20080923final_order_no_30643.pdf

Office of the Secretary
Service Date
September 23 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN GAS
COMPANY'S 2009-2013 INTEGRATED RESOURCE PLAN. CASE NO. INT-08-
ORDER NO. 30643
On May 30, 2008, Intermountain Gas Company filed its 2008 Integrated Resource
Plan (IRP) for the years 2009-2013. The IRP is intended to be a planning document for the
Company that takes into account the many factors and variables that can arise as the Company
looks at supply and demand in the coming years. On July 3 , 2008, the Commission issued a
Notice of Filing and solicited comments. Order No. 30590. The only comments received were
submitted by Commission Staff. The Company filed reply comments on September 9 2008. In
this Order the Commission acknowledges that the IRP meets the requirements set forth in
previous Commission Orders and accepts the Plan for filing.
BACKGROUND
Intermountain Gas filed its IRP pursuant to Order No. 25342 and the Public Utility
Regulatory Policies Act (PURPA) ~ 303(b)(3). Order No. 25342 sets forth the original
requirements for IRPs for local gas distribution companies in accordance with amended Section
303 of PURP A. The Commission has twice modified the requirements for natural gas IRPs.
Order No. 27024 the Commission allowed natural gas utilities to shorten the planning horizon to
five years to match the companies' planning horizons and available market products. Order No.
27098 removed the requirement that IRPs include a formal evaluation of the costs and benefits of
potential demand-side management (DSM) programs. In the latter Order, the Commission stated
that a general explanation of whether there were cost-effective DSM opportunities would be
sufficient.
THE 2008 INTEGRATED RESOURCE PLAN
In its Executive Summary, the Company states that the IRP is meant to describe the
currently anticipated condition from 2009-2013. It further states that the document is meant to
describe conditions based on current expectations for various demand scenarios rather than be "
prescription for all future energy resource decisions." IRP at 1. The Company is the sole
distributor of natural gas in southern Idaho, serving over 300 000 customers in 74 communities
ORDER NO. 30643
during fiscal year 2008. Its system contains over 10 000 miles of transmission, distribution, and
service lines. Id. In fiscal year 2007, over 421 miles of distribution and service lines were added
in response to new customer additions and to maintain service for the growing customer base.
Id.
Intermountain s two major markets are the residential/commercial market (the "core
market") and the large-volume, contract customer ("industrial") market. Id. Intermountain
experienced an increase of 5% in average residential and commercial customers during the first
half of fiscal year 2008. Id. Forty-three percent (43%) of the throughput on Intermountain
system during fiscal year 2007 was attributable to industrial sales and transportation. Id.
Forecast Peak Day "Send-Out"
Peak day "send-out" (delivery) studies and load duration curves were developed
under design weather conditions 1 to determine the magnitude and timing of future deficiencies in
firm peak day delivery capability. Residential, commercial, and industrial peak day load growth
on the Company s system is forecast to grow at an annual average rate of 4% over the next five
years. The Company calculated the growth for the system as a whole as well as for the separate
regions in which the Company operates. When forecasted peak day delivery is matched against
existing resources, there are no peak day delivery deficits. IRP at 3.
Idaho Falls Lateral Region
The Idaho Falls Lateral (IFL) Region serves many cities between Pocatello to the
south and St. Anthony to the north. The residential, commercial, and industrial load served from
the IFL represents approximately 16% of the total Company customers and 21 % of the
Company s total winter delivery during December of 2009. Id. When forecasted peak day
delivery on the IFL is matched against the existing peak day distribution capacity of 1 000 000
therms, there are no peak day deficits throughout the five-year IRP Plan. Id. Intermountain
believes that small, short-duration peak day distribution delivery deficits in the future can be
mitigated by working with customers who have the potential to cut their peak day consumption
by switching to fuel oil during extremely cold temperatures. IRP at 4. However, because there
are no deficits, no industrial alternative fuel use is required.
I A "design" degree day is an estimation of the coldest temperatures that can be expected to occur for a given day.
