20040615Staff Comments.pdf

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LISA NORDSTROM
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5733
Fit. ED
200". JUN I I PM 3: .~ 1
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UTILiTIES COii'lJ-1ISSION
Street Address for Express Mail:
472 W WASHINGTON
BOISE ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
INTERMOUNT AIN GAS COMPANY FOR
AUTHORITY TO INCREASE ITS RATES FORSERVICE. CASE NO. INT-O4-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Lisa Nordstrom, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment Deadline issued in Order No.
29500 on May 12, 2004, submits the following comments.
BACKGROUND
On May 5 2004, Intermountain Gas Company (Intermountain, Company) filed its annual
Purchased Gas Cost Adjustment (PGA) Application with the Commission for authority to place
into effect on July 1 , 2004, new rate schedules that will increase its annualized revenues by $22.
million. Intermountain supplies natural gas to approximately 230 000 customers in southern Idaho.
The PGA account is a deferral mechanism for over- and under-collections and for realized savings
on spot market gas purchases. If its Application is approved, Intermountain states that customer
rates will increase on average approximately 10%. Intermountain states that its earnings will not
be affected as a result of the proposed increase in prices and revenues.
STAFF COMMENTS JUNE 11 2004
THE APPLICATION
Intermountain seeks to pass through to each of its customer classes a change in gas-related
costs resulting from: 1) changes in Intermountain s firm transportation and storage costs resulting
from the Company s management of its storage and firm capacity rights on pipeline systems, 2) an
increase in Intermountain s weighted average cost of gas (W ACOG), 3) an updated customer
allocation of gas-related costs pursuant to the Company s Purchased Gas Cost Adjustment
provision, and 4) the inclusion of temporary surcharges and credits for one year relating to gas and
interstate transportation costs from Intermountain s deferred gas cost account. Application at 3-
Intermountain also seeks to eliminate the temporary surcharges and credits from Case No.
INT-03-1 that were included in its prices during the past twelve months. These changes would
result in an overall price increase to all customers. Because the Company seeks only to recover
costs already incurred and costs that will increase over the next year, Intermountain s earnings will
not increase as a result of the requested changes in prices. The overall effect of the proposed
changes would be an increase in the Company s revenues of $22 126 779. The net increase is
made up of:
Proposed Permanent Price Changes
Increase in Producer/Supplier Costs
Changes in Storage and Transportation Costs
Adjustment to Fixed Cost Collection Rate
Eliminating INT -03-01 Temporary Surcharges
Total Permanent Price Change:
187 419
686 865
(448 865)
693 563)
731 856
Proposed Temporary Surcharges (Credits)
Fixed Cost Collection Adjustment
Capacity Release & Purchases
Segmentation Credits
Overcollection of 186 Accounts
Other Items
Total Temporary Price Surcharges (Credits):
191 821
(539 196)
358 522)
097,480)
198 300
( 605,077)
Total Proposed Price Change:22,126,779
STAFF COMMENTS JUNE 11 , 2004
Staff determined that the impact of the Company s proposal by class of service is as
follows:
RS-l Residential 880 945 08046 72%1.00316
RS-2 Residential 080 132 08083 93%89442
GS-l General Service 7,495 842 08128 10.52%85423
LV -1 Lan!e Volume 234 154 07422 12.33%67593
T -1 Transportation 325 822 01540 16.12%0.11094
T -2 Transportation (Demand)109 884 16628 24.18%85393
T -2 Transportation (Commodity)00000 00%00656
Total Requested Amounts $22 126,779 $0.07127 10.040/0 $0.78105
Customer Class
Proposed
Increased Class
Revenue
Proposed
Average
Increase
$/Therm
Proposed Proposed
Average % Average PriceIncrease $/Therm
*T -1 tariff price plus the Weighted Average Cost of Gas (W ACOG)
Permanent Changes
The permanent adjustment reflects an increase in rates to raise the W ACOG and associated
costs of storage and delivery by $26 874 284. Intermountain proposes increasing the W ACOG
from $0.47500 per therm currently included in the Company s tariffs to $0.55492 per thermo The
Company states that it currently believes future prices, subject to the laws of supply and demand
are poised to soften. Although current commodity future prices dictate a W ACOG of $0.55492 per
therm, Intermountain states it is committed to come before the Commission prior to next winter
heating season to amend the W ACOG if forward prices materially deviate from those used to
calculate the $0.55492 per thermo Id. at 5. The permanent changes also include the elimination of
the temporary surcharge from last year s tracker (Case No. INT-03-1) and an adjustment to the
fixed cost collection rate. These changes would increase Idaho annual revenues by $22 731 856.
