20101129Comments.pdf

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283
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i811HlOV 29 PM 4: 03
Street Address for Express Mail:
472 W WASHINGTON
BOISE ID 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN GAS )
COMPANY'S 2011 - 2015 INTEGRATED )RESOURCE PLAN (lRP). )
)
)
)
CASE NO. INT-G-I0-4
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through
its Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and in response to the
Notice of Filng and Notice of Modified Procedure issued in Order No. 32074 on
September 29,2010, submits the following comments.
BACKGROUND
On August 31,2010, Intermountain Gas Company (Intermountain or Company) fied 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 Utilty
Regulatory Policies Act (PURPA). Intermountain is the sole distributor of natual gas in
southern Idaho. Its service area covers approximately 50,000 square miles containing a
population of approximately 1 milion. Durng the first half of 2009, the Company served
approximately 305,000 customers in 74 communities through a system of over 10,000 miles of
transmission, distribution and service lines. The Company added 120 miles of distribution and
STAFF COMMENTS 1 NOVEMBER 29,2010
2,883 service lines to accommodate new customers and maintain service for the Company's
growing customer base.
THE INTEGRA TED RESOURCE PLAN
Intermountain provides natural gas sales to two major markets: the residential and
commercial market (Core-market) and the industrial market. Durng 2009, the Company served
an average of275,522 residential and 29,673 commercial customers, which equates to an
increase in average residential and commercial customers of 1.1 % from 2008. Residential and
commercial customers use natual gas primarly for space and water heating. Intermountain's
industrial customers use natural gas for boiler and manufactuing applications. The IRP states
that industrial demand for natural gas is strongly influenced by the agricultural economy and the
price of alternative fuels. During 2009, 41.2% of the throughput on Intermountain's system was
attributable to industrial sales and transportation.
The IRP states that the Company's peak day loads (throughput during the projected
coldest winter day) are growing at a manageable rate. The growth in the Company's projected
peak day load is attributable to (1) growth in Intermountain's customer base, primarily
residential and commercial, and (2) production-related growth occuring in the Company's
industrial firm transportation market.
The IRP is a planing document for the Company to analyze numerous factors and
variables that affect the supply and demand for natural gas in the next few years. The Executive
Sumary of the IRP identifies the purose oftheplan as "to describe the currently anticipated
conditions over the five year planing 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 dilgent effort by the Company to plan for anticipated supply
and demand for natural gas durng 2011-2015. The Commission's acceptance of the IRP does
not constitute approval of plan specifics or of any transaction undertaken as par of the plan.
Forecast Peak Day Send-Out
The Company analyzed several peak day send-out (delivery) studies to determine the
magnitude and timing of future deficiencies in firm peak day delivery capabilties, looking at
both a total interstate mainline perspective as well as geographic region specific perspectives.
Residential, commercial, and industrial customer peak day load send-out is matched against
STAFF COMMENTS 2 NOVEMBER 29,2010
available resources to determine which combination of new resources will be needed to meet the
Company's future peak day delivery requirements in the most cost-effective manner. IRP, p. 6.
The Company estimates that residential, commercial, and industrial peak day load growth over
the five-year period wil increase at an average anual rate of 1.75% under a base case scenario. i
The IRP indicates that there are no peak day delivery . deficits when forecasted peak day send-out
is matched against existing resources. IRP, p. 7.
Regional Studies
The IRP analyzes certain geographic regions within Intermountain's service terrtory
based upon the anticipated or known need for. distribution system upgrades within each specific
region. The geographic regions are identified as the Idaho Falls Lateral (IFL) Region, the Sun
Valley Lateral (SVL) Region, the Canyon County Lateral (CCL) Region, the State Street Lateral
(SSL) Region and an All Other Region. The Idaho Falls Lateral is 104 miles in length and
serves a number of cities between Pocatello and St. Anthony in eastern Idaho. The residential,
commercial, and industrial load served off the Idaho Falls Lateral represents approximately 15%
of the total Company customers and 19% of the Company's total winter send-out during
December 2009. IRP, p. 7. The IRP identified a peak day delivery deficit for the Idaho Falls
Lateralthat occurs durng 2011 and increases in each of the next four years. However, the IRP
states that peak day delivery deficits can be managed by bringing on gas from the new Rexburg
LNG facilty.
