20080902Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
RECEIVEO
iuoaSEP -2 PH l¡: 38
iDAHO puaUC
UTILITiES COMM1SSl0N
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN GAS )
COMPANY'S 2009-2013 INTEGRATED )RESOURCE PLAN. )
)
)
)
CASE NO. INT-G-08-2
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of
Record, Kristine A. Sasser, Deputy Attorney General, submits the following comments in
response to Order No. 30590 issued on July 3, 2008.
BACKGROUND
On May 30, 2008, Intermountain Gas Company filed its 2008 Integrated Resource Plan
(IRP) for the years 2009-2013. In its Executive Sumar, 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 "a prescription for all future energy resource decisions." IRP at 1.
Intermountain Gas Company is the primar distributor of natural gas in southern Idaho, serving
over 300,000 customers in 74 communities during fiscal year 2008. Its system contains over
10,000 miles of transmission, distribution and service lines. In fiscal year 2007, over 421 miles
STAFF COMMENTS 1 SEPTEMBER 2, 2008
of distribution and service lines were added in response to new customer additions and to
maintain service for the growing customer base.
Intermountain's two major markets are the residential/commercial market (the "core
market") and the large volume, contract customer ("industrial market"). Intermountain
experienced an increase of nearly five percent (5%) in average residential and commercial
customers between the first half of FY07 and the first half ofFY08. Forty-three percent (43%)
of the throughput on Intermountain's system during FY07 was attributable to industrial sales and
transportation.
According to the Company's filing, peak day "send-out" (delivery) studies and load
duration curves were developed under design weather conditions to determine the magnitude and
timing of future deficiencies in firm peak day delivery capabilty. Residential, commercial and
industrial peak day load growth on the Company's system is forecast to grow at an anual
average rate of four percent (4%) over the next five years. The Company calculated the growth
for the system as a whole along with three separate regions in which Intermountain Gas operates.
The Company's service regions with laterals off the main are the Idaho Falls, Sun Valley, and
Canyon County laterals. When forecasted peak day delivery is matched against existing
resources, Intermountain Gas said it may have delivery deficits on some days of peak use along
its Sun Valley Lateral if a compressor station, which increases capacity by providing higher
pressure, is not added by fiscal year 2011. Also, the Company said it may experience delivery
deficits by 2012 along its Canyon County LateraL. One of the options Intermountain Gas is
considering is to increase capacity by adding a new pipe parallel to an existing line where there
is currently a bottleneck. The IRP sets forth the following abbreviated analysis of the
Company's main service region laterals.
The Idaho Falls Lateral (IFL) region serves cities between Pocatello to the south and St.
Anthony to the north. The residential, commercial and industrial load served off the IFL
represents approximately sixteen percent (16%) of the total Company customers and twenty one
percent (21%) of the Company's total winter delivery during December of2009. 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.
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
STAFF COMMENTS 2 SEPTEMBER 2, 2008
consumption by switching to fuel oil during extreme cold temperatures. IRP at 4. However,
since there are no deficits, no industrial alternative fuel use is required.
The Company's residential, commercial and industrial customers in the Sun Valley
Lateral (SVL) region account for three and a half percent (3.5%) of the total customer base and
slightly over three percent (3.3%) of the Company's total winter delivery during December of
2007. 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 primar industrial load on the SVL is tourism and medical services. No industrial
customers on the SVL have the capabilty to switch to alternative fuels so using industrial fuel to
mitigate peak day consumption is not an option. 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 Company contends that rebuilding
the primary gate station serving the SVL and the use of linepack should be able to cover small,
short-duration deficits until the new capacity comes on line for the FYll heating season.
Fifteen percent (15%) ofthe Company's residential, commercial and industrial load is
served off the Canyon County Lateral (CCL) region, and it accounted for thirteen percent (13%)
of the Company's total winter delivery during December of 2007. 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 durng 2012 and increases thereafter. 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 curently exploring
optional means of enhancing the distribution capabilty in this region. The optimization model
selected the installation of a pipeline-looping project prior to FY12 as the best solution to this
capacity deficit.