Temporary Changes
The temporary surcharges and credits reflect the true up of prior-period costs deferred in
the Company s PGA 186 accounts. The surcharges and credits are separated into a fixed cost
collection deferral true-up, capacity releases and pipeline segmentation credits, 1 a refund of the
Capacity releases and pipeline segmentation credits refer to the Company s rights to excess capacity on the Williams
Northwest Pipeline. This pipeline is the only interstate line that runs through Southern Idaho. The excess capacity
released" or sold to industrial users, marketers and others. The Company provides a credit to customers for the
released capacity through a temporary credit that is trued-up on a yearly basis.
STAFF COMMENTS JUNE 11 , 2004
over collected gas costs, and other smaller items. The total amount of temporary credits requested
by the Company is $605 077.
STAFF AUDIT
Staff has reviewed the Company s filing and related documentation to verify that the
Company s earnings will not increase because of the filing. Staff made addition findings discussed
below.
New Gas Contracts for Purchases and Storage Management
During 2003 and 2004 Intermountain renewed most of its long-term contracts for supply
and for storage management. These contracts were made with credit-worthy parties and have
terms of up to ten years with prices tied to market indices. Intermountain prefers to set its long-
term supply contracts at index prices and then use financial instruments to firm the price when
appropriate. For the most part, the contracts were obtained following a Request for Proposals
(RFP) process that allowed several companies to compete in meeting Intermountain s needs. One
exception was a contract with BP Energy (BP) for winter gas purchases. Because IGI is a wholly-
owned subsidiary ofBP, and the contract was made without a solicitation of bids or another
competitive process, Staff questioned whether the transaction was reasonable. However, after
obtaining additional information from the Company and comparing the contract to other options
Staff believes the contract is reasonably priced and justified.
Intermountain also renewed a storage management contract with Duke Energy. Staff
reviewed the selection process and the subsequent contract and believes it is prudent. Staff
generally encourages the Company to obtain services and products in an open, competitive
fashion. This allows Staff and the Commission the opportunity to ensure that customers receive
the best price for the most appropriate goods and services.
2003-2004 Financial Hedge Transactions
During the month of September 2003 , Intermountain determined that it would be
appropriate to lock all gas costs for the winter of2003. These hedges allowed the Company to
purchase its gas at a price that was very close to the W ACOG of $.475 per therm for the 2003-
2004 PGA period. These hedges eventually ended up costing approximately $200 000 more than
STAFF COMMENTS JUNE 11 , 2004
the indexed market prices but provided significant upward price protection for the 2003-2004 PGA
period. There are currently no financial hedges in place for the 2004-2005 PGA period.
IGI Resources Administrative Contract
During the Staffs PGA mechanism investigation, Case No. INT-Ol-, Staff
recommended and the Commission ordered the Company to solicit RFPs for its administrative
services agreement with IGI Resources that was about to expire on March 31 , 2004
Intermountain notified IGI that it would terminate the contract and seek proposals from other
companies to manage its resources. During May 2003, Intermountain requested a proposal from
five entities that it determined could provide the necessary services. IGI and A vista Energy were
the only entities that submitted proposals. After reviewing all aspects of both proposals
Intermountain chose IGI and signed a seven-year agreement. As part of the new contract, IGI
Resources agreed to reduce its administrative fee.