The residential, commercial, and industrial customers served off the Sun Valley Lateral
represent approximately 4% of the total customers and 4% of the Company's total winter send-
out during December 2009. When forecasted peak day send-out on the Sun Valley Lateral is
matched against existing capacity, a peak day delivery deficit occurs durng 2011 and slightly
increases during each of the next four years. The IRP states that the growth along the Sun Valley
Lateral will require a futue upgrade to the existing pipeline system. The IRP states that the
Company plans to increase the delivery capabilty on the Sun Valley Lateral using a series of
cost-effective system upgrades beginning in 2011.
i The "Base Case" is the Company's estimate of the most likely outcome given its experience, industr knowledge
and understanding of future natural gas markets.
STAFF COMMENTS 3 NOVEMBER 29, 2010
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 IRP states
that there is currently no threat of capacity constraint 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.
Assessment of Potential DSM Programs
The IRP states that, in addition to reviewing traditional and non-traditional resource
alternatives, Intermountain analyzed potential demand-side management (DSM) measures to
mitigate potential constraint areas. Specifically, the Company evaluated three different
programs: the continuation of its $200 rebate to customers who install a 90% or greater
effciency 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% effciency natural gas fuace with a
90% or greater efficiency natural gas furnace.
The IRP analyzed residential, commercial and industrial customer growth and its impact
on Intermountain's distribution system using design weather conditions under various scenaros
for Idaho's economy. Peak day send-out under each of these customer growth scenarios was
measured against the available natural gas delivery systems to project the magnitude and timing
of delivery deficits, both from a total Company perspective as well as a regional perspective.
The resources needed to meet the projected deficits were analyzed within a framework of
options, including DSM measures, to help determine the most cost-effective means to manage
the potential deficits.
STAFF ANALYSIS
In accordance with the Public Utilties Re~ûlatory Policy Act of 1978 (PURPA) (as
amended by the 1992 Energy Policy Act), Commission Order Nos. 25342, 27024 and 27098
require that Intermountain submit an IRP to the Commission every two years, addressing the
following elements:
STAFF COMMENTS 4 NOVEMBER 29,2010
. 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
· Short Term Plan (e.g.- two year)
· Relationship Between Consecutive Plans (2008 Plan to 2010 Plan)
. Public Paricipation
Staff reviewed each of these elements in the Company's 2010 IRP, as described in more detail
below.
Demand Forecasting
Resource planing requires forecasting futue load requirements. As in previous IRPs,
the Company continues to consider thee compönents to determine demand: (l) projecting the
number of customers requiring service, (2) estimating customers' sensitivity to temperatue and
(3) determining anticipated weather affecting customers' usage. The Company produces low
case, base case and high case scenarios to evaluate the adequacy of its supply arrangements
under a wide range of price and growth possibilties. Staff notes that by including detailed
forecasts with multiple scenarios, the Company is better positioned to determine the adequacy
and timing 'of the resources necessar to meet future demand.
Intermountain continues to estimate industral demand by identifying each large volume
contract customer's usage patterns and by surveying management to estimate each customer's
projected natural gas usage. The projections incorporate surey information from the customer's
engineers and marketing personnel regarding plant expansion or modification, equipment
replacement, alternative fuel capabilties, and anticipated product demand. The Company looks
closely at market trends and compares those to customer forecasts. Intermountain's 110
industrial customers are segmented into six separate groups, specifically potato processors, other
food processors, chemical and fertilzer, manufacturers, institutions, and all other. According to
the Company's base case, the three groups with the highest compound anual growth rate over
the next five years are expected to be food processors (5.3 %), institutions (4.i %), and
STAFF COMMENTS 5 NOVEMBER 29,2010
manufacturers (3.3%). Overall, the compound anual growth is expected to be 2.6% for the low
case, 2.i8% for the base case, and 3.2% for the high case. The load forecast for the low case
scenario stars off significantly lower than the base case, so as a percentage of throughput, the
Company's compound annual growth rate is slightly higher than the base .case scenario.
Although industrial contract demand is expected to increase, the Company states that it wil not
increase Maximum Daily Firm Quantity (MDFQ) for its Large Volume Firm Services (LV-I)
over the five-year period because the Company is limited by the amount of capacity available on
Wiliams Northwest Pipeline. Additional interstate pipeline capacity would increase costs for all
customers. Staff agrees that the Maximum Daily Firm Quatity (MDFQ) should not be
increased at the expense of all customers. However, the Company should plan resources to
accommodate additional Large Volume Services (LV-I) that are within the curent MDFQ
theshold.