Design degree days are useful in estimating the highest level of customer demand that may occur, particularlyduring extremely cold or "peak" weather events. IRP at 22.
ORDER NO. 30643
Sun Valley Lateral Region
The Company s residential, commercial, and industrial customers in the Sun Valley
Lateral (SVL) Region account for 3.5% of the total customer base and 3.3% of the Company
total winter delivery during December of 2007. Id. When forecasted peak day delivery on the
SVL is matched against the existing peak day distribution capacity, a peak day delivery deficit
occurs during 2009 and increases thereafter. The primary industrial load on the SVL is tourism
and medical services. Unfortunately, industrial customers on the SVL do not currently have the
capability to switch to alternative fuels as a means of mitigating peak day consumption.
However, the industrial peak day throughput is relatively small. IRP at 5. The optimization
model indicated that the most cost-effective method to increase delivery capability on the SVL is
the addition of a compressor station prior to FYll. While there are some small deficits in FY09
and FYI0, the rebuilding of the primary gate station that serves the SVL and the use of
linepack"z should be able to cover small, short-duration deficits until the new capacity comes
on line for the FYll heating season. Id.
Canyon County Region
Fifteen percent (15%) of the Company s residential, commercial, and industrial load
is served off the Canyon County Lateral (CCL) Region, and it accounted for 13% of the
Company s total winter delivery during December of2007. IRP at 6. When forecasted peak day
delivery on the CCL is matched against the existing peak day distribution capacity, a peak day
delivery deficit occurs during 2012 and increases thereafter. Id. The industrial customers in the
CCL Region do not currently have the capability to switch to alternative fuels as a means of
mitigating peak day consumption. However, the Company states that it is currently exploring
optional means of enhancing the distribution capability in this region. Id. The Company
believes that the best solution to this capacity deficit is a pipeline-looping project with an in-
service ofFY12.
2 "Linepack" involves the ability of a natural gas pipeline to effectively "store" small quantities of gas on a short-
term basis by increasing the operating pressure of the pipe. Most pipelines use linepack as a resource to help manage
the load fluctuations on their systems, building up linepack during periods of decreased demand and drawing it
down during periods of increased demand.
ORDER NO. 30643
COMMENTS
Staff timely filed its comments on September 2, 2008. In accordance with PURP A
and Commission Order Nos. 25342, 27024 and 27098, the Company submitted an IRP that
addressed the following elements:
Demand Forecasting
Assessment of Efficiency Improvements (DSM Actions) & Avoided Costs
Natural Gas Supply Options
Natural Gas Purchasing Options and Cost Effectiveness
Integration of Demand and Resources
Relationship Between Consecutive Plans (2006 Plan to 2008 Plan)
Public Participation
Staffs comments addressed each of these in turn. After a complete evaluation of the Company
IRP, its methodology and conclusions, Staff presented six recommendations to the Commission
that focused on the Company s demand forecasting, DSM program and the necessity of a "two-
year plan.The Company timely filed its reply comments on September 9, 2008. The
Company s reply comments addressed each of the Staffs formal recommendations to the
Commission.
Demand Forecasting
Intermountain s Demand Forecasting outlines three key components about how
future load requirements are modeled for resource planning purposes over the next five years.
The first component
, "
Residential and Commercial Customer Growth Forecast " provides the
anticipated magnitude and direction of Intermountain s residential and small commercial
customer growth by focus zones for Intermountain s current service territory. The second
Heating Degree Days and Design Weather " captures the influence that changing temperature
has on system loads given Intermountain s diverse geographic service territory." Finally, "Usage
Per Customer" discusses the calculations of therm usage per customer. These results, when
combined with the customer forecast and design degree days, are used to develop the IRP
demand forecast.
