20040617Reply Comments.pdf

EXECUTIVE OFFICES HECEIVED m
INTERMOUNTAIN GAS COMPANY ILED
555 SOUTH COLE ROAD. P.O. BOX 7608 . BOISE, IDAHO 83707 . [phone] . FAX: [phone]
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June 17, 2004
Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington S1.
O. Box 83720
Boise, Idaho 83720-0074
Re: INT -04-
Reply Comments of Intermountain Gas Company
Dear Ms. Jewell:
Intermountain Gas Company ("Intermountain" or "Company ) hereby respectfully submits for
consideration by this Commission, a response to the Comments of the Commission Staff filed as
part of the above referenced Case.
The Commission Staff outlined five (5) recommended courses of action for Commission
consideration. Each recommendation is repeated below and includes a response by the Company.
Staff Recommendation Number 1:
Implement the W ACOG recommended by Intermountain until fall of 2005 unless the forward
prices decline materially before that time.
Company Response:
Intermountain concurs with the Staff s recommendation to implement the W ACOG filed with
the above referenced Case on July 1 , 2004. As was stated in the Company s Application
Intermountain " . . . is committed to come before this Commission prior to this winters heating
season with an Application to further amend these proposed prices, should these forward prices
materially deviate from the $0.55492 per therm." Although not delineated in the final Staff
recommendations, Intermountain is also committed to sending a timely price signal to our
customers reminding them by mailer prior to the winter heating as to the change in their natural
gas prices. Included with this reminder will be 1) conservation tips that customers can adopt to
save money on their winter heating season bill, 2) contact information for those customers
needing assistance for payment of their natural gas bill, and 3) payment options available to our
customers to include "Level Pay.
Staff Recommendation Number 2:
Direct the Company to file its next PGA case during the late summer of 2005 for an effective
rate change on or about the end of October 2005.
Jean Jewell
June 17, 2004
Page 2
Company Response:
Postponing the Company s next PGA price adjustment until the late fall of 2005 can have
negative implications to our customers. Additional months of deferred gas costs, both debits and
credits, beyond a twelve (12) month period cause upward price pressure to the PGA. This is
caused primarily by the fixed costs paid to the various pipelines in relation to the Company
collection of these costs during the warm, low sales volume periods of summer and fall. By way
of example, postponing the PGA until October 1 , 2004 would add an incremental 3% - 4%
increase to the proposed residential prices. Intermountain requests a continuation of the
Company s ability to request a July 1 s1 PGA implementation date. Intermountain strongly
believes that a July 1 s1 implementation date, coupled with the above mentioned informational
mailers to our customers, better enables our customers to prepare for the upcoming winter
heating season. A July 1 s1 implementation date provides our customers additional months to
better prepare their equipment efficiencies, conservation decisions and budgets before the winter
heating season commences.
Staff Recommendation Number 3:
Reserve $696 276 for future determination and possible adjustment to the deferral if reasonable
documentation and rationale for inaction is not presented with an enhanced policy and procedure
by December 20, 2004.
Company Response:
The Staff Comments reference "financial accountability." Intermountain Gas Company believes
a review of our total performance would show that it has exercised very good judgment that is
the fundamental basis for "financial accountability." As a for instance, Intermountain has
exercised judgment in managing its business affairs such that it has not had to request an increase
to the service component of its prices for over 20 years - a record unmatched by any other retail
gas utility. Intermountain continually searches for and adopts measures that benefit our retail
prices. The renegotiation during the past twelve (12) months of the Company s Asset
Management and Administrative Service Agreement contracts highlighted by the Staff will alone
save our customers in excess of$10 000 000 over the lives of the contracts.
In addition to cost savings Intermountain Gas Company has sought, whenever practical, to
mitigate the impacts of price volatility to its customers by employing various gas management
tools and by offering unit prices to its customers that remain constant for a prescribed period of
time. We believe Intermountain s history of cost containment for the benefit of its customers
speaks loudly and favorably with regards to its record of exercising good judgment and financial
accountability, including matters of sourcing, transporting and price mitigation of its customer
gas supply.
Notwithstanding this record, the Company respects the Staffs perceived need for a more
formal, methodological or systematic strategy" with respect to the Company s Weighted
Average Cost of Gas or "ACOG" so as to aid them in their consideration and review of the
Company s Application. However, Intermountain does not believe that the incorporation of
automatic "trigger points" is in our customer s best interest. There is no substitute for good
judgment employed using a backdrop of natural gas price fundamentals and other market
indicators. Having said that, however, the Company believes we can bridge the needs of the Staff
with the Company s approach to decision making and are committed to work towards that end.
Jean Jewell
June 17 2004
Page 3
As was mentioned in the Staff Comments, a proposal to the Staff is underway at the Company
and will be presented to the Staff for their review and discussion prior to the month of December.
Intermountain Gas Company strongly opposes the Staffs proposal to "reserve $696 276 for
future determination" pursuant to future discussions with the Staff. The Company remains
committed to work with the Staff to bridge those areas of concern between Staff and Company.
Staff Recommendation Number 4:
Direct the Company to continue to file its W ACOG projections and deferred costs reports with
the Commission and Staff.
Company Response:
The Company would commit to continue this long established practice.
Staff Recommendation Number 5:
Require Intermountain to calculate level pay amounts using 12 months as a divisor.
Company Response:
Intermountain is currently in the process of updating its customer billing system which includes
the process behind level payment amounts. As part of that update, Intermountain is including a
revision to the level pay calculation whereby future level payment amounts will be calculated by
dividing by twelve (12) months rather than an eleven (11) month period.
Intermountain Gas Company appreciates the opportunity to respond to the comments made
the Staff and again requests that the above remarks and opinions are considered in the final
ruling given by this Commission.
Very truly yours
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Michael P. cGrath ~
Director
Market Services and Regulatory Affairs