20101217final_order_no_32139.pdf

Office of the Secretary
Service Date
December 17, 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN
GAS COMPANY'S 2011-2015 INTEGRATED
RESOURCE PLAN
CASE NO. INT-I0-
ORDER NO. 32139
On August 31 , 2010 , Intermountain Gas Company (Intermountain or Company) filed
its Integrated Resource Plan (IRP) for the years 2011-2015. The Company filed its IRP pursuant
to the requirements of Commission Order No. 25342 and Section 303(b )(3) of the Public Utility
Regulatory Policies Act (PURP A). The Executive Summary of the IRP identifies the purpose of
the plan as "to describe the currently anticipated conditions over the five year planning horizon
the anticipated resource selections and the process for making resource decisions." IRP, p. 5.
The Commission reviews Intermountain s IRP to ensure that it represents a diligent
effort by the Company to plan for anticipated supply and demand for natural gas during 2011-
2015. Previous Commission Orders require that Intermountain address the following elements in
its IRP:
Demand Forecasting
Assessment of Efficiency Improvements (DSM Actions) & Avoided Costs
Natural Gas Supply Options
Natural Gas Purchasing Options and Cost Effectiveness
Integration of Demand and Resources
Relationship Between Consecutive Plans (2008 Plan to 2010 Plan)
Public Participation.
See Order Nos. 25342, 27024 and 27098. The Commission s acceptance of the IRP does not
constitute approval of plan specifics or of any transaction undertaken as part of the plan.
On September 29, 2010 , the Commission issued a Notice of Filing and Notice of
Modified Procedure establishing a period for the filing of written comments on Intermountain
IRP. Written comments were submitted by the Commission Staff and by the Idaho Conservation
League. The Company filed brief reply comments responding to three specific recommendations
made by Staff.
ORDER NO. 32139
SUMMARY OF THE COMPANY'IRP
Regional Studies
The IRP analyzes certain geographic regions within Intermountain s service territory,
reviewing anticipated or known need for distribution system upgrades within each specific
region. The geographic regions are identified as the Idaho Falls Lateral (IFL), the Sun Valley
Lateral (SVL), the Canyon County Lateral (CCL), the State Street Lateral (SSL) and an All
Other Region. The Company projects its combined system-wide residential, commercial and
industrial customer growth over the five-year period to be 30 721 (low growth), 34 075 (base
case) and 38,793 (high growth). Intermountain projects its combined system-wide residential
commercial and industrial peak day event load over the five-year period to grow at an average
annual rate of2.03% (low growth), 2.26% (base case) and 2.57% (high growth).
The Idaho Falls Lateral is 104 miles in length and serves a number of cities between
Pocatello and St. Anthony in eastern Idaho, and comprises approximately 15% of the total
Company customers and 19% of the Company s total winter send-out during December 2009.
IRP, p. 7. The customers served in the Sun Valley Lateral represent approximately 4% of the
total customers and 4% of the Company s total winter send-out during December 2009. The
Idaho Falls and Sun Valley Laterals have deficits starting in 2011 that continue to grow through
2015.
The IRP indicates the Company has planned to meet the expected demands in the
Idaho Falls and Sun Valley regions. The deficit identified on the IFL does not include 19 000
Dth of peak withdrawal capability at the Rexburg LNG facility. The Company has enough
capacity through the five-year plan to cover the deficits during a high growth peak day event
scenario by using capacity from the Rexburg LNG plant. The Company also is in the process of
completing upgrades to eliminate its capacity shortfalls on the SVL. The Company is installing a
compressor station to increase the pressure of gas up to the far end of the lateral, where nearly its
entire demand is located. This additional pressure will add approximately 2 900 Dth of capacity
to the SVL by the start of 2011 , and adds enough capacity through the five-year plan to cover the
Company s potential deficits during a high growth peak day event scenario. Growth along the
Sun Valley Lateral will require a future upgrade to the existing pipeline system and the Company
plans to increase the delivery capability on the Sun Valley Lateral using a series of cost-effective
system upgrades beginning in 2011.
ORDER NO. 32139
The Canyon County Lateral represents approximately 14% of the total Company
customers and 13% of the Company s total winter send-out during December 2009. The IRP
states that a matching of the existing peak day distribution with anticipated demand shows that
there are no peak day delivery deficits during 2011-2015.