STAFF ANALYSIS
In accordance with the Public Utilties Regulatory Policy Act of 1978 (PURPA) (as
amended by the 1992 Energy Policy Act), Commission Order Nos. 25342, 27024 and 27098
require that the Company submit an Integrated Resource Plan (IRP) to the Commission every
two years, addressing the following elements:
. Demand Forecasting
STAFF COMMENTS 3 SEPTEMBER 2, 2008
. Assessment of Effciency Improvements (DSM Actions) & Avoided Costs
. Natural Gas Supply Options
. Natual Gas Purchasing Options and Cost Effectiveness
. Integration of Demand and Resources
. Two Year Plan
. Relationship Between Consecutive Plans (2006 Plan to 2008 Plan)
. Public Paricipation
The Company's 2008 IRP addressed each of these elements to various degrees, as described in
more detail below.
Demand Forecasting
The C~mpany's Demand Forecasting represents the basis for the 5 year planing period
of 2009-2013. Demand Forecasting outlines three key components in discussing how future load
requirements are modeled for resource planing. These are outlined as the "Residential and
Commercial Customer Growth Forecast," "Heating Degree Days and Design Weather," and
"Usage Per Customer." The "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 curent service territory. "Heating Degree
Days and Design Weather" capture the influence that changing temperature has on system loads
given Intermountain's diverse geographic service territory. "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.
Based on the recommendations of Staff in past IRPs and Intermountain's continued
dilgence to improve forecasting, Staff has seen progress in paricular areas of Demand
Forecasting. Staff acknowledges the Company's advances recognizing different usage
characteristics, specifically among the peak vs. non-peak months, weekend vs. weekday, and
between non-peak biling classes. Staff also recognizes the detail in forecasting, which includes
multiple customer growth and natural gas price scenarios for each lateral along with the entire
Company. The Company has provided a more detailed description of the regression variables
tested and used for peak and non-peak load forecasting, along with the methodology for
STAFF COMMENTS 4 SEPTEMBER 2, 2008
projecting market penetration and conversion rates. This is precisely the type of description
Staff believes is needed in the IRP, providing a detailed description of the Company's
forecasting process clearly ilustrates a modeling framework. Within the framework of this
methodology Staff believes the Company should continue to closely monitor how accurately its
"IGC Conversion Rate" and "IGC Commercial Multiplier Rate" predict their intended regional
categories over time. Since these rates are calculated based on the percentage of their respective
categories relative to home construction, it is importnt to make sure these interrelationships
provide historically accurate projections given the housing industry's volatilty. Providing a
brief analysis of the Company's effort to track this variance within the next IRP would provide
the Commission and Staff confidence in the Company's commitment to improvement. In
addition, Staff would like to see the Company continue to monitor the benefit of enhancing its
ERT (Encoder-Receiver Transmitter) system technology for selected sampling given the
associated costs. This technology would allow the Company to collect daily usage information
by customer class and may provide more visibility and granularity to its forecasting, specifically
among small commercial customers where the Company says "the GS customer class is very
diverse, ranging from small office buildings all the way up to small food processors." IRP at 30.
Staff acknowledges the Company has installed additional throughput measurement
meters on targeted areas of the Sun Valley (SVL) and Idaho Falls (IFL) laterals. Although data
is stil being collected and has not been completely utilzed for forecasting within the IRP, Staff
believes the Company should provide a sumary in the next IRP ilustrating the statistical
significance, outcome, and decisions resulting from the Company's more complete SVL and IFL
total daily usage data.
In response to Staffs Production Request No. 8g the Company states: "Studying the Sun
Valley Lateral data led Intermountain to conclude that the Total Company models may not be
accurately accounting for what appears to be a higher peak day usage per customer on the Sun
Valley Lateral, an area that includes a housing stock with significantly larger average square
footage per household." As stated previously, Staff believes a sample set of enhancements to the
ERT system would provide intra-class data that would be useful in evaluating the impact of
influential factors such as square footage. In addition, this wil provide valuable information for
forecasting, structuring prices, evaluating trends, and designing DSM programs. The Company
could then evaluate how a sample set of enhanced ERT system data would benefit decision
making given the cost. Perhaps particular programs are more successful among certain regions
STAFF COMMENTS 5 SEPTEMBER 2, 2008
and intra-class profiles. This technology would allow Intermountain to accurately evaluate
appropriate customer incentives, and cut marketing costs through more tageted and successful
campaign avenues. Staff recommends that as more complete data is collected and potential ERT
system enhancements reviewed, the next IRP should be expanded to include an evaluation and
framework of its DSM programs.
