20091223Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
CEl\( I)
2U09 DEC 23 PM 2: 3'
Street Address for Express mail
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN GAS )
COMPANY'S APPLICATION FOR )
AUTHORITY TO ESTABLISH )
INTERRUPTIBLE SNOWMELT TARIFFS. )
)
)
CASE NO. INT -G-09-03
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, in response to the Notice of Application and
Notice of Modified Procedure (Order No. 30957) submits the following comments.
BACKGROUND
On November 5, 2009, Intermountain Gas Company (Intermountain; Company) fied an
Application requesting authority to implement new rate schedules. Application at 2.
Specifically, the Company proposes new rate schedules that would require any new residential or
small commercial customer installng new natural gas equipment, or any existing residential or
small commercial customer performing remodeling work that includes modification of
equipment and piping, for the purose of melting snow on sidewalks, driveways, or other similar
appurtenances ("Snowmelt"), to receive interrptible service for such Snowmelt either under the
Company's proposed Rate Schedule IS-R (Interrptible Snowmelt-Residential) or Rate Schedule
IS-C (Interrptible Snowmelt-Commercial). For residential customers, the Company proposes
pricing the IS-R Rate Schedule at the lower non-summer RS-2 (Residential Service-2) rate. The
RS-2 Rate Schedule is the lowest residential rate schedule, and is for customers using natural gas
STAFF COMMENTS 1 DECEMBER 23, 2009
for both water heating and space heating. For commercial customers, the Company proposes to
price the IS-C Rate Schedule at the lower non-summer GS-l (General Service-I) rate. The
benefit of being on the Interrptible Snowmelt Schedules for RS-2 and GS-l customers is the
savings of being charged the lower non-summer rate during shoulder season Snowmelt, which
would otherwise be priced at the higher summer rate. The Company requests that its Application
be processed by Modified Procedure and that its rates become effective on December 15,2009.
THE APPLICATION
Intermountain asserts that natural gas-fired Snowmelt equipment has increased in
popularity over the past decade. The Company explains that while Snowmelt usage can be
beneficial during off-peak periods to more efficiently use otherwise unused distribution capacity,
it can negatively impact system pressures when firm sales and transportation customers require
peak-day deliveries.
The Company maintains that most Snowmelt equipment uses an inordinate amount of
natual gas compared to a standard space or water heating application. The Company states that
during periods of peak-day throughput, Snowmelt usage competes with firm customers for the
finite amount of available natural gas that can flow through the Company's distribution system,
potentially degrading service to firm customers. Intermountain explains that because Snowmelt
customers use large amounts of natural gas for only a few days or weeks during the winter, it
creates an inefficient use of the Company's distribution system and does not allow for cost
recovery of the added capacity. Therefore, Intermountain proposes that Snowmelt use be
considered an interrptible service. i
Intermountain proposes that all new Snowmelt applications have individual metering
facilties, separate and distinct from metering for any other natural gas service. At its sole
discretion, Intermountain wil manually or remotely tum off all Snowmelt meters in affected
regions of its system when system integrity is at issue. The Company believes that interrptions
will be short in duration and wil depend on weather and snowfall conditions? Existing
Snowmelt users wil be given the option to convert to the terms and conditions of the proposed
rate schedules.
i During periods of peak-day throughput, interrptible customers can be required to cease using natural gas for
Snowmelt to help ensure the needs of firm sales and transportation customers are met.
2 The Company has already negotiated voluntary agreements with existing large volume Snowmelt users that
provide for cessation of Snowmelt upon notice by the Company.STAFF COMMENTS 2 DECEMBER 23,2009
The proposed rate schedules include a Facility Reimbursement Charge to recover the
capital investment required to provide Snowmelt service to new customers. However, the
proposed schedules include a provision that would exempt existing Snowmelt customers from
the one-time Facilty Reimbursement Charge.
Intermountain asserts that customers have been notified regarding Intermountain's
Application through a press release in the Company's service area where customers would be
impacted by the proposed schedules. Intermountain states that the proposed schedules are just,
fair, and equitable.
