LNG and petrochemical production and exports
- Energy policies, regulation and legislation
Prices
Recently, prices at the Henry Hub in southern Louisiana, a benchmark, have been hovering near $3.00/MMBtu and
are anticipated to remain close to this level for the foreseeable future. Henry Hub natural gas spot prices are
projected to be $3.12/Dth in 2018 and $3.09/Dth in 2019.
Northwest Gas Association 2018 Pacific Northwest Gas Market Outlook
Dekatherm = 10 Therms or 1,000,000 British thermal units (MMBtu)
Idaho Public Utilities Commission
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NATURAL GAS
Production
Alta Mesa Holdings LP is currently the only natural gas producer in Idaho. Alta Mesa operations overview:
- 17 wells located in the Payette basin.
- Nine wells producing natural gas, condensate, oil and other liquids.
- Processing facility located at Willow Creek near Payette.
Summary
Idaho residential, commercial and industrial users of natural gas continue to benefit from low natural gas prices and
plentiful supply. Advancements in exploration, extraction, and production techniques continue to transform the industry.
-by Kevin Keyt, IPUC Staff Analyst
Idaho Public Utilities Commission
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NATURAL GAS CASES
Avista submits long-range planning document for Commission acceptance
Avista expects increased reliance on conservation and efficiency to offset the need for additional natural gas
generation over the next 20 years, according to a planning document filed with state regulators in the fall.
Avista is required to file the Natural Gas Integrated Resource Plan
(IRP) with the Commission every other year. The IRP is intended to
demonstrate the utility’s plan to provide safe, reliable and economic
natural gas service to its customers in a number of scenarios, covering
various weather and market conditions, over a 20-year planning
period.
Commission acceptance of the plan does not signal approval or
endorsement of every aspect of the IRP, but rather that the company
has met its requirement to file the plan.
Avista’s 2018 IRP notes that while there has been an increase in the supply of natural gas in the US, and subsequent
low costs have led to increasing interest in natural gas, the utility does not anticipate growth in demand among its
traditional residential and commercial customers throughout the planning period.
Lower prices could lead to increased demand for natural gas among Large Industrial customers, however.
The IRP’s Expected Case scenario anticipates the total number of customers to grow from 348,000 today to 412,000
in 2037, with the average daily demand increasing at an annual rate of 0.02 percent.
The peak-day demand for natural gas is expected to increase by an average 0.71 percent annually through 2037.
To meet that demand, Avista maintains a diversified portfolio of natural gas supply resources, including storage, firm
capacity rights on six pipelines and contracts for the purchase of natural gas from multiple supply basins.
Analysis conducted for the IRP found no resource deficiencies through the 20-year planning period in all conditions
except the High Growth and Low Price scenario. In all other cases examined, the outlook determined that existing
resources will be sufficient to meet demand through 2037.
Rather than adding supply, the IRP calls for efficiency and conservation, or Demand Side Management (DSM), to play
a significant role in meeting demand.
That differs from 2016, when the utility said low natural gas prices rendered DSM programs cost-ineffective.
Commission approves funding increase for low-income programs
In May, the Commission approved a joint request from Avista and the Community Action Partnership Association of
Idaho to increase funding for two programs – the Low Income Weatherization Program and Energy Conservation
Education Program.
The Commission’s decision did not impact rates; rather, the funding is through the company’s Energy Efficiency rider.
The Commission said the move to increase funding for the weatherization program by $125,000 annually, and the
Energy Conservation Education program by $25,000 per year, was justified due to two factors: a long waiting list for
customers interested in enacting weatherization measures in the Lewiston area, and improvements Avista made to
measure the programs’ cost-effectiveness.
In its order authorizing the change, the Commission said it realized increases to funding the two programs had not
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kept pace with base rate increases over the years. The Commission also said the move fulfills its directive that utilities
provide a way for all customers to participate in the energy efficiency programs that all customers fund.
Avista requests Commission approval of efficiency program expenses
In mid-November, Avista asked the Commission to determine that approximately $2.9 million it spent on energy
efficiency and conservation programs between 2014 and 2017 was prudently incurred.
The utility said more than $1.56 million, or 54 percent of the expenses incurred, was provided to customers through
direct incentives.
Avista contends its DSM programs saved 535,449 therms in 2016-2017,
exceeding its targets.
Independent evaluators have determined that the expenses were
cost-effective, according to the company.
Avista rates decline to reflect market conditions
Avista’s natural gas rates dropped Nov. 1 after the Commission approved
changes to two surcharges, the Purchased Gas Cost Adjustment (PGA) and
Fixed Cost Adjustment.
Combined, the changes lowered rates for the average residential customer
by approximately 4.9 percent when they took effect Nov. 1.
