20090929final_order_no_30913.pdf

Office ofthe Secretary
Service Date
September 29, 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF INTERMOUNTAIN GAS COMPANY
FOR AUTHORITY TO CHANGE ITS
PRICES (2009 PURCHASED GAS COST
ADJUSTMENT)
CASE NO. INT-09-
ORDER NO. 30913
On August 19, 2009, Intermountain Gas Company filed its annual Purchased Gas
Cost Adjustment (PGA) Application requesting authority to decrease its annualized revenues by
$72.4 million. Application at.2. On August 26, 2009, the Commission issued a Notice of
Application and Notice of Modified Procedure and set a September 9, 2009, deadline for
comments. Eight public comments were received in addition to comments filed by Commission
Staff. After reviewing the comments and the record in this case, the Commission approves the
Company's Application as more fully set forth below.
THE APPLICATION
With this Application, Intermountain Gas seeks to pass through to each of its
customer classes a change in gas-related costs resulting from: (1) an increase in costs billed
Intermountain due to higher prices charged by Northwest Pipeline GP ('Northwest' or "Northwest
Pipeline) offset by a small decline in contract volumes on Northwest; (2) an increase in costs
from Intermountain's "upstream' Canadian pipeline suppliers; (3) a decrease in the Company's
projected costs relating to its storage contracts; (4) a decrease in Intermountain's Weighted
Average Cost of Gas, or 'WACOG'; (5) an updated customer allocation of gas-related costs
pursuant to the Company's Purchased Gas Cost Adjustment provision; (6) the inclusion of
temporary surcharges and credits for one year relating to gas and interstate transportation costs
from Intermountain's deferred gas cost accounts; and (7) benefits included in Intermountain's firm
transportation and storage costs resulting from Intermountain's management of its storage and
firm capacity rights on pipeline systems. Application at 3-
Intermountain also seeks with this Application to eliminate the temporary surcharges
and credits included in its current prices during the past 12 months, pursuant to Order Nos.
30649 and 30676. The aforementioned changes would result in an overall price decrease to
Intermountain's customers.
ORDER NO. 30913
Intermountain Gas proposes decreasing the W ACOG from the currently approved
$0.67482 per therm to $0.49600 per thermo The Application maintains that weather-adjusted
demand for natural gas has diminished, driven by the downturn in our regional and national
economy. At the same time, natural gas supplies are plentiful. This current imbalance between
supply and demand has driven down the near term prices for natural gas. Application at 6.
The Company asserts that the proposed W ACOG includes the benefits resulting from
Intermountain's storage of significant amounts of natural gas procured during the summer season
for use during the winter when market prices are normally higher. Additionally, and in an effort
to further stabilize prices paid by customers during the upcoming winter period, Intermountain
has entered into various hedging agreements to lock-in the price for significant portions of its
underground storage and other winter flowing'supplies. Application at 6.
Although current commodity futures prices dictate the use of a $0.49600 per therm
W ACOG, the Company continues to remain vigilant in monitoring natural gas prices. If forward
prices for natural gas materially deviate from $0.49600 per therm, the Company is committed to
return to the Commission prior to this winters heating season to amend these proposed rates.
Pursuant to Order No. 30649, Intermountain included temporary surcharges and
credits in its October 1 , 2008 , and November 15 , 2008, prices for the principal reason
collecting or passing back to its customers deferred gas cost charges and benefits. Exhibit No.
Line 26 reflects the elimination of these temporary surcharges and credits.
The Company proposes to allocate deferred gas costs from its Account No. 186
balance to its customers through temporary price adjustments to be effective during the 12-
month period ending September 30, 2010, as follows: (1) fixed gas costs credit of $741 556
attributable to the collection of interstate pipeline capacity costs, the true-up of expense issues
previously ruled on by the Commission, and mitigating capacity release credits generated from
the release of Intermountain's pipeline capacity; (2) deferred gas cost amounts of $12.7 million
attributable to variable gas costs since October 1 2008; and (3) deferred gas costs related to Lost
and Unaccounted-for Gas which results in a net per therm decrease to both sales and
transportation customers. Application at 8.
Intermountain states that a straight cents-per-therm price decrease was not utilized for
the LV -1 tariff. The proposed decrease is fixed-cost related and, because there are no fixed costs
recovered in the tail block of the LV -1 tariff, a cent per therm decrease relating to fixed costs
ORDER NO. 30913
was made only to the first two blocks of the LV -1 tariff. Each block of the proposed T -3 and T-
tariffs include a uniform cents-per-therm decrease for unaccounted-for gas recovery. Id.
Intermountain asserts that customers have been notified regarding Intermountain's
Application through a customer notice and press release. Id. Intermountain states that the
proposed overall price changes reflect a just, fair, and equitable pass-through of changes in gas-
related costs to Intermountain's customers.
THE COMMENTS
Staff reviewed the Company's proposed W ACOG of $0.49600 and its forecasted
natural gas prices through September 2010. Although Staff noted that Intermountain was
predicting gas prices slightly higher than prices anticipated by other sources and forecasts, Staff
found the Company's estimates to be reasonable. Intermountain's proposed W ACOG is the
lowest of any established and/or recently proposed W ACOG of any major northwest gas utility.