The State Street Lateral is identified for the first time in the 2010 IRP. The SSL is a
16-mile stretch of high pressure transmission main that begins in Caldwell and runs east along
State Street into north Boise. Because the lateral's capacity is becoming increasingly tight, and it
is closely surrounded by residential and commercial population that makes it difficult for
construction and land acquisition, the Company included it separately in its planning. The IRP
states that there is currently no threat of capacity constraints in the State Street Lateral, but that
the Company is monitoring it as demand is beginning to approach design capacity. During the
2011-2015 timeframe, the IRP states there are no capacity constraints for the State Street Lateral.
Demand Forecasting
Resource planning involves forecasting future load requirements, and the Company
considers three components to determine demand: (1) projecting the number of customers
requiring service, (2) estimating customers' sensitivity to temperature and (3) determining
anticipated weather affecting customers' usage. The Company creates low case, base case and
high case scenarios to evaluate the adequacy of its supply arrangements under a range of price
and growth possibilities.
Intermountain estimates industrial demand by identifying each large volume contract
customer s usage patterns and by estimating each customer s projected natural gas usage. The
projections include information provided by the customer regarding plant expansion or
modification, equipment replacement, alternative fuel capabilities, and anticipated product
demand.Intermountain s 110 industrial customers are comprised of 6 separate groups
specifically potato processors, other food processors, chemical and fertilizer, manufacturers
institutions, and all other. According to the Company s base case, the three groups with the
highest compound annual growth rate over the next five years are expected to be food processors
(5.3%), institutions (4.1 %), and manufacturers (3.3%). Overall, the compound annual growth is
expected to be 2.6% for the low case, 2.18% for the base case, and 3.2% for the high case.
Intermountain s Core-market customer growth forecast is based on three primary
components:(1) the number of new residential construction customers, (2) the number of
ORDER NO. 32139
residential customers converting to natural gas from other fuel sources, and (3) the number of
small commercial customers. The Company combines the results of a local third party
economics forecast with data it collected on current customers to develop a forecasting
methodology.
Intermountain determines the number of small commercial customers using the same
methodology as in the last several IRPs. It based commercial customer growth on the number of
new residential customers, assuming that new households require additional new businesses to
serve them. Specifically, the "IGC commercial rate " which is the estimated percentage of
commercial customers relative to the number of residential new construction customers, is
multiplied by the number of residential new construction customers. Based on the Company
most recent three-year sales data, this ratio of small commercial customer growth to residential
growth has averaged 11.83%.
Assessment of Efficiency Improvements (DSM Actions) & Avoided Costs
The Company outlines its demand-side management (DSM) opportunities consistent
with Commission Order No. 27098 instructing the Company 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. Specifically, the Company
evaluated three different programs: (1) continuation of its $200 rebate to customers who install a
90% or greater efficiency natural gas furnace when converting to natural gas, (2) a $30 rebate
when a customer installs a .64 or greater energy factor gas water heater at the time of conversion
and (3) a $200 rebate when an existing customer replaces a below 90% efficiency natural gas
furnace with a 90% or greater efficiency natural gas furnace. The Company uses a third party
consultant to help identify potential DSM opportunities using the total resource cost (TRC) test
to identify cost effectiveness, and to evaluate its three DSM programs. Intermountain is
considering deploying the water heater conversion and furnace/water heater upgrades as pilot
programs on the Idaho Falls Lateral in the first quarter of Calendar 2011.
The Company promotes conservation using mail brochures, mass media, and its web
site. An Energy Conservation Brochure is mailed to every Core-market customer and can be
viewed on the Company s web site. The brochure provides information to customers on energy
saving tips and loan programs for energy efficient upgrades. Customers can view their most
recent consumption history on the Company s web site, and Intermountain provides a 10-minute
ORDER NO. 32139
video to community action agencies and others who counsel homeowners on wise energy use.
Industrial customers can obtain up-to-date, hourly site-specific information on their usage from
the Company s web site. Intermountain also works with numerous organizations to assist with
energy efficiency research, outreach, and training.
The IRP indicates the Company continues to make progress to reduce lost and
unaccounted-for (LAUF) natural gas. LAUF is the difference between the volumes of gas
delivered to the distribution system and the volumes billed to customers. The Company has
audits in place to help identify dead meters, malfunctioning meters, incorrect meter sizes, billing
errors, and distribution line leaks. According to the audit results provided by the Company, gas
loss due to distribution line damage has dropped by 54% since 2007, and drive rate errors have
dropped 58% over the same period. This is the first IRP where the Company included a
summary of its efforts to conserve LA UF natural gas.