WEIGHTED AVERAGE COST OF GAS (W ACOG)
The requested W ACOG of $.55492/therm is an increase of 17% over the $.475 W ACOG
currently included in Company rates. The current W ACOG was approved by the Commission last
year after the Company requested a W ACOG of $.50305/therm. The reduced W ACOG of
$.475/therm was still 48% higher than the 2002 W ACOG.
Although last year s Company-proposed W ACOG of $.50305/therm was based on forward
gas prices available at the time, market prices for natural gas softened and the Company was able
to purchase financial hedges in September 2003 at prices that in aggregate were below the
ACOG approved by the Commission. The result was very little accrual in the Company s gas
cost deferral account and an actual reduction in the Company s deferred cost collection requested
in this case.
The Commission may be faced with similar conditions again this year. Like last year
market prices are higher than the current W ACOG, and forward prices on May 21 , 2004 (after the
Company filing) indicate market prices could produce a W ACOG above the Company s request
but the Company believes prices could soften before winter.
2 See Order No. 29199, page 5, Case No. INT-Ol-
STAFF COMMENTS JUNE 11 , 2004
In spring and summer 2003 , high natural gas prices in Idaho were caused by extremely low
storage levels and increased access to Northwest gas from other market areas. In the fall of2003
prices declined after drilling increased and storage needs were satisfied. Today even though the
storage injection picture has improved for the 2004 season, significant upward pressure remains on
the price of natural gas. Factors causing that pressure include oil prices at near record levels, an
improving economy creating increased demand for electricity and natural gas, improved access by
new markets to northwest natural gas and a new pipeline anticipated to begin delivery in 2005
from Wyoming to Kansas.
Not all market indicators are negative. Increased natural gas prices have spurred
significant increases in natural gas exploration, drilling rig counts have continued to increase over
the last twelve months and approximately three dozen sites are proposed for new liquefied natural
gas (LNG) import terminals increasing supply opportunities from overseas. The first of the new
LNG import terminals is anticipated to come online in late 2004 or 2005. Imports to the few
current LNG receiving terminals are also significantly higher than in years past.
Natural gas is a commodity subject to the market forces of supply and demand both in spot
and futures markets. Natural gas prices over the past five years have been highly volatile and
unpredictable. Seasonal swings in market prices have traditionally seen low prices in
spring/summer and higher prices in fall/winter, although in 2002, summer prices were higher and
winter prices were lower.
Given the uncertainty in natural gas prices, and the various objectives that parties may want
to achieve, there are several alternatives that the Commission could consider in setting the
WACOG.
1) The Commission could simply approve the W ACOG increase to $.55492/therm as
proposed by the Company. The Company s proposed W ACOG is based upon forward market
prices as of April 30, 2004 and if anything, appears to underestimate the W ACOG if current
forward gas prices are utilized. While this alternative sends an immediate, more appropriate price
signal to customers, it comes at a time when gas consumption is low and many customers may not
notice.
2) The Commission could delay any increase until October when anticipated winter gas
prices may be more fully known and the W ACOG can be more accurately established. This
alternative provides a price signal when more customers are aware of the impact and could result
in a lower overall W ACOG if gas prices soften. However, there is also a risk that gas prices will
STAFF COMMENTS JUNE 11 , 2004
increase resulting in both a larger deferred cost balance to be included in the surcharge and a
higherWACOG.
3) The Commission could approve a modest increase in the W ACOG now and then
adjust the W ACOG again in October if necessary. This alternative sends at least some immediate
price signal to customers, it partially mitigates higher future deferred cost balances and it reduces
the possibility of a much larger W ACOG increase in October. The downside is that it will likely
result in two rate increases in four months. It is also more administratively burdensome and
possibly more confusing to customers.
Staff believes it is important to provide a price signal to customers that reflect the price the
Company is paying for gas. Customers are encouraged to conserve as prices increase.
Unfortunately, the timing of the request diminishes the price signal that many customers will
receive because of reduced summer time consumption. Nevertheless, without a change in the
W ACOG, Staff estimates that the Company will likely defer an additional $5 million in gas costs
to be included in the surcharge by October 2004. While Staff recognizes the problem of increasing
rates in July when customers may not notice, we also recognize that a single increase in October
could be even more severe and will provide customers little additional time to react or prepare.
