20081121Application.pdf

EXECUTIVE OFFICES
INTERMOUNTAIN GAS COMPANY
555 SOUTH COLE ROAD. P.O. BOX 7608. BOISE, IDAHO 83707. [phone]. FAX: [phone]
RECE!V
20Ð8NOV 2 I PH 3: 52
ItJAHO pueuc
UTILITIES COMMISS¡ON
November 21,2008
Ms. Jean Jewell
Idaho Public Utilities Commission
472 W. Washington Street
P.O. Box 83720
Boise, il 83720-0074
RE: Intermountain Gas Company
Case No. INT -G-08-05
Dear Ms. Jewell:
Enclosed for filing with this Commission is an original and seven (7) copies of Intermountain
Gas Company's Application seeking approval to place into effect a change in its Composite
Depreciation Rate, effective Januar 1, 2009.
Please acknowledge receipt of this filing by stamping and returing a copy of this Application
cover letter to us.
If you have any questions or require additional information regarding the attached, please contact
me at 377-6168
?lit:~~:r
Gas Supply and Regulatory Affairs
CC: K. F. Morehouse
E. NBook
S. W. Madison
MPM/sc
RECc¡\lçn. . .. .,J L. ,. ~. !i,... ~
2008 NOV 21 PM 3: 52
INTERMOUNTAIN GAS COMPANY
CASE NO. INT -G-08-05
APPLICATION
and
EXHIBIT
In the Matter ofthe Application of INTERMOUNTAIN GAS COMPANY
for Approval to Place into Effect
a Change in Its Composite Depreciation Rate
R.ECE...i\..lt: n'\ ... . ... j ." ...'" IH."
Morgan W. Richards, Jr.
ISB # 1913
804 East Pennsylvania Lane
Boise, Idaho 83706
Telephone [phone]
200B NOV 2 l PH 3: 52
P' ""'l i('IDAHO 'u;J,,,\;~.,,v'~:
UTiLITIES CCMMi;:;;,U,'¡
Attorney for Intermountain Gas Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
In the Matter of the Application )
of INTERMOUNTAIN GAS COMPANY for)
Approval to Place into Effect a Change )
in Its Composite Depreciation Rate )
Case No. INT-G-08-05
APPLICATION
COMES NOW Intermountain Gas Company ("Intermountain" or "Applicant") and,
pursuant to Idaho Code, Title 61, and Rules 6.2 and 23 of the Rules of Practice and
Procedure of the Idaho Public Utilities Commission ("Commission"), makes an Application
seeking approval to place into effect a change in its composite depreciation rate.
Communication in reference to this Application should be addressed to:
Michael P. McGrath
Director - Gas Supply and Regulatory Affairs
Intermountain Gas Company
PO Box 7608
Boise, ID 83707
and
Morgan W. Richards, Jr.
804 East Pennsylvania Lane
Boise, Idaho 83706
In support of this Application, Intermountain does allege and state as follows:
APPLICATION - 2
i.
Intermountain is an Idaho corporation, whose principal place of business is 555
South Cole Road, Boise, Idaho, and is qualified to do business in the state of Idaho.
II.
Intermountain is a gas utilty, subject to the jurisdiction of the Idaho Public utilities
Commission, engaged in the sale and distribution of natural gas within the State of Idaho
under authority of Commission Certificate No. 219 issued December 2,1955, as
amended and supplemented by Order No. 6564 dated October 3, 1962. Intermountain's
Articles of Incorporation and amendments thereto are on file with this Commission in
Case No. U-1034-120 to which reference is hereby made.
Intermountain provides natural gas service to the following Idaho communities and
counties and adjoining areas:
Ada County - Boise, Eagle, Garden City, Kuna, Meridian, and Star;
Bannock County - Chubbuck, Inkom, Lava Hot Springs, McCammon, and Pocatello;
Bear Lake County - Georgetown, and Montpelier;
Bingham County - Aberdeen, Basalt, Blackfoot, Firth, Fort Hall, Moreland/Riverside, and Shelley;
Blaine County - Bellevue, Hailey, Ketchum, and Sun Valley;
Bonnevile County - Ammon, Idaho Falls, lona, and Ucon;
Canyon County - Caldwell, Greenleaf, Middleton, Nampa, Parma, and Wilder;
Caribou County - Bancroft, Conda, Grace, and Soda Springs;
Cassia County - Burley, Declo, Malta, and Raft River;
Elmore County - Glenns Ferry, Hammett, and Mountain Home;
Fremont County - Parker, and St. Anthony;
Gem County - Emmett;
Gooding County - Bliss, Gooding, and Wendell;
Jefferson County - Lewisvile, Menan, Rigby, and Ririe;
Jerome County - Jerome;
Lincoln County - Shoshone;
Madison County - Rexburg, and Sugar City;
Minidoka County - Heyburn, Paul, and Rupert;
Owyhee County - Bruneau, Homedale;
Payette County - Fruitland, New Plymouth, and Payette;
Power County - American Falls;
Twin Falls County - Buhl, Filer, Hansen, Kimberly, Murtaugh, and Twin Falls;
Washington County - Weiser.
Intermountain's properties in these locations consist of transmission pipelines,
liquefied natural gas storage facilities, distribution mains, services, meters and regulators,
and general plant and equipment.
APPLICATION - 3
II.
Intermountain's currently effective composite depreciation rate of 3.35% was
approved by this Commission in Case No. INT-G-05-3, Order No. 29975, dated February
13, 2006. The Commission states in its Order No. 29975 "the Company shall update its
depreciation study and submit the same to the Commission for review no later than three
years from the entry of this Order."
iv.