Intermountain's Core-market customer growth forecast continues to be based on three
primar components: (l) the number of new residential construction customers, (2) the number
of residential customers converting to natural gas from other fuel sources, and (3) the number of
small commercial customers. As with the past several IRPs, the Company combines the results
of a local third pary economics forecast with data it collected on current customers to develop a
forecasting methodology. The annual number of new Core-market customers is determined by
taking the third pary projection of houses added in each county, and multiplying it by "IGC's
market penetration rate" calculated for each county.
2 Next, the Company determines the
anticipated percentage of conversion customers by taking the "IGC conversion rate" calculated
for each county, and multiplying it by that county's additional new constrction customers.3
When the estimated number of conversions is added to the number of new residential homes,
adjusted for "IGC's market penetration rate," the total number of expected residential customers
is determined for each county. Virtually 100% ofIGC's residential new construction customers
are RS-2, meaning customers have at least a gas furace and a gas water heater.
2 The market penetration rate is the historical number of Intermountain customers relative to the number of
residential households.3 The conversion rate is the historical number of conversion customers relative to the number of residential new
constrction households. Staff questions whether the number of conversions should be based on the number of
additional new constrction customers, especially when new constrction has deteriorated over the last couple years.
STAFF COMMENTS 6 NOVEMBER 29,2010
Intermountain determines the number of small commercial customers using the same
methodology as 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's
most recent three-year sales data, this ratio of small commercial customer growth to residential
growth has averaged 11.83%. For purposes of this IRP, the Company rounded this to 12%
Company-wide. Similar to Staffs concern with forecasting the number of conversions using
additional new construction customers, Staff questions whether the number of commercial
customers are accurately forecasted by using the number of additional new construction
customers.
When estimating customer usage, the Company must capture the influence of weather on
demand. Intermountain continues to use a 65°F heating degree day (HDD) to calculate the two
distinct types of heating degree days, Normal Degree Days and Design Degree Days. Both are
calculated regionally based on historical data, but the Normal Degree Days represents the
weather that would be expected to occur on any given day, and the Design Degree Day is an
estimate of the coldest possible day that can be expected to occur on any given day.
Intermountain's Design year is based on the premise that the coldest weather experienced for any
month, season, or year wil occur again. This is wl)at the Company uses to develop its peak
forecast models. Staff believes it is reasonable to plan resources assuming the coldest weather
experienced wil occur again.
The Company continues to study load trends so that it can better estimate the reaction of
each class to price and daily weather. As with the last IRP, the Company stil does not have
technology to collect daily usage data by customer class, so to forecast the peak months, it
calculated average usage per customer based on the total combined residential and small
commercial send-out for each day. On page 34' of the IRP, the Company states that the Core-
market group is non-homogeneous and that it "would like to test whether models developed
based upon the individual customer classes would perform better for predicting peak usage per
customer than models developed using total Core-market data." In order to evaluate intra-class
variation in usage, the Company installed additional throughput measurement meters on tageted
areas of the Sun Valley and Idaho Falls laterals. Unfortunately, multiple equipment
STAFF COMMENTS 7 NOVEMBER 29, 2010
malfuctions caused data to be lost on both laterals. According to the Company's response to
Production Request No. 26, a malfuctioning switch on the data collector caused the loss of the
200312004 SVL winter data, and an unidentifiable problem caused the loss.ofthe 2005/2006
SVL winter data. Similarly, the 2005/2006 IFL winter data was lost due to failure of a battery
pack on the data collector.
Intermountain did not explain how it improved forecasting based on the total daily usage
data that was salvaged, or how it might reinstall equipment less susceptible to malfuctions.
However, Staff notes that in each consecutive IRP the Company states that "the GS (General
Service) customer class is very diverse, ranging from offce buildings all the way up to small
food processors." IRP, p. 36. Staff notes that the Company's more granular usage data was lost
due to several equipment malfunctions, but as stated in the analysis of the last IRP, Staff believes
a sample set of enhanced Encoder Receiver Transmitter (ERT) system data would provide intra-
class daily usage information that would be beneficial for forecasting, specifically for the
General Service customer class. Staff encourages the Company to continue evaluating the cost
of an additional set of sample collector ERT units, so that the enhanced ERT system data costs
can be accurately compared to the potential benefits,.