Staff recommends that the Commission increase the W ACOG as proposed by the Company
in this case and direct the Company to send conservation tips and contact information to customers
in the next bill. In October the Company should be directed to send a reminder to customers that
rates are higher than for the prior heating season. Staff also recommends that the Company be
directed to file its 2005-2006 PGA establishing new rates by October 31 , 2005 to more closely
coincide with the heating season. Staff believes that while current market price forecasts dictate an
increase is necessary at this time, various factors also indicate that a delay in filing next years PGA
can be accommodated. Finally, while Staff does not necessarily support multiple rate increases as
described in Alternative No., it does recommend that the Company be directed to continually
monitor its W ACOG and consider a more immediate W ACOG adjustment if natural gas
costs/prices materially decline.
RISK MANAGEMENT
Over the past four years the annual range of weekly price movement on northwest natural
gas markets was between $.23/therm and $2./therm with rate adjustments ranging between
$. 13/therm and $.28/therm. This is compared to the total change in winter rates throughout the
STAFF COMMENTS JUNE 11 , 2004
1990's of$.058/therm. Neither customers nor the Company can easily absorb these large annual
price fluctuations.
As it has over the last few years, Intermountain proposes a W ACOG based solely on
forward market prices. Other than a small amount of gas in storage, the Company has currently
made no fixed price purchases for the upcoming PGA period or any other period in the future.
Because there are no fixed-price transactions, there is no assurance that the proposed rates will
recover the actual commodity cost for the next year. Nor is there any assurance that the price
customers pay for gas will not increase again in the near future should market prices increase.
Without some financial accountability, it appears that the Company will not routinely make
forward fixed-price decisions for customer rate stability using a reasonable, systematic and
methodological approach.
PGA Investigation
The issue of price volatility is not new to customers and the Commission. While Staff
understands that Intermountain has little control over the volatile market prices, both Staff and the
Commission have searched for better ways to encourage the Company to make prudent purchases
for customers. On July 13, 2001 , in Case No. INT-01-3 the Commission stated:
The Commission is concerned that the current PGA mechanism fails
to optimize Company incentives to acquire gas at the lowest market price
available while minimizing volatility risks to ratepayers. To address this
concern, the Commission directs Staff and the Company to explore
modifications to the PGA that will increase the incentives to Intermountain
Gas to manage market risk and obtain the lowest commodity price. Once
Staff and the Company report their findings, the Commission will consider
taking formal action to implement beneficial changes.
ON. 28783 at 11.
During 2001-2003, Staff conducted an investigation relating to Intermountain s purchasing
strategy and the PGA mechanism. At the conclusion of the investigation, Staff recommended no
change to the mechanism, but asked the Company to increase its documentation efforts so the
Commission and Staff could understand the Company s decisions to ensure that they are prudent.
Fortunately for customers, natural gas prices declined significantly in 2002 and the PGA process
ST AFF COMMENTS JUNE 11 , 2004
afforded a significant rate decrease. However, the decrease was short lived, natural gas prices
increased, and a substantial rate increase was approved in 2003.
Intermountain s Purchase Strategies
While the Company has improved the documentation provided to Staff, Staff continues to
have significant concerns relating to Intermountain s hedging strategies and methodologies. Staff
has previously requested and the Commission has ordered the Company to submit its formal gas
purchase strategy for review to address these Staff concerns. As a part of that Order, the
Commission again emphasized volatility concerns and further put the burden of prudent purchases
on the Company:
IT IS FURTHER ORDERED that ninety days (90) days from issuance of
this Order Intermountain Gas shall file a formal, written Risk Management
Policy with the Commission. This filing shall place special emphasis on
managing reliability, price, service quality, credit risk and customer rate
volatility. In addition, this formal policy should also include trigger points
or volatility limits that could be used to make hedging decisions or forward
market purchases. Finally, this filing shall also address the Company
long-term supply issues and opportunities.