STAFF REVIEW
In Staffs review of Intermountain's proposal, four primary factors were analyzed:
1) The impact of gas-fired Snowmelt equipment on system capacity;
2) The Company's process for implementing interruptions;
3) The benefits of the proposal as a Demand Response strategy; and
4) Intermountain's calculation of the Facilty Reimbursement Charge.
Impact of gas-fired Snowmelt equipment on system capacity
Since the Company's inception in 1955, the Company has designed and constrcted its
distribution facilities to serve the needs of its firm service customers at peak-day deliverability.
It has made substantial capital upgrades in order to account for its growing firm loads. On the
Sun Valley lateral alone, the Company has completed two uprates at a cost of approximately
$1.2 millon and recently finished another at a cost of$316,064 or $19.75 per therm of added
capacity.
A number of cities, businesses, and residents have installed natural gas Snowmelt under
sidewalks, parking lots, and drveways. Natural gas Snowmelt equipment presents a unique set
of challenges for the Company in designing its distribution system because it puts a very large
load on the system. However, because it is utilzed for a short period of time it does not generate
revenue commensurate with the load, when compared to space and water heating. Because the
number and size of these natural gas Snowmelt installations have grown, the Company must
design its system to meet the Snowmelt peak loads, which have a very low load factor.
The Company proposal only requires interrptible service for new customers. Staff
believes existing customers with firm Snowmelt service are likely not paying their full cost of
STAFF COMMENTS 3 DECEMBER 23, 2009
service. Even though this issue wil have to be addressed in the next rate case, Staff believes
interrptible service is a step in the right direction. By making Snowmelt service interrptible,
future system expansions to serve this load can be avoided and Snowmelt service can occur
when system capacity is available. The proposed tariffs align the Company's commitment to
provide reliable service with the desire to avoid costly capital upgrades. Therefore, Staff agrees
that the interrptible Snowmelt tariffs present an equitable solution to keep costs down and
prevent the subsidization of Snowmelt customers by more traditional natural gas users.
The Company's process for implementing interruptions
Intermountain's proposal requires that all new Snowmelt applications have individual
metering facilities, separate and distinct from any metering providing other natural gas service.
When required, the Company wil manually or remotely tum off all Snowmelt meters in affected
regions of its system. The Company has indicated to Staff that it can anticipate the need to
curtail load and has the ability to provide notice to customers prior to interruption. Staff agrees
that it is important whenever possible to give customers adequate notice of an interrption to
make alternative arrangements for snow removaL. Some cities, small businesses, and elderly
residents rely on natural gas for snow removal in order to keep sidewalks clear, businesses
operating, and driveways open. Staff recommends that except for emergencies, the Company
notify customers or propert managers a minimum of two hours prior to interrpting service.
This notification should be delivered based on the customers preferred method of
communication, either by telephone or e-maiL. The Company should also keep customers
abreast of when service is expected to be restored. This up-to-date information wil allow
customers who have selected natural gas as their preferred method of snow removal to find
alternative methods and plan accordingly.
The benefits of the proposal as a Demand Response strategy
Occasionally storms, severe weather, and periodic system repairs have the potential to
affect the supply of gas. Building enough pipeline capacity to satisfy every possible supply.and
demand scenario is possible, but the capital costs would be tremendous. In place of incurring
costly upgrades, the utilty is left with two alternative choices when capacity is constrained: it
can either curil load to customers on interrptible service tariffs or utilze incentive driven
demand response programs. Both alternatives are designed to reduce load during times of peak
STAFF COMMENTS 4 DECEMBER 23,2009
demand. Without these alternatives, when demand is high and supply is low, interrptions
would occur with firm service customers.
Since Snowmelt involves significant capacity requirements but is only necessar for a
fraction of the year, Intermountain's proposal to make this service interrptible presents an
opportunity for all customers on the system to conserve resources and lower costs by allowing
the Company to forego expensive capital upgrades. In addition, similar to a demand response
program, the proposal induces existing customers to voluntarily convert their Snowmelt systems
to interrptible service. The proposal offers residential customers the lower RS-2 winter rate for
interrptible Snowmelt use between April and November, and offers commercial customers the
GS-l winter rate for interrptible Snowmelt that may occur between April and November.
Initally the number of customers on the interrptible Snowmelt schedules wil be low; however
Staff hopes that the lower rate in shoulder months wil increase the number of paricipants.
