20230103_INTG2209_jtcs.pdf

DECISION MEMORANDUM
TO:COMMISSIONER ANDERSON
COMMISSIONER CHATBURN
COMMISSIONER HAMMOND
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:JOSEPH TERRY
CLAIRE SHARP
DATE:DECEMBER 28,2022
RE:IN THE MATTER OF THE APPLICATION OF INTERMOUNTAIN GAS
COMPANY FOR AUTHORITY TO ISSUE SHORT-TERM SECURITIES;
CASE NO.INT-G-22-09
BACKGROUND
On December 28,2022,Intermountain Gas Company ("Company"),a subsidiary of
MDU Resources Group,Inc.("MDU"),filed an Application requesting authorization to issue up
to $150 million,not to exceed a period of 364 days.The Company represents that the proceeds
from these short-term borrowings will be used for gas costs.The Company stated that it will
submit the proper filing fee under separate letter.
The Company has the option to select between two interest rate methods-the Secured
Overnight Financing Rate ("SOFR")plus an applicable margin from the SOFR Advances
column,or the prime rate.There will be a one-time administrative fee and an up-front fee.
These fees have not been determined at the time of the Application.
Natural gas prices have been significantlyhigher than normal this year,beginning in
November and continuing through December.These high prices are not expected to drop
significantlythrough January due to several factors,such as colder than normal weather
throughout the country;Must Flow Operational Orders in the south end of the Northwest
Pipeline increasing prices from the Sumas and Stanfield suppliers;and pipeline maintenance and
constraints on southwestern pipelines.The chart below from the U.S.Energy Information
Administration illustrates the volatilityand severity of the natural gas prices.
DECISION MEMORANDUM -1 -DECEMBER 28,2022
Sumas daily natural gas spot price (Dec 2017-Dec 2022)
do11ars per million British thermal units (MMBtu)
$80 &
$70 Nov 15,2018 \Mar 1,2019
569.25/MMBtu $161.33/MMBtu$60
$50 Dec 21,2022
550.33/MMBtu$40
$30
$20
Dec-17 Jun-19 Dec-20 Jun-22
Price shocks in a natural gas can impact the Company's liquidity.Even if the Company
can recover these costs from ratepayers,there is a delay from the time the Company purchases
the natural gas and the time the Company will be able to recover these costs.With a normal
pattem of gas prices,the usual amount of short-term debt would be sufficientto cover the delays,
but when prices spike for a prolonged period of time,additional access to short-term debt may be
needed.
The Company is not independently rated by any of the rating agencies and instead is
rated as part of the MDU's family of companies.MDU was rated at BBB+by both Fitch and
Standard and Poor's.Because the Company is approximately 5%of MDU's revenue,this
proposed authority has a low probability of impacting MDU's credit rating.
Idaho Code §61-903 states that the Company may issue securities payable at periods of
not more than 12 months after the date of issuance without an order from the Commission,if the
total short-term securities do not exceed 5%of the total authorized securities the Company has
outstanding,and those securities are not converted to securities with a payable period exceeding
12 months.The request is for an additional $150 million in debt that will mature in less than a
year.The Company had $234.5 million in long term debt and $186.4 million in stock as of
September 30,2022.This request exceeds 5%of the Company's total authorized securities,and
therefore,required an application.
DECISION MEMORANDUM -2 -DECEMBER 28,2022
STAFF RECOMMENDATION
Staff recommends the Commission approve the Company's Application for authority to
issue an additional $150 million in short-term debt.
Staff recommends the Commission order the Company to file with the Commission the
verified report for these short-term securities showing the amount realized includingthe itemized
costs and expenses incurred in connection with this issuance.
Staff recommends the Commission order the Company to continue filingquarterly
reports identifyingthe date of issuance,principal amount,interest rate,date of maturityand
identity of payee for all promissory notes issued in that quarter.In addition,the Company should
continue filing its capitalization ratios with the quarterly report.
COMMISSION DECISION
Does the Commission approve the Company's Application for authority to issue an
additional $150 million in short-term debt?
Does the Commission wish to establish the filing requirements as described above?
seph Terry
DECISIONMEMORANDUM -3 -DECEMBER 28,2022