Natural Gas Supplies
Intermountain receIves supplies predominantly from the Western Canadian
Sedimentary Basin in Alberta and northeast British Columbia. Combined, these represent 55-
60% of supply with the remainder coming from the Rockies Basin, a region primarily from the
states of Wyoming, Utah, Colorado and New Mexico. Overall, the Company has experienced a
drastic decline in reserves and production from regions that have historically been top
producers." IRP, p. 51. Fortunately, new drilling technology enables coal seam and shale gas
reserves to make up for productivity losses in the top producing basins. The Company estimates
gas from the Northwest Territories and Alaskan North Slope is at least 10 years out; however
when combined with new shale reserves, the Company expects long-term production to increase
through 2024.
The Company must purchase capacity on several interstate pipeline companies to
transport gas from the supply basins to the Company s distribution system. All of the natural gas
that was once captive to this region is now available to more expensive eastern markets
however, because pipeline bottlenecks have been eliminated. Supplies in Alberta, British
Columbia, and Rockies flow east, so regional discounted prices are lost to competition with
higher prices in the Midwestern U.S. and eastern Canada. The IRP indicates there continues
be adequate supply from all three basins, but the northwest market has tightened because of
pipeline expansions east and less short-term production from conventional wells.
ORDER NO. 32139
The Company also has a portable Liquefied Natural Gas unit to shave peak on the
northern end of the Idaho Falls Lateral. In 2007, the Company built the infrastructure necessary
to accommodate injections into the IFL, and in 2009, installed a permanent storage tank to
reduce reliance on tanker trucks. The portable equipment can be operational within five to seven
days anywhere in the Company s service territory, so it also acts to remediate shortages on the
other laterals.
Natural Gas Purchasing Options and Cost Effectiveness
Intermountain uses three underground storage facilities in western Washington
northeastern Utah, and eastern Alberta, Canada, to manage its supply and delivery portfolio. 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.
The Company hedges against more expensive gas during peak load months by injecting excess
gas into storage during off-peak periods when prices are lower. This storage has provided price
stability to customers, minimizing the amount of year-round interstate capacity, and allowing the
Company to serve the winter peak while minimizing year-round firm gas supplies.
The Company has two conventional LNG facilities, one owned by Northwest Pipeline
located near Plymouth, Washington, and a Company-owned facility near Nampa, Idaho. As
previously mentioned, the Company also has a portable Rexburg satellite LNG facility that
conceivably can be located anywhere a tanker truck can travel. Currently the Rexburg LNG
facility is needed to remediate the potential near-term peak day supply deficits on the Idaho Falls
Lateral.
The Company s strategies help ensure that adequate gas supplies are available to its
customers, and that the adverse impact of significant price movements in the natural gas
commodity is mitigated.
Public Participation
According to Order No. 25342, when the Company is "formulating its plan, the gas
utility must provide an opportunity for public participation and comment and must provide
methods that will be available to the public of validating predicted performance." The Company
held two IRP public meetings, one in Boise and the other in Pocatello. Only one person attended
the Pocatello meeting.
ORDER NO. 32139
STAFF COMMENTS AND COMPANY REPLY
Staff recommended the Commission accept Intermountain s 2011-2015 IRP as
fulfilling the requirements established by the Commission. Staff also made three
recommendations to improve future IRPs. First, because the Company projects commercial
customer growth based on new residential home construction, Staff questioned whether these
relationships provide accurate projections, given volatility in the housing industry. Staff
recommended that in future IRPs the Company provide a comparison of forecasted and actual
results over the past several IRPs, illustrating the number of conversions per class, number of
customers per class, and usages.
Staff also stated a concern with the Company s position regarding the deployment of
DSM programs for residential and small commercial customers. The IRP states that at the
conclusion of prior regulatory procedures and evaluations
, "
it was not clear that DSM made
sense for IGC for a variety of reasons and externalities. As a result, the IPUC ordered IGC not to
deploy any Core-market DSM programs." IRP, pp. 76-77. The Company referenced Order No.
26546, Case No. INT -96-, to support its statement that it need not deploy Core-market DSM
programs. Staff recommended the Commission clarify the intent of its language in Order No.
26546 regarding Core-market DSM programs.
Finally, Staff recommended the Company notify city leaders in advance of future IRP
public meetings and filings. Staff stated this may be particularly important on the Idaho Falls
Lateral, where Intermountain may have to make additional arrangements to meet the demand of
new large volume and transportation customers. City leaders are key stakeholders who represent
the communities Intermountain serves, and should be an integral part of the IRP planning
process.
Intermountain filed comments to respond to each of Staffs recommendations.
Regarding additional information on forecasts and actual results on customer conversions and
usage, the Company stated its "future IRPs will include a summary comparison of number of
conversions per class, number of customers per class, and usage in the 'Relationship Between
Consecutive Plans ' section of the document." Reply Comments , p. 1.
