20021105Decision Memo.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
RANDY LOBB
DON HOWELL
TERRI CARLOCK
DAVE SCHUNKE
ALDEN HOLM
MICHAEL FUSS
TONYA CLARK
BEV BARKER
GENE FADNESS
WORKING FILE

FROM: LISA NORDSTROM

DATE: NOVEMBER 5, 2002

RE: IN THE MATTER OF THE APPLICATION OF INTERMOUNTAIN GAS COMPANY TO INCREASE ITS COMPOSITE DEPRECIATION RATE. CASE NO. INT-G-02-4.

Intermountain Gas Company’s current composite depreciation rate of 3.71% was approved by the Commission in Case No. INT-G-99-2, Order No. 28311 dated March 29, 2000. At that time, the Commission found that “the Company’s depreciation rates and methodology should be revisited in three years.” Order No. 28311 at 6.
In compliance with this Order, Intermountain Gas Company filed an Application on October 18, 2002, requesting authority to increase its composite depreciation rate from 3.71% (3.93% when weighted by 9/30/01 assets) to 4.08%. The Company stated that this 0.15% increase is necessary in order to accrue the proper dollars over the remaining service life of the Company’s property. If approved, the higher rate would increase Intermountain’s annual depreciation accrual and decrease Intermountain’s ratebase by $428,482 annually. Although the Company’s depreciation expense would increase under its proposal, the present Application does not request a related increase in customer rates.
Based on an updated depreciation study by AUS Consultants, the Company concludes that the current rate is under-depreciating its assets. A four-page summary of the depreciation study was included with the Company’s Application. The complete depreciation study with workpapers, which the Company states are voluminous, is available for inspection at Intermountain’s general business office, which is located at 555 South Cole Road, Boise, Idaho (208-377-6097).
Based upon Intermountain’s books and records as of September 30, 2001, the updated depreciation study determined that the original cost of depreciable property increased from $234,093,752 to $280,990,082 during the three-year period. Likewise, the accumulated reserve increased from $116,479,251 to $143,992,182. The current study would require an annual depreciation and amortization expense accrual of $11,462,932 for the remaining life of the Company’s property.
The study also discussed special circumstances pertaining to Intermountain’s recovery rates. In this study, Intermountain’s planned deployment of electronic meter reading equipment and the recovery of the associated investment were addressed by establishing unique depreciation parameters and rates for that investment. The study also discussed the service life and estimated removal cost of the Company’s LNG facilities.
Intermountain Gas Company requests that its Application be processed pursuant to the Commission’s Rules of Procedure, i.e., by written submission rather than by hearing. Commission Rules of Procedure, IDAPA 31.01.01.201-204. The Company asks that the increase to the annual composite depreciation rate and amortizations be made effective at the beginning of the Company’s fiscal year, October 1, 2002.
STAFF RECOMMENDATION
Staff has no objection to Modified Procedure but recommends a comment deadline be set in mid-January to permit sufficient time to obtain responses to production requests (formal and/or informal), as well as allow adequate time to review and audit the underlying depreciation study performed by AUS Consultants.
COMMISSION DECISION
Does the Commission wish to process this case pursuant to Modified Procedure with the extended comment period recommended by Staff?

Lisa Nordstrom

M:INTG0204_ln

DECISION MEMORANDUM 2