Assessment of Effciency Improvements (DSM Actions) & Avoided Costs
In response to an April 27, 1997, fiing by the Company (Case No. INT-G-97-2), the
Commission issued Order No. 27098 allowing the Company, in its biennial IRP, to address
efficiency measures with a "general explanation with each IRP filing of whether there are cost
effective (demand-side management (DSM)) opportunities." Order No. 27098 at 2. Prior to that
time the Commission required that the IRP address"... a full spectru of opportities available
to the Company, including conservation and efficiency measures...." Order No. 25342.
In addressing efficiency, the Company simply states that it hired Navigant as a consultant
to identify DSM opportunities. However, Staff believes it is importt to provide a detailed
explanation in the IRP of the cost effective opportunities that Navigant identified, with their
various costs, design, deployment potential, peak savings, year-round gas savings, and
implementation timelines. By providing these evaluations and making them available within the
IRP, the Commission and Staff are made aware of the potential gas saving opportunities. With
regard to the Company's curent evaluation ofDSM programs, the Company states: "While
most of the measures in Navigants group provided cost-effective, year-round gas savings, none
had any meaningful effect on Intermountain's peak demand." Staff believes that although these
programs may not directly target just Intermountain's "peak demand," they may provide year-
round gas savings relief during the remainder of the year, enabling Intermountain's customers to
lower anual per-capita demand. Within the next IRP, Staff recommends that DSM program
cost effectiveness be evaluated according to its affect on peak demand and year-round gas
savings.
Similar to the Company providing a methodology detailing the framework of demand
forecasting, Staff recommends a similar approach with the curent and future DSM programs.
This approach should outline a methodology for selecting pilot areas, targeting customers,
determining customer incentives, program design, and timeline for implementation to ensure
Intermountain is successfully promoting effciency. Curently there are three incentive programs
STAFF COMMENTS 6 SEPTEMBER 2, 2008
that have been under evaluation and consideration by the Company since the 2006 IRP. By
outlining a framework for these program milestones within the IRP, Intermountain can assess,
decide on, and implement programs in a timely manner.
Natural Gas Supply Options
The Company addresses commodity supply in two sections of the IRP, "Traditional
Supply-Side Resources" and "Non-Traditional Supply Resources," IRP at 43-50 and 51-54,
respectively. Intermountain's traditional natual gas supplies are located primarily in three
producing regions: British Columbia (BC), Canada; Alberta, Canada; and the Rocky Mountain
(or Domestic) region consisting of production primarily from the states of Wyoming, Utah,
Colorado and New Mexico.
British Columbia, Canada, has traditionally been a source of inexpensive and abundant
gas for the Pacific Northwest. However, the completion of the Alliance pipeline delivering
capacity to Eastern Canada and the Midwest US has alleviated captive regional bottlenecks that
previously benefited the Northwest. Currently there is adequate supply given the provincial
demand, however future natural gas discoveries in Northeast BC are necessary for Intermountain
to rely on future imports from this region. Alberta production accounts for nearly forty percent
(40%) of the Company's daily supply purchases. Positive factors influencing the decision to
purchase Alberta supplies are vast reserves, extensive pipeline facilities, and access to
production-based storage. Despite the fact that Alberta is believed to have the largest natural gas
reserves on the North American continent and produces ten times the Pacific Northwest's yearly
consumption, a couple of concerns remain. Since most of the shallow reservoir wells were
exhausted, new well completions are expected to be deeper wells which have a different
production cycle. Unlike shallow wells, which typically have steep production curves but
exhaust quickly, these have shallow production curves which have steadier rates that last for
much longer periods. Therefore, short run supply availability may tighten but long term
forecasts project growth. The Rockies basin has historically been the second largest source of
supply due to Intermountain's positioning with regards to interstate capacity. Although this gas
currently trades at a discount compared to the aforementioned basins, Intermountain foresees
several new pipeline projects that could put upward pressure on price. Among these pipeline
projects are plans to tae gas west into California and east on the Midwestern pipeline system.
STAFF COMMENTS 7 SEPTEMBER 2, 2008
However, at this point Intermountain expects to continue obtaining approximately fifty percent
(50%) of anual supply from Rockies.
The Company's non-traditional supplies are primarily focused on two areas: 1) the
encouragement of customers to switch from natural gas to fuel oil, coal, wood chips, or propane;
and 2) the Company's alternative options such as remote/portable LNG and biofuel production.