Order No. 29277, page 16.
The Company accordingly filed its Risk Management Policy on September 26, 2003. After
Intermountain provided its purchase strategies to the Commission, the Company met with Staff to
address Staff questions and explain its risk management process on two separate occasions during
the fall and winter of 2003. While the meetings were informative and included discussions with
the Company s marketer IGI Resources, it became apparent that the Company still uses subjective
market factors and forces" and advice from IGI before making hedging decisions. There is no
formal, methodological or systematic strategy in place. The Company states it does not want to
use a systematic approach because it does not want to be tied down to any particular benchmark.
Staff believes and has stated many times that it does not believe it is necessary to have unchanging,
inflexible benchmarks, but that some objective approach is vital. The written policy is so broad
that it allows the Company to simply guess when using management discretion to make decisions
rather than conducting a thorough analysis.
ST AFF COMMENTS JUNE 11 , 2004
Recommended Policy Changes and Calculation of Sharing
Over the past few years the Staff and the Commission have made clear statements to the
Company regarding the need to include customer rate stability and a reasonable purchase
methodology to provide that stability in the Company s Risk Management Policy. In addition, the
Commission has required increased documentation of gas acquisition strategies, including risk
management measures. In spite of these clear statements and requirements for increased
documentation, it is still unclear how the Company makes fixed-price decisions, as the Company
purchase strategy does not allow for any method of measurement or systematic review. Staff
continues to advocate a hedging policy that includes volatility limits and purchase points. As a
result, Staff cannot state that all the Company s decisions or lack of action relating to hedging are
prudent. For example, last winter IGI presented the Company with an opportunity to secure 2004-
2005 gas at a price of $0.4511 , below the W ACOG of $0.475 in place at the time. This price
hedge would have guaranteed a decrease during the next PGA period while providing significant
price protection. However, based on information that was not disclosed to Staff, the Company
decided to wait and perhaps hedge the price if it fell below $0.425/therm. Gas prices did not fall to
$0.425/therm and in fact rose to its current projected level of $0. 5549/therm. It is this
undocumented decision-making and apparent reliance simply on a price view that Staff believes is
inappropriate. Although it is inappropriate to lock in high prices solely for the sake of stability,
Staff believes that not locking in at least some gas under a layering approach at prices below the
current W ACOG was a mistake. Even if prices had declined below the prices that were locked in
additional hedges could have been purchased and customers would have received a lower price in
the next period, providing significant price protection.
Staff has discussed this approach to hedging with the Company. The need for established
policies and procedures that include reference or trigger points, an action point linked to the
ACOG currently in rates, and layering concepts for hedges have been the primary focus of these
discussions. Intermountain s management has committed to expand its policy and procedures to
better identify these concepts and further document its activities.
Intermountain s management will develop and present to its Risk Committee a more
concrete proposal with recommended changes to its policy and procedures. Intermountain
anticipates this review will result in approval of the proposal. The proposal will then be presented
to Staff for additional discussion.
STAFF COMMENTS JUNE 11 , 2004
Staff s prior PGA investigation concluded that because of the large swings in natural gas
prices a sharing mechanism could lead to unreasonable financial ramifications for the Company.
For this reason Staff is still not recommending a formal sharing ratio in the PGA. Without some
financial accountability, however, it appears the Company has not made forward decisions to
assure rate stability in a way that can follow established guidelines and triggers for action while
also being reasonable. Staff therefore recommends that the Commission reserve $696 276 of
increased W ACOG costs for judgment and future adjustment in the deferral if necessary. This
amount reflects a sharing with customers calculated based on 10% of the savings customers would
have achieved had the Company locked 25% of its 2004-2005 gas needs on December 8, 2003
when natural gas options priced at $.4511/therm were available to reduce the current forecasted
ACOG of $.5549 . Staff chose 10% to be consistent with the current electric sharing
mechanisms and believes that 25% is a conservative volume to layer in for forward natural gas
purchases when prices are below the current W ACOG in rates. Staff has used these percentage
figures for sharing and layering in this case but realizes that the formalized policy and procedures
may have different ratios for guidelines.