Intermountain continues to look at the impact of a similar set of modeling variables.
Even though weather and price are usually the most explanatory variables, the Company also
tested other key variables. Some examples of these variables include: Consumer Price Index
CPI, Ban Prime Loan Rate, Gross Domestic Product (GDP), Per Capita Personal Income, and
the 30-year mortgage rate. As stated in the last IRP, Staff encourages the Company to look at a
larger set of variables to forecast demand. Staff believes basic variables such as household size
and persons per household are predictive. In the peak months (November though Februar), the
correlation between weather and customer usage is strong. The typical customer on the system
increased usage by 0.143 thermsper degree day. When comparing customer usage by lateral, the
Sun Valley lateral was roughly three therms per customer higher per degree day than the rest of
the Company. Also, unlike other laterals, daily snowfall was one of the key explanatory
variables used to estimate SVL usage. This may be because Sun Valley customers use natural
gas for snowmelt. In order to better manage this capacity, the Company received approval to
provide incremental snowmelt loads on an interrptible only basis, which will help to offset
future demand during peak day loads. OrderNo. 31089, Case No. INT-G-09-3. In future IRPs,
STAFF COMMENTS 8 NOVEMBER 29, 2010
Staff encourages the Company to continue comparng the difference in customer usage by
lateraL.
The Company continues to forecast non-peak usage using separate monthly usage models
for each customer class. Specifically, total usage data for the month was divided by customers
for that same month to arrive at usage per customer for a given month. During the non-peak
months each class has dramatically different usage patterns, so the Company used a regression
equation for each of the Core-market customer classes. Although weather was a less explanatory
variable than in the peak models, it was included in all the models. Several of the same variables
were tested as in the peak model, but aside from weather, the only other predictive varables
were a two-year moving average price to forecast RS-2, and a winter usage trend to forecast OS.
Staff is concerned regarding the limited number of varables to predict usage. Staff believes the
Company should include more variables in its analysis of usage and consider modeling the intra-
class differences in usage between each lateral,' specifically for the GS class where customers are
non-homogeneous.
Similar to Staffs recommendation for the last IRP, Staff encourages the Company to
closely monitor how accurately its IGC Conversion Rate and IGC Commercial Multiplier Rate
predict their intended regional categories over time. Because these rates are calculated based on
the percentage of their respective categories relative to new residential home construction, Staff
questions whether these interrelationships provide'historically accurate projections given the
housing industry's volatilty. Given the dynamic economy, and the varing usages of
commercial customers who might relocate or change operations, it is important to closely
monitor forecasts. This is especially true of the Large General Service customers on the IFL that
have the potential of becoming a Large Volume Finn Service (LV -1). Staff recommends that in
future IRPs the Company provides a forecasted vs. actual comparison over the past several IRPs
ilustrating the number of conversions per class, number of customers per class, and usages.
Comparisons should include the Large Volume Service (LV -1) customers, since they are
technically Core-market customers. This is a fudamental part of evaluating the need for future
resources and should be clearly displayed within each IRP filing. By providing this information,
Staff can more accurately evaluate the forecasting methodology used by the Company for
resource planing. An analysis of the Company's effort to track this in each IRP would also
demonstrate a commitment to improvement.
STAFF COMMENTS 9 NOVEMBER 29, 2010
Assessment of Effciency Improvements (DSM Actions) & Avoided Costs
The Company continues to outline its DSMopportunities consistent with Commission
Order No. 27098 allowing the Company, in ,its biennial IRP, to address effciency 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. Prior to that Order, the Commission
required that the IRP address "a full spectr of opportities available to the Company,
including conservation and efficiency measures." Order No. 25342.
In evaluating Intermountan's energy efficiency and DSM programs, Staff found that the
Company continues to promote conservation using mail brochures, mass media, and its website.