Non-traditional supplies offer promising complementary solutions to reducing peak
consumption. Therefore, Staff recommends that Intermountain continue to engage in
negotiations with its IFL industrial customers capable of utilzing non-traditional supplies.
Identifying and enabling customers with the capabilty to switch fuel could reduce demand
during peak periods and provide relief to all customers.
The Company's supply options are diversified and adequately explained. In Staffs
opinion the Company has sufficiently addressed supply-side options in the IRP.
Natural Gas Purchasing Options and Cost Effectiveness
Intermountain's strategies for purchasing natural gas include optimizing three modeling
components to identify the most appropriate resources to meet demand. These modeling
components can be characterized as the Demand Forecast, Supply Resources, and Transportation
Resources. Intermountain uses advanced allocation software to utilze its resources effectively
over time given regional natural gas demand. Other factors that make Intermountain the lowest
cost retail service provider in Idaho are its substantial utilzation of storage facilities and its
proximity to centralized transportation capacity.
Intermountain utilzes three geographically diverse underground storage facilties located
in Western Washington, Northeastern Utah, and Eastern Alberta Canada. In addition, the
Company has two LNG facilities, one owned by Northwest Pipeline located near Plymouth,
Washington, and a Company owned facilty near Nampa, Idaho. All of the Company's out-of-
service territory storage is either bundled with transportation to the service territory or is
combined with Company-contracted transportation to the service territory. Intermountain injects
excess gas into storage during off-peak periods when prices are lower and then withdraws it
during the peak load months. This process allows for more effcient year-round use of natural
gas supply and transportation capacity.
Intermountain's proximity to several interstate pipelines allows it to effectively allocate
its natural gas supply mix from several different basins based on price differentials, and
STAFF COMMENTS 8 SEPTEMBER 2, 2008
subsequently redeliver that specified volume on its own distribution pipeline network at the
lowest possible price. Since Northwest Pipeline (a large pipeline connecting the Rockies supply
basin) rus directly through Intermountain's service territory, Intermountain is able to
geographically utilze this service more directly. In addition to Nortwest Pipeline,
Intermountain has firm capacity on three other pipelines that deliver Alberta, Canada, gas to
Northwest's Stanfield interconnect.
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. The Company has documented the processes, procedures,
and evaluation of resources, therefore the Staff considers this section sufficiently covered within
the IRP.
Integration of Demand and Resources
Intermountain projects residential, commercial and industrial average annual growth to
occur at 2.1 % (low growth), 3% (base case) and 4.1 % (high growth). Under each of these
customer growth scenarios Intermountain identifies deficits that would occur if corrective action
were not taen. When forecasting peak day sendout for the IFL Design Base Case and
comparing it against the existing peak day lateral capacity, which includes the Satellte LNG
peak withdrawal capability, no peak day delivery deficit occurs in any year under all customer
growth scenarios. When forecasting peak day sendout for the SVL Design Base Case and
comparing it against the existing peak day lateral capacity, a peak day delivery deficit occurs
staring in 2009 for design weather scenarios and increases at an average rate of 265 MMBtu for
low growth, 379 MMBtu for base case, and 546 MMBtu for high growth. However, the
Company believes these deficits can be remediated by rebuilding the gate station and relying on
linepack for very short durations until 2011. When forecasting peak day sendout for the CCL
Design Base Case and comparing it against the existing peak day lateral capacity, a peak day
delivery deficit occurs staring in 2012 under base case growth and high growth. Intermountain
attributes this deficit to a single, undersized, bottleneck line which stands out as the weak point
in the system despite multiple pipelines of different diameters and pressures. The Company
believes the best enhancement for this situation is a loop line installed prior to 2012 that will
remove the curent bottleneck restriction associated with the curent pipeline network. Staff
STAFF COMMENTS 9 SEPTEMBER 2, 2008
remains confident regarding the Company's ability to allocate resources according to the
magnitude of future deficits. Therefore, Staff acknowledges the remediation decision that
enhancements will provide to ensure adequate service. Staff believes the Company has
specifically described and evaluated the types of additional supply resources that wil be
acquired, developed, or constructed to eliminate deficits and, therefore, the Company has
fulfilled its necessary IRP requirements.
