20090925final_order_no_30908.pdf

Office of the Secretary
Service Date
September 25, 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN
GAS COMPANY'S REQUEST FOR
AUTHORITY TO ESTABLISH A HOOKUP
FEE ALONG ITS SUN VALLEY LATERAL.
CASE NO. INT-09-
ORDER NO. 30908
On June 15 , 2009, IntelTI1ountain Gas Company filed an Application with the
Commission seeking authority to establish a hookup fee along its Sun Valley Lateral. The
Company requested that the Application be processed by Modified Procedure and that the
hookup fee be implemented as of July 15, 2009.
On July 10, 2009, the Commission issued a Notice of Application, set a deadline for
intervention, and suspended the Company s request for a July 15 , 2009, effective date. Order
No. 30857. No parties petitioned to intervene. On August 11 , 2009, the Commission issued a
Notice of Modified Procedure setting a 21-day comment period. Order No. 30876. Five
comments, all favoring the hookup fee, were filed with the Commission. By this Order, the
Commission approves IntelTI1ountain Gas s request as more fully discussed herein.
THE APPLICATION
The Sun Valley Lateral is currently operating near system capacity. The Company
maintains that it has made and will continue to make substantial capital upgrades to the Lateral in
order to serve the daily natural gas needs of all its Sun Valley Lateral customers. The next
planned distribution system upgrade off the main Sun Valley Lateral is the "Ketchum Uprate
planned to be completed in 2009. This upgrade will provide for an additional 16 000 thelTI1s per
day of incremental distribution capacity to new Ketchum and Sun Valley, Idaho customers at an
estimated cost of $640 000.
The Company anticipates that a significant portion of the planned growth along the
Lateral will be large homes and high-usage seasonal customers whose estimated peak-day
demand requirements are extremely high compared to their daily usage throughout the year.
IntelTI1ountain Gas proposes a new rate schedule that would require new customers whose
estimated peak usage on the Sun Valley Lateral exceeds the average peak-day usage on the
1 The "uprate" of a natural gas pipeline is the process required to increase the allowable operating pressure of a
pipeline segment.
ORDER NO. 30908
Lateral to pay a fee. The fee would be based on the disproportionate amount of incremental
distribution system plant investment that these new customers create. The customers who will
be subject to the proposed hookup fee will be the same new customers causing the need for, and
who directly benefit from, additional Sun Valley Lateral distribution system capital upgrades.
The Company reports that the average peak-day usage per customer along the Sun
Valley Lateral is presently 15.5 thelTI1s per day.
The Company proposes that the hookup fee initially be set based on the estimated
cost of construction of the Ketchum Uprate Project - $640 000. The Company intends to file a
revised rate schedule with the Commission reflecting the actual costs of the Ketchum Project
when they are known. If actual costs of the Project result in a lower hookup fee than that which
is initially approved, and therefore charged, to customers, the Company will issue a refund to
customers who paid the inflated fee. If actual costs result in a higher hookup fee the Company
does not intend to seek the difference from customers who paid the lower fee prior to the
detelTI1ination of actual costs.
The Company asserts that its earnings will not change as a result of the proposed new
rate schedule. Any collected hookup fee will be applied as a reduction to the distribution system
plant investment (rate base) provided to serve the incremental Ketchum/Sun Valley area
customers thereby avoiding any cross-subsidies that would otherwise occur to pay for any above
average customer usage.
The Company believes that failure to approve a hookup will cause undue
subsidization and upward price pressure on customers who do not directly benefit from the
Ketchum/Sun Valley area distribution system upgrades.
THE COMMENTS
Staff recognized IntelTI1ountain Gas s concern about its ability to provide service to
the large homes and high-usage seasonal customers along the Sun Valley Lateral. In order
align the Company s commitment to provide service and still ensure that projects are cost
effective, IntelTI1ountain Gas identified a geographic region that will directly benefit from the
Ketchum Uprate Project.2 Based on its proposed hookup fee and growth forecasts, the Company
estimated that it would take from two to four years to recover the costs of the Ketchum Uprate
Project.
2 The area north of Gimlet Road but excluding Gimlet Subdivision.
ORDER NO. 30908
Staff believes that the Company s proposal is a reasonable means of achieving extra
capacity to meet above average growth in per customer peak-day demand while allowing new
customers with average demand to take service without added cost. Consequently, Staff
supported the proposed hookup fee and recommended that the hookup fee stay in effect until
either the project investment is completely recovered or the additional incremental 16 000 thelTI1
capacity is utilized. Staff supported the Company s proposal to provide refunds to customers
who paid a higher hookup fee if actual costs of the proj ect reveal a lower hookup fee calculation.
Staff recommended that refunds include interest at the customer deposit rate.
Five public comments were received. All public comments supported the Company
proposal. The comments described the hookup fee as an equitable solution for future growth in
which high-usage customers pay their fair share.
COMMISSION FINDINGS AND CONCLUSIONS
Having fully reviewed the Application and comments in this proceeding, the
Commission approves IntelTI1ountain Gas s Application for authority to establish a hookup fee
along its Sun Valley Lateral. IntelTI1ountain Gas is committed to providing for all of its
customers ' peak-day natural gas needs. However, the seasonal occupancy of the large homes
being built in the area identified by IntelTI1ountain Gas does not allow the Company to generate
year-round revenue to make the Ketchum Uprate Project cost effective without a hookup fee.
Therefore, the Commission finds it reasonable for IntelTI1ountain Gas to charge a hookup fee
those customers who will directly benefit from the capital investment and, ultimately, whose
demand makes the uprate necessary.
The Commission further finds that if actual costs of the Ketchum Uprate Project
result in a lower hookup fee calculation than that initially approved and charged to customers
the Company will refund the difference between the charges and the lower hookup fee ultimately
approved by the Commission. We do not require that refund amounts, if any, include interest.
Finally, the Commission finds it reasonable for the Company to collect the hookup fee until
either the Ketchum Uprate Project costs are completely recovered or the additional incremental
000 thelTI1 per day capacity provided by the project is fully utilized.
ORDER
IT IS HEREBY ORDERED that IntelTI1ountain Gas s Application for authority to
establish a hookup fee along its Sun Valley Lateral is approved.
ORDER NO. 30908
IT IS FURTHER ORDERED that the hookup fee become effective on October 1
2009. IntelTI1ountain Gas is directed to file a confolTI1ing tariff no later than September 30, 2009.
IT IS FURTHER ORDERED that IntelTI1ountain Gas issue refunds if actual costs of
the Ketchum Uprate Project result in a lower hookup fee calculation than that initially approved
and charged to its customers.
IT IS FURTHER ORDERED that the Company collect the hookup fee until either
the Ketchum Uprate Project costs are completely recovered or the additional incremental 16 000
thelTI1 per day capacity provided by the project is fully utilized.
IT IS FURTHER ORDERED that IntelTI1ountain Gas file an updated application
apprising the Commission of actual costs of the Ketchum Uprate Project and resulting hookup
fee calculation within 60 days of the completion ofthe Project.
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.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ~5"J+.
day of September 2009.
MD. KEMPT SIDENT
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MACK A. REDFO
ATTEST:
€t2~ Je D. Jewell
Co mission Secretary
O:INT-09-01 ks3
ORDER NO. 30908