The Energy Conservation Brochure is mailed to every Core-market customer and can be viewed
on the Company's website. The brochure provides information to customers on energy saving
tips and loan programs like that of the Idaho Department of Water Resources, where customers
can receive low-interest loans on energy effcient upgrades. Customers can view their most
recent consumption history on the Company's website, and watch a 10-minute informational
video with instructions on do-it-yourself installations and guidance for conservation and natural
gas efficiency. The Company also provides copies of the video to community action agencies
and others who counsel homeowners on wise energy use. Industrial customers utilze the
Company's industrial password protected website containing up-to-date, hourly site-specific
information to help them manage usage. This is especially useful for customers tracking and
evaluating energy saving measures and new production procedures. Intermountain also worked
with numerous organizations to fuer their respective energy efficiency research, outreach, and
training.
In the futue, Staff encourages the Company to provide specific information regarding the
scope and magnitude of its parnerships, perhaps focusing on the time period between IRPs to
explain how it assists or supports the agencies it idèntifies. Staff also believes in futue IRPs, the
Company should have a system in place to estimate the impact of its advertising (e.g. - hold out
sample, customer sureys). Simply concluding, as the Company has, that its advertising has
been successful because it "continues to see a decline in per customer usage and therefore
believes that the messaging is having a positive'response" does not accurately capture the impact
of its advertising.
Based on its analysis, Staff believes the Company is continuing to make progress to
conserve natural gas by finding and eliminating sources of lost and unaccounted for (LUAF)
STAFF COMMENTS 10 NOVEMBER 29,2010
natural gas. LAUF is the difference between the volumes of gas delivered to the distribution
system and the volumes biled to customers. The Company has several audits in place that help
identify dead meters, malfuctioning meters, incorrect meter sizes, biling errors, and distribution
line leaks. According to the audit results provided by the Company in its IRP, gas loss due to
distribution line damage has dropped by 54% since 2007, and drive rate errors have dropped
58% over the same period. Although the number of dead meters and pressure errors has
increased from 2007 levels, this is the first IRP where the Company has included a summar of
its efforts to conserve LUAF natual gas. The audit results are tellng and indicate that the
Company, in addition to promoting natural gas conservation among customers, is making
progress to keep its own LUAF natural gas low. Staff encourages these types of audits in future
IRPs.
The Company continues to use an evaluation from 2007, when the Company engaged a
third pary consultant to help identify potential DSM opportunities using the total resource cost
(TRC) test to identify cost effectiveness. The Company has been evaluating three potential DSM
programs over the last several IRPs. One program is a natural gas conversion program that gives
homeowners a $30 rebate when they convert to a natural gas water heater from another energy
source and install a .64-or-greater energy factor (EF) gas water heater. The other two are for
existing customers. The first isa $200 rebate when customers replace a below 90% effciency
natual gas fuace with a 90%-or-greater effciency natural gas furnace. The second is a $30
rebate when customers replace a .59-or-below EF natual gas water heater with a .64-or-greater
EF natual gas unit. Intermountain is considering deploying the water heater conversion, and
fuace/water heater upgrades as pilot programs on the Idaho Falls Lateral in the first quarer of
Calendar 2011.
DSM includes behavior modification, building envelope improvement measures, and
higher-effciency natural gas equipment. Staff èvaluated the Company's two primar goals in
evaluating demand side management (DSM) programs, primarly: (1) to ascertain whether
achievable and economically viable DSM could provide a reliable resource in Intermountain's
peak-load management, and (2) to faciltate year-round imprõyements in natural gas usage. Staff
/,
notes both are important goals to determine whether potential deployment of DSM is viable. The
Company wil continue to offera $200 rebate when a homeowner installs a 90% or greater
efficiency natural gas furnace at the time of a conversion.
STAFF COMMENTS 11 NOVEMBER 29,2010
Staff encourages the Company to deploy cost-effective DSM and to carefully conduct
market research when it rolls out pilot programs. When determining the appropriate rebate
levels and pilot markets, the Company should carefully evaluate: (1) the success of the
messaging, (2) program acceptance, (3) recent installer costs, (4) potential free ridership, and
(5) the processes for minimizing its administrative costs. The processes for reviewing programs
should achieve results that clearly evaluate, measure, and verify (EM&V) the program's success.
In addition, Staff encourages the Company to include all storage costs when determining the
avoided cost calculation used as a benchmark for DSM savings. This is especially true for heat-
sensitive conservation measures. Storage facilties offset more expensive winter purchases, and
increase the Company's abilty to meet a design day. As conventional storage facilties approach
capacity, and LNG storage becomes the next available resource to offset high winter prices and
meet potential peak, the avoided cost benefit of DSM programs will become more promising and
should be examined regularly.
