20041203Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:DONOVAN E. WALKER
DATE:DECEMBER 1, 2004
SUBJECT:IN THE MATTER OF INTERMOUNTAIN GAS COMPANY'S 2005-2009
INTEGRATED RESOURCE PLAN, CASE NO. INT-04-
On April 30, 2004, Intermountain Gas Company (Company) submitted its Integrated
Resource Plan (IRP) for the years of 2005-2009 to the Commission. On October 26, 2004, the
Commission issued a Notice of Application and Modified Procedure, establishing a written
comment deadline. Comments were filed by the Commission Staff on November 16, 2004.
BACKGROUND
The Company s filing was made pursuant to the Commission s directive in Order No.
25342. (PURP A 9 303(b )(3), Energy Policy Act of 1992). Order No. 25342 initiated Integrated
Resource Plan Requirements for local gas distribution companies (LDC) in accordance with
amended Section 303 ofPURPA. That Order lists the elements that the IRP should contain. The
Commission twice modified the requirements for natural gas IRPs: Order No. 27024 allowed
natural gas utilities to shorten the planning horizon to five years to match the Company
planning horizon and available market products; and Order No. 27098 removed the requirement
that IRPs include a formal evaluation of the costs and benefits of potential Demand Side
Management (DSM) programs, stating that a general explanation of whether there are cost
effective DSM opportunities will be sufficient.
THE INTEGRATED RESOURCE PLAN
According to the Company s IRP Executive Summary, the IRP is meant to describe the
currently anticipated conditions over the five-year planning horizon, the anticipated resource
selections, and the process for making those resource decisions. IRP at 1. Intermountain Gas is
the sole distributor of natural gas in southern Idaho, and during fiscal year 2003 it served about
DECISION MEMORANDUM
242 000 customers in 74 communities. Id. Their system contains approximately 9 500 miles of
transmission, distribution, and service lines, with over 350 miles of those lines being added in
fiscal year 2003 to accommodate new customer additions and to maintain service for the
Company s growing customer base. Id.
Intermountain Gas has two major markets: 1) the residential/commercial market; and 2)
the industrial market. The Company s residential and commercial customers increased 5%
during the first quarter of fiscal year 2004. Id. Forty-eight percent (48%) of the throughput on
the Company s system during fiscal year 2003 was attributable to industrial sales and
transportation. Id.
Customer growth forecast in the IRP was analyzed not only from a total company
perspective but also by specific geographic regions within the Company s service territory. Id.
2. Peak day sendout studies and load duration curves were developed under design weather
conditions to determine the magnitude and timing of future deficiencies in firm peak day
delivery capability from both a total company interstate mainline perspective, as well as within
each specific geographic region. Id. Residential, commercial and industrial customer peak day
sendout was matched against available resources to determine which combination of new
resources would be needed to meet the Company s future peak day delivery requirements at the
best possible cost. Id.
Total Comvanv - Residential, commercial, and industrial peak day load growth on the
Company s system is forecast over the five-year period to grow at an average of 40/0. Id. When
matched against existing resources, a peak day delivery deficit occurs starting in January 2007
and increases each year thereafter. Id. at 3. The projected deficits in firm deliverability will be
eliminated through one or more means including: 1) long-term firm capacity release and/or
segmentation; 2) city gate deliverable gas supply; 3) storage, together with related mainline
rights; and 4) call back opportunities. Id. at 4
Idaho Falls Lateral Region - The Idaho Falls Lateral Region serves a number of cities
between Pocatello in the south to St. Anthony in the north. Id. The residential, commercial, and
industrial load served off of the Lateral represents approximately 16% of the total Company
customers and 20% of the Company s total winter sendout during the winter of 2003-2004. Id.
When forecasted peak day sendout is matched against the existing peak day distribution capacity,
a peak day delivery deficit occurs in 2005 and increases each year thereafter. Id. at 5. The
DECISION MEMORANDUM
Company believes that small, short duration peak day distribution delivery deficits can be
eliminated or at least mitigated by working with the regions industrial customers to facilitate the
use of fuel oil during extreme cold temperatures. Id. However, the projected delivery deficits
are of such magnitude that "looping" of the existing system is warranted, adding the necessary
firm delivery capability to that area. Id.