Regarding DSM programs for Core-market customers, Intermountain concedes it has
limited the use of cash incentive rebate programs, and "maintains that the intent of language in
Order No. 26546 was to refrain from the deployment of Company sponsored conservation rebate
ORDER NO. 32139
programs unless they could be proven to be cost effective and necessary and therefore in the best
interest oflntermountain s customers." Reply Comments, p. 1.
In response to Staffs suggestion that the Company do more to encourage public
participation in the IRP process, Intermountain stated it "is committed to improve its public
participation throughout the rest of the state (outside Boise), and will reassess its strategies in
that regard." Reply Comments, p. 2.
IDAHO CONSERV A TION LEAGUE COMMENTS
The Idaho Conservation League (ICL) filed comments to encourage additional
efficiency programs by Intermountain. In order "to mitigate price volatility and the need for
expensive new infrastructure " ICL stated that "Intermountain should pursue Demand Side
Management options far more than contemplated in the IRP." ICL Comments, p. 1. ICL argues
that price increases in the long term are inevitable, given expected declines in gas from existing
sources in Canada and the northwest states. ICL stated particular concern that "faced with
limited access to the Rockies, Intermountain plans to rely on Canadian sources they acknowledge
to be more expensive and in decline." ICL Comments, p. 3. ICL stated the Company instead
should be planning for long-term price stability by investing in DSM programs.
ICL recognizes that Intermountain should invest only in DSM programs that are cost-
effective, but noted other DSM programs offered by utility companies may "reveal that
Intermountain Gas may not be pursuing all cost effective energy efficiency." ICL Comments
, p.
6. ICL suggested the Company work in cooperation with Idaho Power Company to share a DSM
burden associated with customers who switch from electricity to gas as their heat source.
DISCUSSION
Intermountain Gas Company is a natural gas utility as defined in Idaho Code ~~ 61-
116 and 61-117, and the Commission exercises jurisdiction over Intermountain pursuant to Idaho
Code ~ 61-129 and the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq. An IRP
is a planning document for the Company to consider many factors and variables that can arise as
the Company looks at natural gas supply and demand in the next few years. The plan is not
merely an academic or regulatory exercise but is intended to demonstrate to the public that the
Company has considered, and prepared for, a multitude of scenarios. The Commission expects
each company submitting an IRP to vigorously test each assumption used in its plan to better
ensure that the results of its IRP accurately reflect changing markets and customer demand.
ORDER NO. 32139
Staff conducted a thorough review of the IRP and raised three concerns addressed by
the Company in reply comments. First, the Company committed to provide in future IRPs a
more thorough comparison of number of conversions per class, number of customers per class
and customer usage. The Commission appreciates the Company s commitment and believes it is
appropriate to provide this additional information. Intermountain s response to Staff regarding
DSM programs for residential and small commercial customers does perhaps indicate a
misunderstanding of the Commission s directive for these programs. To clarify, Intermountain
should consider any DSM programs for Core-market customers that have the potential to be cost-
effective in promoting and enticing energy savings. As recommended by the Idaho Conservation
League, Intermountain should carefully consider all DSM programs that are available to
encourage customers to use natural gas efficiently, and Company reviews of programs must be
included in its IRPs. Its IRPs in the future must reflect that it has evaluated DSM programs for
all customer groups. Finally, the Company s commitment to improve public participation in the
IRP process is a critical component of the process. It should provide appropriate notice to city
and county leaders as part of the process, especially in the Idaho Falls and Rexburg areas. The
Commission is concerned that the portable Rexburg satellite LNG facility is not sufficient to
encourage and support new business opportunities in the Rexburg area.
Based upon our review of the Company s IRP and the written comments, the
Commission finds that Intermountain Gas Company s 2010 Natural Gas IRP satisfies the
requirements set forth in previous Commission Orders. Accordingly, the Commission accepts
the Intermountain Gas Company 2010 Natural Gas Integrated Resource Plan for filing. The
Commission s acknowledgement and acceptance of the Plan should not be interpreted as
approval of the plan, or as a judgment of the prudence of any transactions undertaken as part of
the plan.
ORDER
IT IS HEREBY ORDERED that the Commission accepts the Intermountain Gas
Company 2010 Natural Gas Integrated Resource Plan for filing.
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. 32139
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this /1 Hi
day of December 2010.
~.
Jf~'
MARSHA H. SMITH, COMMISSIONER
~ _
w:uMACK A. REDFORD, COMMISSIONER
ATTEST:
Je D. Jewell
Commission Secretary
bls/O:INT-IO-O4 ws2
ORDER NO. 32139