20101130ICL Comments.pdf

RECEi\1 r~l
Benjamin J. Otto
Idaho Conservation League
710 N. 6th St
Boise, Idaho 83702
Ph: [phone] ext 12
Fax: [phone]
zmn NUV 29 PM 5: 01
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN
GAS COMPANY'S 2011-2015 INTEGRATED
RESOURCE PLAN
CASE NO. INT - 10 - 04
COMMENTS OF THE IDHAO CONSERVATION LEAGUE
The Idaho Conservation League ("ICL") offers the following comments on the
Intermountain Gas Integrated Resource Plan. The general theme of our comments is that, while
current gas prices maybe low, every indication is that future prices will rise. Meanwhile,
. Intermountain faces current capacity deficits on parts of its system and future deficits
throughout. To mitigate price volatilty and the need for expensive new infrastructure,
Intermountain should pursue Demand Side Management options far more than contemplated in
the IRP. Further, to fully represent the interest of all Idaho ratepayers the PUC should use the
occasion of this IRP to provide some policy leadership for al Idaho utilties.
The IRP reveals that, while curent gas prices are low, future gas prices wi rise.
Economic law holds that price depends on supply and demand. The natural gas market
ovet the past few decades has witnessed increasing demand with wide variations in supply. While
many low cost supply sources began to run down, new sources from new regions or different
geologic formations have increased supply. These new supplies are largely more expensive than
prior sources as driling, production, and transportation costs rise. As a result, the IRP recognizes
ICL COMMENTS 1 November 29,2010
that "both consumers and producers have seen extreme short and long term price volatilty along
with changes in national and regional pricing trends.")
In the future, the Pacific Northwest is more likely to be exposed to this price volatility.
The IRP explains that Intermountain receives gas from three sources Alberta, British Columbia,
and the Rockies.2 Each source presents unique characteristics that will lead to future price
increases. Alberta provides 40% of intermountain's gas currently but "this decade has seen
production and reserve declines and some forecast indicate continuing declines in availabilty of
export gas.,,3 In the future the Pacific Nortwest faces rising prices from diminishing low cost
supplies and increased competition from higher paying markets in the Midwest and eastern US.
While Alberta may be able to tap new supplies, these "wil not be available for at least ten years."4
All told, while Alberta has been a source of low cost reliable supply, the IRP explains that future
prices will rise and the Pacific Northwest will face stiff competition form other markets.
British Columbia is another historically low cost and reliable supply source for
Intermountain. The IRP explains that future prices are likely to rise. While in the past pipeline
bottlenecks have made the Pacific Northwest the only potential buyer, new pipeline capacity has
opened up access to higher priced markets in the Midwest and East.s Coupled with declining
production and uncertain future gas sources Idaho gas users can expect higher prices and a less
reliable supply from this region. Instead of planning to replace this source or reduce gas demand,
the IRP instead states, "new discoveries (in the region) are critical to future deliverabilty to the
\
Pacific Northwest. . ."6
) IRP at 52.
2 IRP at 52 - 53.
3 IRP at 52.
4 Id.
S IRP at 53.
6 Id.
ICL COMMENTS 2 November 29, 2010
Intermountain's second largest supply source is the Rockies.7 Historic prices have been
low due to limited pipeline capacity to other markets. However, the IRP explains that new
pipelines "have greatly minimized or eliminated most of the capacity bottlenecks so that supplies
can now more easily move to higher priced markets found to the east or in California. . . (T) he
more effcient pipeline system has essentially eliminated the price advantage that Pacific
Northwest markets have enjoyed."8 Moreover, Intermountain's import capacity from this region
is currently maxed out. Absent "building new capacity through the Kemmerer constraint point,"
which is "unlikely to happen," the company plans to rely on supplies from Alberta and British
Columbia instead.9
In sum, Idaho should plan for rising prices and tightening gas supplies for the foreseeable
future. While short-term prices and supplies may not be impacted by these market conditions,
long term prices inevitably will be. ICL is particularly concerned that, faced with limited access
to the Rockies, Intermountain plans to rely on Canadian sources they acknowledge to be more
expensive and in decline. Instead, Intermountain should be planning for long-term price
stabilty for Idaho ratepayers by investing in Demand Side Management.
Demand for Gas in Idaho continues to grow leading to local capacity constraits.
The IRP reveals two capacity constrains projected for this winter, the Idaho Falls lateral
and Sun Valley Laterai.io To address constraints on the Idaho Falls lateral, the Company intends
to continue to expand the Rexburg Liquefied Natural Gas facilty.1I The IRP describes this option
as "somewhat expensive when compared to other options.'.i Another option to address the
7 IRP at 53.
8 !d.
9 Id.
10 IRP at 7 - 8.
II IRP at 65.
12 IRP at 56.
ICL COMMENTS 3 November 29,2010
capacity constrain is to assist industrial customers to burn fuel oil or even coal.13 However, these
options remain very uncertain as the IRP acknowledges "a lengthy approval process" and
"diffcult to assess" costS.14 Finally, the IRP aludes to future "looping" of the lateral but does not
provide any time frame or projected cost of this new infrastructure.15 Meanwhile, Intermountain
does intend to roll out pilot DSM measures in this area as another option. \6 ICL believes the
Company should invest in helping industrial and residential consumers become more effcient,
rather than rely on uncertain, polluting, and costly oil or coaL. This investment allows ratepayers
to control gas bils and benefits the public by avoiding unnecessary air emissions.