When combined with the proposed taiff provision exempting existing residential and
commercial customers from paying the one-time Facilty Reimbursement Charge, the proposal
presents a modest incentive that will entice some existing customers to paricipate. In order to
increase paricipation with existing Snowmelt customers, Staff recommends the Company
actively promote and market the taiffs as a conservation measure that is similar to a demand
response program.
Intermountain's calculation of the Facilty Reimbursement Charge
The proposed tariffs include a Facilty Reimbursement Charge to recover the capital
investment required to provide interrptible Snowmelt service to a new customer. This charge
curently includes the cost of the meter set and other related facility and equipment costs. Since
there is not a solution currently available within the natural gas industry to cost effectively shut-
off and tu-on service remotely under cold conditions, interrption wil initially be made by
manual shut-off. However, once satisfactory remote Snowmelt cycling equipment is available,
Staff recommends the Company retum with a proposal to the Commission outlining the cost of
installng automated equipment. Once the additional cost of an automated system has been
evaluated and deemed cost effective, it is Staffs recommendation that the system become
automated. This wil allow the Company to cycle customers' systems on and off for shorter
periods of time during longer interrptions and make the process of initiating interrptions more
efficient as the number of customers with Snowmelt increases.
STAFF COMMENTS 5 DECEMBER 23, 2009
Public Participation and Comments
Intermountain included its press release with its Application on November 5, 2009. The
press release was sent on that same day to newspapers in the area that would be impacted by the
new, proposed Interrptible Snowmelt Tariffs. Existing customers did not receive direct
notification of the Company's proposal through biling statement messages or inserts. Staff
assumes this was done because the proposal primarily affects new customers. Existing
customers would need to "opt in" to paricipate in the program.
Interested paries were given until December 23,2009 to file comments. As of December
18, 2009, two customers had fied comments. Both comments opposed the new tariff proposaL.
One customer opposed curailng or interrpting gas asking that, instead, a surcharge be
assessed for usage over a certain threshold. This comment might be an indication that some
customers' understanding of the purpose of the proposed new tariiIis to "punish" Snowmelt
customers for excessive use, when in fact, it is to ensure Intermountain has the capacity to serve
its firm customers with the natual gas that is needed to provide heat to homes and businesses in
the winter season during times of peak usage.
The second comment came from an existing residential Snowmelt customer in the Sun
Valley area who said he opposed having service interrpted during peak usage periods. This is
another example of a customer not being aware of the reason behind the Company's proposaL.
This customer would not be necessarily affected by the new tariffs, because he is an existing
customer and would have to "opt in" to the program before his service would be subject to
interrption.
STAFF RECOMMENDATION
After a complete evaluation of the Company's Application, its methodology and
conclusions, Staff recommends that the Commission approve the Company's proposed
Interrptible Snowmelt Schedule. However, Staff has the following additional
recommendations:
1) That the Company notify customers or property managers a minimum of two hours
prior to interrpting senrice. This notification should be delivered based on the
customers preferred method of communication, either by telephone or e-maiL. The
STAFF COMMENTS 6 DECEMBER 23, 2009
Company should also keep customers abreast of when service is expected to be
restored and when service has been restored.
2) That the Company actively promote and market the tariffs as a conservation measure
that is similar to a demand response program.
3) That once satisfactory remote Snowmelt cycling equipment is available, the Company
return with a proposal to the Commission outlining the cost of installng the new
equipment.
'ì~f.~
Respectfully submitted this ti day of December 2009.
1ika~1AKris me A. Sasser
Deputy Attorney General
Technical Staff: Matt Elam
i: umisc:commentsiintg09.3ksmemp comments. doc
STAFF COMMENTS 7 DECEMBER 23, 2009
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 23RD DAY OF DECEMBER 2009,
SERVED THE COMMENTS OF THE COMMISSION STAFF, IN CASE NO.
INT-G-09-03, 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
E-MAIL: mmcgrath(iintgas.com
MORGAN W RICHARDS JR
RICHARDS LAW OFFICE
804 E PENNSYLVANIA LANE
BOISE ID 83706
E-MAIL: mwrlaw(icableone.net
,b~-SECRETAR~ ~
CERTIFICATE OF SERVICE