20040630Press Release.pdf

IDAHO PUBLIC UTILITIES COMMISSION
Case No. INT-04-, Order No. 29540
June 30, 2004
Contact: Gene Fadness [phone]
Website: www.puc.state.id.
Intermountain Gas rates increase by 10 percent
Boise - Rates for residential customers of Intermountain Gas will increase by nearly 10 percent
effective Thursday.
The Idaho Public Utilities Commission approved the new rate to reflect the rapidly fluctuating
cost of wholesale natural gas. However, the company states that current gas futures, subject to
the laws of supply and demand, may soften in coming months. The commission directed the
company to seek a rate adjustment before the winter heating season if the price deviates more
than 5 percent of the current weighted average cost of gas (W ACOG), which, as of Thursday,
will be 55.49 cents per thermo The W ACOG before this increase was 47.5 cents per thermo
Forward monthly NYMEX natural gas futures for the Northwest are in the range of 49 cents to
61.5 cents for the next year.
The increase approved today does not reflect a permanent rate change, but is part of the
company s purchased gas cost adjustment, typically a yearly process that adjusts the gas
purchase portion of customer bills up or down depending on the cost of natural gas in the
wholesale market. "The PGA mechanism is designed to pass through prudently incurred
commodity costs in a timely fashion " the commission said. "Wholesale natural gas prices have
fluctuated dramatically over the past few years, resulting in higher natural gas costs for gas
utilities nationally and in Idaho.
PGA adjustments do not increase or decrease the company s earnings. The revenue raised from
an increased PGA goes directly to pay Intermountain s gas suppliers. The company does not drill
its own wells and is dependent on wholesale natural gas to serve its approximate 230 000
southern Idaho customers. During years when wholesale prices are higher than the company
forecasts, customers experience an increase in the gas purchase portion of their bills, which
usually represents about half the total bill. When wholesale prices drop lower than proj ected
customers get a decrease. In 2003 , customers got a 33 percent increase while in 2002 they got a
28 percent decrease in the PGA portion of their bills. "In contrast to a general rate case, the
annual PGA tracker considers only those changes in gas costs that are generally recognized as
outside the company s control " the commission said.
The increase will raise $22.1 million to cover the company s gas purchases. Commission staff
reviewed the company s filing and related documentation to verify that the company s earnings
will not increase as a result of the PGA.
The rate for customers using an average 69 therms per month for natural gas space and water
heating will increase from 81 cents to 89 cents per therm, or about $5.58 per month. The rate for
customers who use natural gas for space heating only and average about 48 therms per month
will increase from 92 cents to $1 per therm, or about $3.86 a month. The rate for commercial
customers using an average of299 therms per month will increase from 77 cents to 85 cents per
therm, or about $26.19 per month. A therm is a unit of heat equal to 100 000 British thermal
units (BTU s).
The commission placed nearly $700 000 of Intermountain s request in a reserve account until the
company complies with previous commission orders to create a hedging and risk management
strategy that makes it easier for the commission to assess the company s gas purchasing
decisions. The company s current practice of relying on sound judgment using natural gas price
fundamentals and other market indicators "has largely been successful " the commission said
but "appears to leave Intermountain Gas and its customers more vulnerable than necessary." The
commission is asking the company to implement a flexible systematic method for gas purchasing
decisions that can be audited.
T 0 conduct prudency reviews, the commission needs to know what information the company
used when it decided whether or not to purchase natural gas " the commission said. "Criteria that
trigger action or company explanations of why action was not taken are essential so that the
commission may assess the company s decisions and avoid hindsight reviews.
Commissioners said they have previously asked the company to change how it manages market
risk. "Although considerable time has passed, these concerns have not been adequately
addressed. "
The commission also ordered that future PGA filings be made closer to the winter heating season
to more accurately forecast prices and more closely align rate changes with the winter heating
season. "Due to the market volatility experienced the last several years, we have struggled to set
rates using futures pricing information that predicts what winter commodity prices will be six
months in the future " the commission said. "Although we used the best information available in
May, better information is available in August." The commission directed the company to submit
its 2005 PGA filing by Aug. 15 for a rate that would be effective Oct.
Because Thursday s increase may not be noticed on bills until the winter heating season, the
company will send customers a reminder just before winter. Included with the reminder should
be conservation tips, payment options and contact information for those customers needing
assistance to pay their bills.
A full text of the commission s order, along with other documents related to this case, are
available on the commission s Web site at www.puc.state.id.. Click on "File Room" and then
on "Gas Cases" and scroll down to Case No. INT-04-
Interested parties may petition the commission for reconsideration by no later than July 21.
Petitions for reconsideration must set forth specifically why the petitioner contends that the order
is unreasonable, unlawful or erroneous. Petitions should include a statement of the nature and
quantity of evidence the petitioner will offer if reconsideration is granted.
Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.
Box 83720, Boise, ill , 83720-0074, or faxed to 208-334-3762.
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