Sun Vallev Lateral Region - The load served by this region represents approximately 4%
of the total Company customers and 4% of the Company s total winter sendout during the winter
of 2003-2004. Id. A peak day delivery deficit under the IRP's forecasted peak day sendout
occurs during 2005 and increases each year thereafter. Id. at 5-6. Growth along the Sun Valley
Lateral warrants an upgrade to the existing pipeline system. Id. at 6. The tourism industry
driven industrial load in this region is limited in size and does not currently have the capability to
switch to alternative fuels as a means of mitigating peak day sendout. Id.
Canvon County Region - The load served off of the Canyon County Lateral represented
approximately 14% of the total Company customers and 17% of the Company s total winter
sendout during the winter of 2003-2004. Id. Forecasted peak day sendout results in a peak day
delivery deficit occurring during 2006 and increasing thereafter. Id. at 6-7. The industrial
customer base served by the Canyon County Lateral does not currently have the capability to
switch to alternative fuels as a means of mitigating peak day sendout and the Company is
currently exploring optional means of enhancing the distribution capability on this Lateral. Id.
ST AFF COMMENTS
In comments filed on November 16, 2004, Staff recommends that Intermountain s 2004
IRP satisfies the technical requirements of Commission Order No. 25342 as modified by Order
Nos. 27024 and 27098, and recommends acceptance of the IRP for filing. Staff further stated
that its recommendation should not be interpreted as approval of the plan, or as a judgment of the
prudence of any transactions undertaken as part of the plan.
Staff reviewed the Company s forecasted growth projections and, although stating that
that the conversion rate for customers converting existing structures to gas space or water heating
seemed somewhat optimistic, found the projections to be within a reasonable range. Staff
Comments at 3. Staff stated that the Company has made significant improvements in its demand
side management programs. Id. at 4. The Company promotes the efficient use of natural gas
through mass media advertisement customer communication, marketing information and the
DECISION MEMORANDUM
Company s website. Id. Additionally the Company provides two ongoing equipment financing
programs and contributes customer funds to the Gas Technology Institute. Id. The Company
continues to improve its Supervisory Control and Data Acquisition system (SCADA), and
continues to participate in the Rebuild Idaho energy efficiency campaign. Id. The Company
further proposes two new programs to promote high-efficiency gas furnaces. Id.
With regard to the Company s analysis of gas supply options, Staff points out that
pursuant to Case No. INT-03-, the Company must file an enhanced Risk Management
Policy and Procedure for gas purchase strategies by December 20, 2004. Id. at 5. Staff looks
forward to review of that filing and a more formal discussion of the company s risk management
program in subsequent integrated resource plans. Id. Staff states that the Company satisfied the
requirement of providing a comparative evaluation of gas purchasing options. Id. The
Company discusses the many options available for supply, transportation, and storage along with
the general decision criteria necessary to meet the supply needs of its customers. Id. The
Company provides quantitative resource utilization analysis through its resource optimization
model. Id. The Company s model includes many alternative resources but, because of existing
contract constraints correctly built into the model, there are very few realistic opportunities for
change in the planning horizon of 5 years. While Staff believes the resource model can properly
evaluate the presented resources there is room for improvement by including additional market
alternatives. Id.
Staff states that the Company satisfied the requirement of providing a short-term plan for
implementing the IRP, and filed an extensive comparative analysis to its previous IRP. Id. at 6.
Staff states that the Company met the public participation requirement by holding two public
workshops during the development of the IRP: one in Boise; and the other in Pocatello. Id.
COMMISSION DECISION
Does the Commission wish to acknowledge that Intermountain Gas Company s 2004
Natural Gas Integrated Resource Plan satisfies the requirements set forth by the Commission in
Order No. 24342, as modified by Order Nos. 27024 and 27098? If so, does the Commission
wish to accept the Plan for filing?
Donovan E. Walker
DECISION MEMORANDUM