Staff realizes this amount is a significant sharing for Intermountain. However, the
Company has chosen to rely on management discretion for risk management decisions. It is
apparent that management's decision to do nothing in December 2003 could prove the more costly
alternative for customers. Staff understands the Company s confidence in its management but
believes customers should not be penalized for the Company s decision when those decisions do
not fit within an established policy or are not properly documented. Had the Company provided
the Commission with a risk management plan based on more stringent customer impact criteria
such as trigger points or customer rate volatility limits, Staff would have additional criteria to
judge the overall results. Staff recommends that this amount of $696 276 be reserved for further
evaluation and justification. This evaluation should be completed after serious discussions
between Staff and the Company regarding future policy and procedure enhancements, with a final
3 Total 2003 normalized annual therms (268 262 707) times 25% multiplied by the difference between the December
, 2003 W ACOG ($.4511) and the proposed W ACOG ($.55492) times 10% sharing. This is based on what Staff
believes would have been a reasonable hedge purchase and shares an appropriate amount of the additional cost (10%)
with Intermountain.
STAFF COMMENTS JUNE 11 , 2004
report and recommendations or settlement presented to the Commission no later than December
, 2004. Staff will include in the discussions and its evaluation the importance of the actual gas
cost incurred in the 2004/2005 PGA and what affect it should have on the cost sharing adjustment.
To the extent an adjustment is necessary, the credit should be applied to all gas purchasing
customers on a per therm basis in the next PGA.
CONSUMER ISSUES
Customer Notice
When Intermountain filed its Application on May 5 , 2004, both the customer notice and
press release were included in the filing. Customers were notified of the Application by bill stuffer
and had until June 11 2003, to file comments with the Commission. Staff reviewed the customer
notice and press release and determined that both complied with the notice requirements of IDAP
31.21.02.102. The customer notice was mailed with cyclical billings beginning
May 7, 2004 and ending June 6, 2004.
Customer Comments
As of June 4 2004, the Commission had received 15 written comments from customers, all
opposing any increase. Eight of the commentors questioned the need for an additional increase
after the 33% increase granted last year. One stated
, "
All the utility companies need to be reined
in. Rates are already too high." Five indicated that they are seniors on fixed incomes. Four of the
comments mentioned the proposal to change the time of year for reviewing the PGA. Three
thought the PGA review should take place closer to the heating season; one did not think the time
of year made any difference.
Customer Relations
Several payment methods are available to Intermountain s customers. In addition to
mailing in payments, customers may make online payments through the e-payment center or
arrange to have payments withdrawn directly from the customer s bank account. In addition to
these free payment methods, other options are available that require payment of service fees. More
information on all these options are available on Intermountain s website at www.intgas.com
Programs available to customers who have trouble paying their gas bills include LIHEAP
(Low Income Home Energy Assistance Program), Project Share and Project Warmth. Project
ST AFF COMMENTS JUNE 11, 2004
Share and Project Warmth serve different geographic areas and do not overlap. Customers in dire
need are often able to get assistance from two programs: LIHEAP and Project Share or Project
Warmth. In some situations, a customer may not qualify for LIHEAP benefits because his or her
income exceeds the income eligibility criteria for the program. However, these customers may
still qualify for Project Share funds or Project Warmth funds because those income requirements
are more lenient. Generally, the programs have funds available between December 1 and April 30.
Information concerning contacting the various organizations may be obtained from Intermountain
or the Idaho Public Utilities Commission by telephone or through the respective organization
websites.
During the months of December through February, no electric or gas utility may terminate
service or threaten to terminate service to a residential customer who declares that he or she is
unable to pay in full for service and whose household includes children (under the age of 18),
elderly (age 62 or older), or infirm persons. During the winter protection period, customers are
encouraged to make payments or sign-up for a program called the Winter Payment Plan. The
Winter Payment Plan is especially appropriate for customers who do not qualify for any of the fuel
funds, e., LIHEAP, but still have difficulty making ends meet. The Winter Payment Plan offers
relief from high winter bills by allowing customers, for up to five months (November through
March), to pay one-half of the customer s regular Level Pay amount. Upon making the March
payment, the customer is expected to call the Company and establish a payment plan, usually a
regular Level Pay amount, with the balance still owing after the winter months rolled into a new
Level Pay amount.
