20080717final_order_no_30599.pdf

Office of the Secretary
Service Date
July 17,2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF INTERMOUNTAIN GAS FOR
AUTHORITY TO CANCEL ITS EXISTING
l AND T-2 TRANSPORTATION
TARIFFS AND IMPLEMENT A T-
TARIFF.
ORDER NO. 30599
CASE NO. INT -08-
On May 7 , 2008, Intermountain Gas Company filed an Application with the
Commission seeking authority to cancel its existing T -1 and T -2 Transportation Tariffs and place
into effect a new Industrial Transportation Tariff (T-5 Tariff). More specifically, the Company
asserts that it is necessary to cancel the T-1 and T-2 tariffs in order to ensure continued
compliance with the applicable rules and regulations pertaining to the Northwest Pipeline.
On May 29, 2008, the Commission issued a Notice of Application and set an
intervention deadline. Order No. 30562. Northwest Industrial Gas Users was the only party to
petition to intervene and it was granted intervention in Order No. 30577. The Commission
issued its Notice of Parties on June 20, 2008. Following consultation with the parties, it was
determined that a formal discovery period was unnecessary to address issues raised by the
Application. On June 27, 2008, the Commission issued a Notice of Modified Procedure setting a
14-day comment period. Order No. 30586.
THE APPLICATION
The Company asserts that it is necessary to cancel the T-1 and T-2 tariffs and
implement the new T-5 tariff to comply with the applicable rules and regulations pertaining to
Northwest Pipeline interstate pipeline system. Northwest's Federal Energy Regulatory
Commission (FERC) Gas Tariff requires that a shipper have sole title to the natural gas
transported on Northwest's system. The shipper must have concurrent title to both the gas
molecule as well as the interstate transportation rights transporting that same gas molecule.
Intermountain Gas maintains that there are two fundamental attributes of its T -1 and
2 tariffs at odds with Northwest's regulation requirement: (1) the Company s T-1 and T-
tariffs are "bundled" transportation services to include the use, and compensation for, the
1 Northwest Pipeline is an interstate pipeline system utilized to transport natural gas.
ORDER NO. 30599
Company s firm capacity on Northwest's system; and (2) the tariffs require that customers
procure their own supply of natural gas from a third-party marketer. Presently, to ensure
compliance with Northwest's FERC Gas Tariff, Intermountain Gas has contractually agreed
beyond the scope of the tariffs to release interstate transportation capacity to prearranged
marketer parties who supply gas to existing T-l and T-2 customers. However, the Company
feels that, given the evolving dynamics of the interstate natural gas market, as additional
marketers compete for business on Intermountain Gas s distribution system, the likelihood that
concurrent commodity and transportation titles will become severed is greatly intensified thereby
risking non-compliance with FERC regulations if the T -1 and T -2 tariffs remain in use.
Concurrent with the elimination of its T -1 and T -2 tariffs, Intermountain Gas intends
to offer each T-l and T-2 customer the opportunity to choose from the menu of remaining
unbundled industrial transportation services; specifically those services as offered under the
Company s T-3 and T-4 tariffs, and, if approved by the Commission, the proposed T-5 tariff. In
order to help facilitate a customer s option to elect the T-4 tariff, the Company seeks
Commission approval to waive the T-4 tariffs Exit Fee provision.
According to its Application, T -1 customers have the option of selecting the T -4 tariff
- an unbundled version of the T-l tariff. T-2 tariff customers have no equivalent unbundled
tariff option. Therefore, the proposed T -5 rate schedule is an unbundled version of the
Company s T-2 tariff. Intermountain Gas asserts that, with the interstate transportation capacity
release, the T-5 customer s burner-tip price "should be economically equivalent" to that provided
under the bundled T-2 service.