In the other current capacity deficit, the Sun Valley Lateral, Intermountain plans
additional compression to increase deliveries.17 Also, the company recently gained approval to
institute a snowmelt curtailment tariff.18 As the most weather dependant region Intermountain
serves, ICL believes the company should pursue some demand side management programs to
address any future capacity issues.
Beyond these two capacity constraints, the IRP reveals continued growth in
Intermountain's customer base. The company forecasts the industrial sector will grow by 4.72%
over the next five years.19 In total, the IRP explains overall customer demand to rise by 2.26%
annually.20 This growth does not appear to factor in even faster growth rates caused by increased
amounts of fuel switching. As explained further below, ICL encourages Intermountain and the
Commission to increase the number of Idahoans switching from electric to gas heat and hot
13 IRP at 61 - 62.
14 IRP at 61.
15,IRP at 8.
16 IRP at 79.
17 IRP at 66.
18 IRP at 9.
19 IRP at 40.
20 IRP at 45-46.
ICL COMMENTS 4 November 29, 2010
water. To accommodate current and future capacity constraints, along with addressing rising gas
prices, Intermountain should be planning for increase Demand Side Management investments.
The IRP reveals an inadequate pursuit of Demand Side Management investments.
The Idaho PUC as long recognized that, in the context of electricity, utilties must pursue
all cost effective DSM options. While Intermountain IRP explains that back in the 1990's this
Commission did not deem DSM measures for gas utilties an important investmenei, times have
changed. As explained above, gas prices are rising along with demand. While historically the
Pacific Northwest has enjoyed limited competition from other markets, new pipelines have
eliminated this price advantage. Based on this reality, the IRP sums up nicely by stating, "now
more than ever it is vital that all natural gas customers use energy as wisely and as effciently as
possible. "22
Despite this recognition, the Intermountain offers a very limited DSM portfolio. The
Company identifies the three broad categories of DSM measures behavior modification, building
envelope improvement, and effcient equipment.23 However, the IRP revels investments in only
one of these areas, appliances. They plan to continue to offer a $200 rebate for customers who
switch to natural gas and install an effcient furnace.24 As pilot programs, Intermountain intends
to roll out limited rebate programs for effcient furnaces and water heaters in the Idaho Falls
lateraL. 25 Beyond equipment incentives the Company promotes effciency in new construction
and provides some information and videos on its website.26 While a good start, ICL believes the
21 IRP at 76 -77.
22 IRP at 69.
23 IRP at 76.
24 IRP at 78.
25 IRP at 79.
26 IRP at 72.
ICL COMMENTS 5 November 29,2010
IRP does not adequately explain why others measures are not cost effective, especially for
avoiding the long term price increases coming down the road.
Of course, Intermountain should only invest in DSM if it is cost effective. But other gas
utilties, including others owned by Intermountain's parent, offer a broader array of programs.
Cascade Natural Gas is owned by Intermountain's parent, serves Oregon and Washington, and
offers incentives for equipment, insulation, and duct sealing. Montana-Dakota, also owned by
the same parent offers incentives for programmable thermostats. A vista, while a combined
electric and gas utilty, offers much higher incentives for equipment and specific incentives for
fuel switching. These examples reveal that Intermountain Gas may not be pursuing all cost
effective energy effciency. Going forward the Commission should require a more robust
evaluation of DSM measures.
The IRP contains some interesting analysis of the impact to Idaho electricity from the
direct use of natural gas. According to Intermountain, if their customers used electricity for heat
instead of gas, Idaho Power's average load would be 66% higher, while winter peak demand
would be 93% higher.27 During summer time peaks, natural gas water heating customers mean
Idaho Power's peak is 1935MW lower than if those customers used electricity.28 If only to control
rising electricity costs, the Commission should encourage Intermountain and Idaho Power to
work together to pursue fuel switching incentives.
In exchange for takng some electric sales through natural gas switching Intermountain
can work with Idaho Power to share the Demand Side Management burden. For example, the
IRE lists building envelope as a potential DSM measure, but does not include any incentive
programs for existing customers. By working to share the cost of the incentive with Idaho Power,
both companies could create a very cost effective program. Meanwhile, Idaho ratepayers will
27 IRP at 73.
28 IRP at 74.
ICL COMMENTS 6 November 29,2010
benefit from the cooperation by having more programs of controllng their energy bils. ICL
believes the Commission should provide some necessary leadership and policy direction to
encourage this action.
Conclusion
ICL recognizes that DSM investments go far beyond incentive programs. As
Intermountain ramps up its DSM activities ICL stands ready and willng to work with the
Company and the Commission to formulate an appropriate business model, investment review
process, and complementary rate designs. Further, ICL looks forward to working with the
Commission and all Idaho utilties to develop complementary DSM programs that benefit all
Idaho ratepayers.
Dated the 29th day of November, 2010.
Respectfuy submitted,!k~.Benjamin J. Otto
Idaho Conservation League
ICL COMMENTS 7 November 29, 2010