Between the effective date of the last PGA, July 1 , 2003 and June 7, 2004, the IPUC
Consumer Assistance Staff received a total of 243 complaints and inquiries regarding
Intermountain. Of these, there were 130 complaints regarding credit and collection issues, of
which 98 concerned disconnection of service and 22 concerned deposits, an increase over the same
period of time last year. Higher rates have contributed to customers' difficulty in paying their gas
bills.
Staff notes that the Commission revised its Utility Customer Relations Rules, with rule
changes becoming effective in May 2003 and March 2004. Energy and water utilities regulated by
the Commission were allowed to collect deposits under new circumstances, including instances
where a customer receives two or more written final termination notices. Another change allowed
utilities to collect substantially higher deposits from customers who use gas for space-heating only.
STAFF COMMENTS JUNE 11 , 2004
Payment-troubled customers are now experiencing the impact of these rule changes. Customers
unable to pay monthly bills in full are facing the prospect of paying deposits in order to retain
servIce.
Intermountain has several mechanisms in place to assist customers when they are unable to
pay in full. The most popular by far is the level payment plan that divides a year s total bill into
twelve equal monthly payments, making it an excellent budgeting tool. Every April or May, the
plan is reviewed and the payment amount reviewed. The payment amount will be modified, if
necessary, to reflect changes in the customer s usage during the past year and the current rates in
effect. In calculating the level pay amount, Intermountain s practice has been to divide customers
annual energy bill by 11 rather than 12. All other energy utilities serving Idaho customers use
months as the divisor. Although this practice provides a cushion to keep monthly payment
amounts from changing drastically from year to year, it causes level pay amounts to be higher than
if the divisor were 12 instead of 11. Given the impact of new credit policies as described above
and faced with the prospect of another rate increase, Staff recommends that Intermountain be
required to calculate level pay amounts using 12 months as a divisor. This will make monthly
level pay amounts more affordable, offering more payment-troubled customers the opportunity to
establish good credit with the Company and avoid the additional expense of having to pay a
deposit or being subject to termination of service.
RECOMMENDATIONS
Based on the findings listed above, Staff recommends that the Commission:
1. Implement the ACOG recommended by Intermountain until fall of 2005 unless the
forward prices decline materially before that time.
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.
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.
4. Direct the Company to continue to file its W ACOG projections and deferred costs
reports with the Commission and Staff.
5. Require Intermountain to calculate level pay amounts using 12 months as a divisor.
STAFF COMMENTS JUNE 11 , 2004
Respectfully submitted this
/I-P-
day of June 2004.
~D~
Lisa Nordstrom
Deputy Attorney General
Technical Staff: Alden Holm
Michael Fuss
Nancy Harman
Terri Carlock
i :/u mi sel eommen ts/in tgO4.2 Lnahmfu ssn h
STAFF COMMENTS JUNE 11 , 2004
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 11TH DAY OF JUNE 2004
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. INT-04-, BY MAILING A COpy THEREOF POSTAGE PREPAID TO THE
FOLLOWING:
MICHAEL E HUNTINGTON
VP- MARKETING & EXTERNAL AFFAIRS
INTERMOUNTAIN GAS COMPANY
PO BOX 7608
BOISE ID 83707-1608
HAND CARRIED
MORGAN W. RICHARDS JR
MOFF A TT THOMAS ET AL
PO BOX 829
BOISE ID 83701-0829
HAND CARRIED
MICHAEL P McGRATH
INTERMOUNT AIN GAS COMPANY
PO BOX 7608
BOSIE ID 83707-1608
HAND CARRIED
E- MAILED
SECRETARY
CERTIFICATE OF SERVICE