That equates to a monthly savings of $2.38, lowering that customer’s monthly bill from $48.31 to $45.93.
Both the FCA and PGA can be adjusted with Commission approval.
The FCA decreased by 4.2 percent for residential customers. It is designed to break the link between Avista’s
revenues and energy use among its customers, removing the utility’s disincentive to promote energy efficiency and
conservation. Effective Nov. 1, it is a rebate of 0.766 cents per therm for residential customers due primarily to
increased energy use among customers during a colder-than-normal winter in 2017.
The PGA is designed to account for changes in costs Avista incurred
over the previous year purchasing, storing and transporting the
natural gas required to serve approximately 83,000 customers in
northern Idaho. If the costs do not match the amount that customers
paid into the PGA account, the PGA allows Avista to balance the
two.
It is reflected as a credit when natural gas prices are lower than the
amount included in rates, or as a surcharge when market prices
exceed projections.
The primary drivers behind the PGA change that took effect Nov. 1 – a decrease of 0.7 percent for the average
residential customer - were continued low natural gas commodity costs and lower costs for transporting natural gas on
interstate pipelines to Avista’s distribution system.
The change to the PGA was the second decrease to that mechanism to take effect in 2018, following a Commission
decision in January to lower the PGA by 6.4 percent for residential customers. That change equated to a savings of
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$2.73 per month for the typical residential customer. Though
the PGA is typically adjusted in the fall, Avista asked the
Commission in December 2017 to authorize a rate reduction
so that customers could benefit from lower costs during the
winter heating season.
Avista launches new program
Customer service and electric system reliability will be the
focus of Avista’s Idaho Service Quality Program, approved
by the Commission in November.
Rates will not be affected by the implementation of the program, which will be modeled after a similar program in
place in Washington.
The program’s design calls for Avista to track and report its annual performance in meeting benchmarks created for
13 electric measures and 9 natural gas measures that fall into three categories – customer service, electric system
reliability and customer guarantees.
Among them are benchmarks for customer satisfaction based on a quarterly survey; response time for outages,
electric system emergencies, connections of service and billing inquiries; and timely completion of investigations into
customer-reporter problems.
Avista agreed to develop the program as part of a settlement agreement approved by the Commission in a 2017
general rate case.
The 2018 calendar year will be the initial reporting period, with the first annual report due to the Commission on or
before April 30, 2019.
Commission denies Intermountain Gas request for infrastructure mechanism
In June, the Commission denied an Intermountain Gas Co. proposal to implement an Infrastructure Integrity
Management Mechanism (IIMM), which would have allowed the company to recover from ratepayers the costs
incurred on infrastructure improvements made during the previous
calendar year.
In its application filed with the Idaho Public Utilities Commission in late
2017, Intermountain said the IIMM would allow it to speed up the
replacement of aging infrastructure, enhancing the safety of its
distribution system, and address the increasing impact of regulations.
In its order denying the request, the Idaho Public Utilities Commission
said that while it supported the goals of the IIMM related to safety
and reliability, the company is obligated to maintain safe and reliable
service to its 335,000 customers across southern Idaho regardless of
the existence of a cost-recovery mechanism such as the IIMM.
Additionally, the Commission said, the costs the company sought to recover through the IIMM are “predictable and not
necessarily volatile” and “do not pose an imminent threat to the safety or integrity of Intermountain’s system.”
In its order, the Commission also said the IIMM would run afoul of provisions in Idaho Code 61-502A that prohibit the
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Commission from setting rates for any utility that grant a return on property not currently used and useful. Since
Intermountain’s proposal did not call for retiring existing pipe for depreciation purposes, the IIMM would have
allowed the company to receive a return on property that had been removed from service.
“Recovery of costs related to the replacement of aging infrastructure, whether accelerated or otherwise, is best
accomplished in a general rate case that allows analysis of all expenses, rate base, and impact on the Company’s
return on equity,” the Commission said in its order.
Intermountain Gas rates lowered to reflect market conditions
Rates for Intermountain Gas customers decreased by an average of 10.2
percent on Oct. 1 after the Commission approved a change to the utility’s
Purchased Gas Cost Adjustment (PGA).
The PGA is the variable component of natural gas rates that can be
adjusted annually to account for expenses that fluctuate.
The change is designed to pass through to customers approximately $24.5
million. That led to a 10.0-percent decline in residential rates – a savings
of $4.12 per month based on average consumption and weather.
Commercial customers saw a reduction of 11.9 percent, or $21.89/month.
A number of factors contributed to the change, including a decrease in
transportation costs billed to Intermountain by its firm transportation providers; a decrease in the Weighted Average
Cost of Gas due to higher production in shale gas wells, leading supply to outpace demand; and benefits resulting
from Intermountain’s management of storage and firm capacity rights on various pipeline systems.