Staff attributed some of Intermountain's WACOG difference to: (1) Northwest Pipeline's
proximity to Intermountain's service territory; (2) the significant capacity Intermountain holds on
Northwest Pipeline for delivery of gas supplies from the Rockies Basin; and (3) Intermountain's
extensive gas storage that allows it to hedge gas at lower prices. Ultimately, Staff determined
that the proposed W ACOG of $0.49600 per therm is reasonably supported by future commodity
prices and, therefore, recommended the Commission approve the Company's Application.
In Order No. 30649, the Commission ordered that Intermountain Gas be permitted to
recover a maximum of 0.85% of its total throughput as lost and unaccounted-for gas (L&U).
The Commission also ordered the Company to submit quarterly reports regarding its L&U. This
year the Company has significantly dropped its estimated percentage of L&U from 0.86% to
0.45% of total throughput - approximately 47% lower than last years estimates. Staff
recommended that the Commission maintain the maximum L&U gas recovery at 0.85% of total
throughput. However, in order to continue to evaluate the Company's losses and procedures but
make reporting less onerous, Staff recommended that the Commission reduce the frequency of
L&U reports from quarterly to semi-annually. Staff also recommended that the Commission
direct the Company to work with Staff in determining the content of the semi-annual reports.
Eight public comments were received in addition to comments filed by Commission
Staff. All comments favored any proposal that would result in lower rates. Several comments
advocated for a greater decrease than that proposed by the Company.
ORDER NO. 30913
Eight public comments were received in addition to comments filed by Commission
Staff. All comments favored any proposal that would result in lower rates. Several comments
advocated for a greater decrease than that proposed by the Company.
DISCUSSION
We have reviewed the record for this case, including the Application and comments.
The Commission has jurisdiction over Intermountain Gas Company, a public utility, its
Application for authority to change rates and prices, and the issues involved in this case pursuant
to Title 61 ofthe Idaho Code, and more specifically, Idaho Code ~~ 61-117, 61-129, 61-307, 61-
501 , and 61-502, along with the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
The Commission is required to establish just, reasonable, and sufficient rates for
utilities subject to our jurisdiction. Idaho Code ~ 61-502. The PGA mechanism is used to adjust
rates to reflect changes in the costs for the purchase of gas from suppliers, including
transportation, storage and other related costs of acquiring and delivering natural gas. The
Company s earnings are not to be increased from changes in prices and revenues resulting from
the annual PGA.The PGA mechanism is designed to pass through prudently incurred
commodity costs in a timely fashion.
A current imbalance exists between supply and demand for natural gas which has
driven down gas prices. In addition, Intermountain Gas utilizes dynamic hedging strategies and
effectively manages its natural gas storage. These actions by the Company allow Intermountain
Gas to guarantee stable and low prices to its customers. Consequently, we find it reasonable to
decrease the approved W ACOG from $0.67482 per therm to $0.49600 per thermo
In response to Order No. 30649, the Company has filed quarterly reports with the
Commission explaining how it tests for, identifies, and remediates equipment measurement
errors and leaks. In order to continue to evaluate Intermountain s lost and unaccounted-for gas
but make reporting less onerous, the Commission finds it appropriate for Intermountain to reduce
reporting from quarterly to semi-annually on its losses and procedures. Commission Staff is
directed to meet with the Company and collaborate in determining the content of the Company
semi-annual L&U reports. Finally, the Commission maintains the cap on the amount recovered
for L&U gas at 0.85% of total throughput, which is the current level approved in Order No.
30649.
ORDER NO. 30913
ORDER
IT IS HEREBY ORDERED that Intermountain Gas Company's Application is
approved. Intermountain is authorized to pass through its proposed adjustments, surcharges, and
credits to customers as filed. The Company shall decrease its annualized revenues by $72.4
million and establish a Weighted Average Cost of Gas at $0.49600 per thermo The Company
shall file conforming tariffs to be effective October 2009.
IT IS FURTHER ORDERED that Intermountain Gas continue to file quarterly
W ACOG projections and monthly deferred costs reports with the Commission.
IT IS FURTHER ORDERED that Intermountain Gas promptly file an Application to
amend its W ACOG should gas prices materially deviate from the presently approved $0.49600
per thermo
IT IS FURTHER ORDERED that Intermountain Gas maintain its maximum lost and
unaccounted-for gas recovery at 0.85% of total throughput. The Company shall submit to the
Commission a semi-annual report regarding its lost and unaccounted-for gas.
IT IS FURTHER ORDERED that the Company collaborate with Staff in determining
the content of the Company's semi-annual L&U reports.
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. 30913
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
:;
9.,.It
day of September 2009.
LI.
KEMPT6 , P IDENT
-(I
MARSHA H. SMITH, COMMISSIONER
ATTEST:
~A\.tt.. D. Jewell
Co mission Secretary
O:INT-09-03 ks2
ORDER NO. 30913