Staff acknowledged the Company s efforts to improve its forecasting. Specifically,
the Company cited different usage characteristics between peak and non-peak months, weekends
and weekdays, and non-peak billing schedules. Staff also recognized the detail of
Intermountain s forecasting and noted that "a detailed description of the Company s forecasting
process clearly illustrates a modeling framework." Staff Comments, p. 5. Staff recommended
ORDER NO. 30643
that the Company continue to closely monitor: (1) how accurately its "IGC Conversion Rate
and "IGC Commercial Multiplier Rate" predict growth in the number of customers and loads
over time; and (2) the benefits of enhancing its ERT system technology for selected sampling
given the associated costs. Staff recommended that, as more complete data is collected and
potential ERT system enhancements reviewed, the next IRP include an evaluation of the
Company s current and future DSM programs. Finally, Staff urged the Company to continue to
update and summarize the statistical significance of outcomes and decisions resulting from the
Company s more complete SVL and IFL total daily usage data.
In its response comments, Intermountain asserted that it does track the "IGC
Conversion Rate" and "IGC Commercial Multiplier Rate" on an ongoing basis and will, in future
IRPs, provide data representing the correlation between the projected and actual rates over time.
Further, the Company acknowledged the value of enhanced ERT technology and data. While it
expressed concerns about affecting the useful life of the ERT devices (with more frequent
electronic interrogations), the Company stated that it is evaluating ways to improve access to the
ERT data and is committed to report on its efforts. Finally, Intermountain hopes that the SVL
and IFL daily usage data will soon provide statistically valid information to more accurately
analyze daily usage patterns. The Company assured the Commission that it would include a
detailed summary of updated SVL and IFL daily usage data in future IRPs.
Assessment of Efficiency Improvements (DSM Resource Options)
The Commission previously directed Intermountain Gas to address efficiency
measures in its biennial IRP with a "general explanation with each IRP filing of whether there
are cost effective DSM opportunities." Order No. 27098. Staff noted that, in its present filing,
the Company simply states that it hired Navigant as a consultant to identify DSM opportunities.
Staff cited the importance of providing a detailed explanation of the cost-effective opportunities
that Navigant identified, with various costs, design, deployment potential, peak savings, year-
round gas savings, and implementation timelines. Staff reasoned that, while the programs
identified by Navigant might not directly target Intermountain s peak demand, they could
provide some relief during the remainder of the year, enabling Intermountain s customers to
lower annual per-capita demand. Accordingly, Staff recommended that, within the next IRP
Intermountain evaluate DSM cost-effectiveness according to its effect on peak demand and year-
round gas savings.
ORDER NO. 30643
In its response, Intermountain stressed its belief that a primary objective of the IRP
process is to plan for and ensure sufficient resources during an extreme weather event, i., peak
day. However, the Company acknowledged that efficient use of natural gas provides year-round
benefits. Intermountain agreed, for future IRPs, to better define the effectiveness of not only
peak day, but also year-round, DSM opportunities.
Natural Gas Supply Options
Intermountain addressed commodity supply for both traditional and non-traditional
supply resources. Staff noted that non-traditional supplies (e., fuel oil, coal, wood chips
propane, remote/portable LNG, biofuels) offer promising complementary solutions to reducing
peak consumption, thereby providing relief to all customers. On that basis, Staff recommended
that Intermountain continue to engage in negotiations with its IFL industrial customers capable
of utilizing non-traditional supplies.
Overall, Staff found the Company s supply options to be diversified and adequately
explained. Staff believed the Company sufficiently addressed supply-side options in the IRP.
Natural Gas Purchasing Options and Cost Effectiveness
Intermountain uses advanced allocation software to utilize its resources effectively
over time given regional natural gas demand. The Company s strategies have not only ensured
that adequate gas supplies are available to its customers, but also that the adverse impact of
significant price movements in the natural gas commodity is mitigated, and the credit risk
inherent in the implementation of certain price risk reducing strategies is minimized. Based on
the Company s documentation of processes, procedures, and the evaluation of its resources, Staff
considers this section of the IRP sufficiently addressed.