With each update of the Company's depreciation parameters and associated
rates, special circumstances regarding Intermountain's recovery rates are addressed. The
current study addresses, among other things, the lengthening of its mains and services
depreciation lives and the corresponding adjustment to net salvage of that same plant.
The Company continues to make increased use of plastic in its main and service lines.
The cost advantage of plastic pipes lower cost vs. steel coupled with increasing evidence
of plastics longer service life necessitates the proposed increase in the lives of main and
service investment. The Company also continues to experience longer than anticipated
useful life from its installed meters and therefore proposes an increase in the useful life of
this class of plant.
v.
Intermountain has contracted the services of AUS Consultants, the same outside
consultant employed as part of Case Nos. INT-G-94-1, INT-G-96-7, INT-G-99-2, INT-G-
02-4 and INT-G-05-3, to perform an update to the 2005 depreciation study. The results
of this study indicate that the Intermountain's current composite rate is overdepreciating
its assets. Therefore, Intermountain requests a decrease in its composite depreciation
rate from 3.35% (3.34% when the accrual rates per Order 29975 are weighted by
09/30/07 assets) to 2.96%. The effect of the lower rate would be to decrease
Intermountain's annual depreciation accrual by $1,462,205.
Vi.
Intermountain does not seek a change in its prices as a result of this Application.
APPLICATION - 4
VII.
The current definition of depreciation used by the Federal Energy Regulatory
Commission and the National Association of Regulatory Commissioners is as follows:
"Depreciation," as applied to depreciable utility plant, means the loss in
service value not restored by current maintenance, incurred in connection
with the consumption or prospective retirement of utility plant in the course
of service from causes which are known to be in current operation and
against which the utility is not protected by insurance. Among the causes to
be given consideration are wear and tear, decay, action of the elements,
inadequacy, obsolescence, changes in the art, changes in demand, and
requirements of public authorities.
The American Institute of Certified Public Accountants in its Accounting
Terminology Bulletin #1 defines depreciation accounting as follows:
Depreciation accounting is a system of accounting which aims to distribute
cost or other basic value of tangible capital assets, less salvage (if any),
over the estimated useful life of the unit (which may be a group of assets) in
a systematic and rational manner. It is a process of allocation, not of
valuation.
The prescription of depreciation rates is an important element of the regulatory
process because it must allocate the full cost of an asset over the life of the property
items in a rational manner.
VII.
The depreciation study update fied with this case was based upon the books and
records of the Company as of September 30, 2007. The calculation of the amount of the
annual depreciation expense required per year was calculated on an individual account
basis. The methods used in the calculation were the Simulated Plant Record Balances
Method and the Simulated Plant Retirement Method. These Methods both use the "Iowa
Curves" type mortality distribution. The current study was conducted using the
Company's data and the "Iowa Curves" as described in the NARUC publication of
July 25, 1984, "Depreciation Practices for Small Gas Distribution Companies". The
current study is summarized and shown in Exhibit No. 1 attached hereto and incorporated
herein by reference. A copy of the current depreciation study working papers, which is
voluminous, is available for inspection at Intermountain's general business offce.
APPLICATION - 5
ix.
During the recent three-year period, the original cost of depreciable propert
increased from $327,259,429 to $383,460,395, as shown in Column (d), Line 25, on
Page 1 of Exhibit NO.1 and the accumulated reserve increased from $176,363,745, to
$207,030,611, as shown in Column (e), Line 25, on Page 1 of Exhibit NO.1. The current
study necessitates an annual accrual of $11,341,514 of depreciation expense per year
over the remaining life of the property as shown in Column (n), Line 25, on Page 2 of
Exhibit NO.1.
x.
The current study indicates a decrease is needed in the composite rate from the
current rate of 3.35% (3.34% when weighted by 09/30/07 assets) to 2.96% a decrease of
0.39% (0.0039). This decrease is required in order to accrue the proper dollars over the
remaining life of the propert. Exhibit No.1, Pages 2 through 4, contain a summary
comparison by plant function and by account of the current depreciation rates and the
proposed and requested depreciation rates in this Application.
xi.
Pursuant to Commission Order No. 29975, Intermountain completed a
comprehensive study of its LNG facility located in Nampa, Idaho. This study is available
for review at the Company's General Office located in Boise.
xii.
Intermountain asks that the decrease to the annual composite depreciation rate be
effective January 1, 2009 consistent with the beginning of Intermountain's annual
financial reporting period.
xii.
Intermountain asks that this matter be processed pursuant to the Commission's
Rules of Modified Procedure. Applicant stands ready to respond to any requests for
information.
APPLICATION - 6
xiv.
WHEREFORE, Applicant respectfully petitions this Commission for relief as
follows:
(1) That Applicant be authorized to decrease the current composite
depreciation rate on an account by account basis from 3.35% (3.34% when
weighted by 09/30/07 assets) to 2.96% as shown in Column (i), on Exhibit
No.1, page 1.
(2) That the Applicant's current prices remain unchanged as a result of this
Application.
(3) That Applicant be authorized to record the decrease in the annual
composite depreciation rate effective on January 1, 2009.
(4) For such other relief as this Commission deems just.
DATED at Boise, Idaho, this 21 st day of November 2008.
INTERMOUNTAIN GAS COMPANY
Morgan W. Richards, Jr.
BY
Morga . Richards, Jr.
Attorney f r Intermountain Gas Company
År~~
APPLICATION - 7
EXHIBIT NO.1
CASE NO. INT -G-08-5
INTERMOUNTAIN GAS COMPANY
(Depreciation Study)
(4 pages)
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Case INT -G-08-05
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Case INT -G-08-05
Intermountain Gas Company
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Exhibit No. 1
Case INT -G-08-05
Intermountain Gas Company
Page 4 of4
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