THE COMMENTS
Staff recognized Intermountain Gas s concern regarding compliance with FERC
regulations and the Company s increasingly complicated contractual arrangements implemented
to assure compliance. Because the T -1 and T - 2 transportation tariffs require the customer to
procure its own gas supply and also include an allocated portion of the Company s transportation
cost, the tariffs are at risk of non-compliance without modification. The Company s proposed
remedy is to eliminate embedded transportation costs from its industrial transport tariffs. Staff
found it reasonable for Intermountain Gas to seek modification of its tariffs to ensure compliance
with the Northwest Pipeline and FERC.
ORDER NO. 30599
Intermountain Gas s existing T-4 tariff provides an equivalent alternative to current
l customers absent the embedded interstate transportation costs. In order to further facilitate a
customer s option to elect the T -4 tariff, the Company seeks Commission approval to waive the
4 tariffs Exit Fee provision. Staff supported waiver of the T-4 Exit Fee. Current T-
customers do not have an existing equivalent alternative absent the embedded interstate
transportation costs. Without the T-2 tariff, customers who specify a maximum daily firm
quantity will need another option. In response, the Company has proposed the implementation
of a new T -5 tariff to meet the future needs of current T -2 customers. Staff had no objection to
the implementation of the proposed T-5 tariff.
Instead of having interstate transportation capacity provided by Intermountain Gas
within the T-l and T-2 price structure, the Company will accommodate the customers' ability to
procure gas by turning over interstate transportation capacity on Northwest Pipeline to the
customer or the customer s marketing agent, subject to recall. Intermountain Gas affirmed that it
would provide customers with the same allocated receipt point proportion as was permissible
previously under the T -1 and T -2 tariffs.
Despite the Company s assurance of a smooth transition, Staff indicated concern
about the impact that the tariff changes would have on customers. Staff urged that Intermountain
Gas have a clear transition plan wherein customers were openly informed and not penalized for
the termination of the tariffs. Staff recommended that the Commission require Intermountain
Gas to monitor the transition to prevent termination penalties from being charged due to the T-
and T -2 tariff eliminations.
The intervenor, Northwest Industrial Gas Users (NWIGU), filed comments indicating
that its concerns had been addressed and resolved through direct communications with
Intermountain Gas. As a result, NWIGU supported Intermountain Gas s Application.
COMMISSION FINDINGS AND CONCLUSIONS
Having fully reviewed the Application and comments in this proceeding, we approve
Intermountain Gas s Application for authority to cancel its existing T -1 and T -2 Transportation
Tariffs and implement a T -5 Tariff. Considering the evolving dynamics of the interstate natural
gas market, the Commission finds it reasonable for Intermountain Gas to modify its tariffs to
ensure compliance with the Northwest Pipeline and FERC regulations. The Commission further
ORDER NO. 30599
finds that waiving the T-4 tariffs Exit Fee is appropriate in order to assist those customers
electing to take service under the existing T -4 tariff.
It is important that current T-l and T-2 customers not be penalized for the
Company s decision to terminate their tariffs. Therefore, the Commission directs Intermountain
Gas to closely monitor the transition to ensure that termination penalties are not charged due to
the elimination ofthe T -1 and T -2 tariffs.
ORDER
IT IS HEREBY ORDERED that Intermountain Gas s Application for authority to
cancel its existing T -1 and T -2 Transportation Tariffs be granted.
IT IS FURTHER ORDERED that the implementation of a new T-5 Tariff be granted.
IT IS FURTHER ORDERED that the Exit Fee associated with Intermountain Gas
T -4 tariff be waived in order to facilitate a customer s option to elect service under the T -4 tariff.
IT IS FURTHER ORDERED that Intermountain Gas closely monitor the transition
of current T -1 and T -2 tariff customers to ensure that the customers are not penalized by the
Company s business decision to eliminate tariffs.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code ~ 61-626.
ORDER NO. 30599
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
-fA.
day of July 2008.
;j~
MARSHA H. SMITH, COMMISSIONER
fd~~EMPTON, COM IONER
ATTEST:
Je D. Jewell .
Commission Secretary
O:INT-08-01 ks3
ORDER NO. 30599