Integration of Demand and Resources
Staff expressed confidence about the Company ability to allocate resources
according to the magnitude of future deficits. Staff noted the Company specifically described
and evaluated the types of additional supply resources that will be acquired, developed, or
constructed to eliminate deficits. As a result, Staff believed the Company has fulfilled the
necessary requirements for its IRP.
Two-Year Plan
In its 2006 IRP comments, Staff recommended that the Commission "consider
striking the requirement for the Company to submit a two-year plan within the IRP." However
ORDER NO. 30643
no formal recommendation was made to the Commission. Thus, the Commission did not make a
determination regarding the elimination of the two-year plan. In its 2008 comments, Staff noted
that Intermountain did not include a two-year plan section.
Staff comments regarding Intermountain s 2008 IRP reiterated the prevIOUS
recommendation for removal of the two-year plan within the IRP. Staff reasoned that the five-
year plan should provide information that would adequately fulfill the two-year plan s purpose
and the inclusion of a two-year plan within the Company s five-year plan (filed every two years)
results in duplicative information that does not further illuminate the overall plan.
In its reply, Intermountain agreed with Staffs recommendation to remove the two-
year plan from future IRPs to eliminate the redundancy.
Relationship Between the Plans (2008 IRP vs. 2006 IRP)
Staff acknowledged that, in a comparative analysis between the 2006 IRP and the
present IRP, the Company satisfied its IRP requirement by discussing several differences in the
outcome of its key planning components. However, Staff noted that Intermountain s progress in
methodology and program design was not clearly illustrated. Staff recommended that, within the
next IRP, the Company focus on improvements or changes, specifically within the "Demand-
Side Management" section.
In response to this recommendation, Intermountain agreed to provide a more detailed
comparison between IRPs.
Public Participation
Staff believed that the Company met the requirement for public participation in the
IRP process. Staff recommended that the Company continue to target developments in payment
plans and energy payment assistance as utility rates increase. Staff noted that directly
contributing to weatherization assistance programs and Community Action Partnership (CAP)
agencies helps ensure the success of these payment assistance plans.
Legal Effect
The Staff had no comments on the legal effect of the IRP.
DISCUSSION
Pursuant to Idaho Code ~ 61-129 and the Rules of Procedure, IDAPA 31.01.01.000
et seq.the Commission has jurisdiction over Intermountain Gas Company (a natural gas utility)
and over the issues raised in this case. Specifically, an IRP is meant to be a planning document
ORDER NO. 30643
for the Company that takes into account the many factors and variables that can arise as the
Company looks at supply and demand in the coming years. The plan is not meant to be merely
an academic or regulatory exercise but a showing to the public that the Company has considered
and prepared for, a multitude of scenarios. The Commission expects each company submitting
an IRP to vigorously test each assumption used in its plan to better ensure that the results of its
IRP reflect the changing markets and demand.
Based upon our review of the Company s IRP and Staff comments, the Commission
finds that Intermountain Gas Company s 2008 Natural Gas IRP satisfies the requirements set
forth in previous Commission Orders. This acknowledgement and acceptance of the Plan 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.
Further, after considering Staffs recommendation regarding elimination of the two-
year plan, and noting the Company s agreement, the Commission finds it appropriate to remove
the requirement of a two-year plan analysis. Although the IRP is a five-year outlook and a more
focused evaluation might seem beneficial, the IRP is filed every two years, which requires the
Company to re-evaluate its five-year outlook on a biennial basis. Under these circumstances, the
Commission finds that inclusion of a two-year plan is redundant.
ORDER
IT IS HEREBY ORDERED that the Commission accepts the Intermountain Gas
Company 2008 Natural Gas Integrated Resource Plan for filing.
IT IS FURTHER ORDERED that, in future IRPs, the requirement of a two-year plan
is eliminated.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by 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 and 62-619.
ORDER NO. 30643
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ;;l.. 3 ~
day of September 2008.
\~\:-il~
L1~
MARSHA H. SMITH, COMMISSIONER
I t:
MPTO1f,CO MISSIONER
ATTEST:
D. Jewel
Commission Secretary
O:INT-08-ks2
ORDER NO. 30643