Two Year Plan
Within the "Two- Year Plan" section of the 2006 IRP Staff Comments, Staff
recommended that the Commission "consider striking the requirement for the Company to
submit a two-year plan within the IRP." This recommendation was made because Staff believed
that the Company's five-year IRP provided information adequately addressing the original need
for requiring the two-year plan, and that it may no longer be necessary for the Company to
submit a two-year plan within its IRP. Although no Commission Order has been issued
eliminating the two year plan, nor has a formal recommendation been made to the Commission,
the Company did not include a 2 year plan with this Petition.
It remains Staffs opinion and recommendation that Order No. 25342, page 4, be
modified to remove the statement requiring "A short-term (e.g., two-year) plan outlining the
specific actions to be taken by the utility in implementing the integrated resource plan." The
information in the five-year plan should provide information that would adequately fulfill the
two year plan's purose, and the inclusion of the two-year plan within the Company's five-year
IRP usually results in duplicative information that does not furher iluminate the overall plan.
Relationship Between the Plans (2008 IRP vs. 2006 IRP)
In the comparative analysis between the 2006 IRP and the present IRP the Company
satisfies its IRP requirement by discussing several differences in the outcome of its key planning
components. Although this information fulfills the necessary IRP requirements, progress in
methodology and program design is not clearly ilustrated. More specifically, the "Demand-Side
Management" comparative evaluation simply restates what was previously discussed in the 2006
IRP leaving the reader with little indication of progress. The Company briefly discusses
Navigant's work but provides little detail on how the outcome has contributed toward future
planning or program design. Within the next IRP, Staff recommends that the Company focus on
STAFF COMMENTS 10 SEPTEMBER 2, 2008
these improvements or changes, specifically within the "Demand-Side Management" section as
price increases continue to escalate the need for, and cost effectiveness of, efficiency and
conservation.
Public Participation
Staff believes the Company has met the requirement for public paricipation in the IRP
process. The Company's customer contact and marketing personnel paricipate in energy
effciency education through working relationships with members of the community.
Intermountain paricipates in the Energy Resource Symposium, a half-day seminar for energy-
assistance providers and advisors. Paricipants were given information on various developments
in payment plans and energy payment assistance. Staff recommends the Company continue to
target these types of programs as utility prices increase. Directly contributing to weatherization
assistance programs and CAP agencies helps ensure success and spread information on these
payment assistance plans. Staff notes that Intermountain is an active partner in the Rebuild
Idaho energy efficiency campaign, Energy Star, and is a co-sponsor of the Idaho Building
Efficiency Conference.
STAFF RECOMMENDATION
After a complete evaluation of the Company's IRP, its methodology and conclusions,
Staff recommends that the Commission acknowledge the Company's IRP as fulfillng the
necessary requirements. However, Staff has the following recommendations for future IRPs:
1) That the Company provide an analysis of how accurately its "IGC Conversion Rate" and
"IGC Commercial Multiplier Rate" predict growth in number of customers and load over
time.
2) That the Company continue to monitor the benefit of enhancing its ERT system
technology for selected sampling given the associated costs.
3) That the Company continue to briefly summarize the statistical significance, outcome,
and decisions resulting from the Company's more complete SVL and IFL total daily
usage data.
4) That the Company define the cost effectiveness ofDSM opportunities as both year
around and peak demand gas savings, and elaborate on cost effective programs with a
STAFF COMMENTS 11 SEPTEMBER 2, 2008
framework for program design, estimating costs, deployment potential, peak savings,
year around savings, and implementation timeline.
5) That the Company provide more detail on the differences in DSM evaluation between its
IRPs.
6) That the Commission remove the statement requiring "A short-term (e.g., two-year) plan
outlining the specific actions to be taken by the utilty in implementing the integrated
resource plan." Order 25342, page 4.
') _N~Respectfully submitted this ~day of September 2008.
if:ta: l a. ~4iJ\Kris me A. Sasser
Deputy Attorney General
Technical Staff: Matt Elam
i:umisc/commentsintg08.2ksme comments
STAFF COMMENTS 12 SEPTEMBER 2, 2008
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 2ND DAY OF SEPTEMBER 2008,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. INT-G-08-2, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
MICHAEL P McGRATH / DIRECTOR
GAS SUPPLY & REG. AFFAIRS
INTERMOUNTAIN GAS COMPANY
PO BOX 7608
BOISE ID 83707
,b~SECREAR~~
CERTIFICATE OF SERVICE