After reviewing Intermountain's nSM section, Staff has one disagreement with the
Company regarding the deployment of Core-market, cost-effective DSM. On pages 76 and
77 of the IRP, the Company 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." In Production Request No. 32, Staff asked the Company to provide the Order
number and specific Commission Order language to support the Company's belief it should not
deploy any Core-market DSM programs. The Company cited Order No. 26546, Case No. INT-
G-96-04, in response, specifically the following: "Jt is now apparent that some demand-side
management programs which have or would have been deemed prudent only a short time ago,
are, because of these changes (note: energy effcient practices, technology, and related standards)
no longer supportble. We encourage the Company to review its other DSM programs to
determine their necessity, cost!enefit ratios and effectiveness." The Company added the
parenthetical language to Order No. 26546~ indicating its own interpretation of the Commission's
statement.
In Case No. INT-G-96-4, the Company proposed to: (1) place into effect ajointly
administered (Niagara Conservation Corporation) new residential low-flow shower head and
faucet aerator demand side management (DSM),program (w/related accounting procedures), and
(2) reduce the rebate in the Company's existing residential water heater rebate program from
STAFF COMMENTS 12 NOVEMBER 29, 2010
$100 to $50. Regarding the low-flow shower head and faucet aerator, the Commission was
concerned with the equity of cost distrbution, declining need for such a program, actual energy
savinls and measurement of those savings. Regarding the proposed decrease in the water heater
rebate program incentive payment, the Commission was persuaded that new federal standards
had eliminated the less efficient water heaters from suppliers, and the only heaters available
exceeded the standards required by the Company's program. Based on these specific concerns,
the Commission directed elimination of the low-flow showerhead pilot program, and terminated
the Company's existing residential water heater rebate program.
Staff disagrees with the Company's interpretation of Order No. 26546. The Commission
did not "order IGC not to deploy any Core-market DSM programs." Staff believes the Company
should investigate all potential Core-market DSM for cost-effectiveness, and if a program is
deemed cost-effective, the Company should deploy it. Staff recommends that the Commission
clarify the intent of its language in Order No. 26546 regarding Core-market DSM programs.
Natural Gas Supply Options
The Company continues to categorize its supply of gas into traditional and non-traditional
resources. Traditional resources come from conventional basins and tyically depend on
pipeline capacity to move gas to Intermountain's distribution system or storage facilities. Non-
traditional resources are those that help supplement the traditional supply side resources during
peak demand conditions. These may not come froffan interstate pipeline supplier, producer, or
interstate storage operator.
Intermountain continues to receive supplies predominantly from the Western Canadian
Sedimentar Basin in Albert 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 continues to
summarize a "drastic decline in reserves and production from regions that have historically been
top producers." IRP, p. 51. Fortunately, neW driling technology has allowed coal seam and
shale gas reserves to make up for productivity losses in the top producing basins. The Company
estimates gas from the Northwest Terrtories and Alaskan North Slope is at least ten years out;
however, when combined with new shale reserves, long-term production is expected to increase
through 2024. Staff agrees that gas from the Northwest Terrtories and Alaskan North Slope are
STAFF COMMENTS 13 NOVEMBER 29,2010
at least ten years out, but notes that significant upward price pressure may expedite supply
delivery from these basins.
The Company must purchase capacity on several interstate pipeline companies to
transport gas from the supply basins to the Company's distribution system. Unfortunately,
because pipeline bottlenecks have been eliminated, all of the natural gas that was once captive to
this region is now available to the more expensive eastern markets. Supplies in Albert, British
Columbia, and Rockies flow east, so regional discounted prices are no longer available because
the northwest now competes with higher prices in the midwest U.S. and eastern Canada. Staff
believes there continues to 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.
As with the last IRP, the Company characterizes non-traditional supplies as resources that
help supplement traditional resources. These include fuel oil, coal, wood chips, propane,
portable LNG, and biofuel production. Although the Company may be able to use alternative
supply at any time, the supply is optimally suited for meeting peak demand. There curently are
industrial customers on the IFL with the abilty to bur fuel oil and coaL. Industrial customers
are best able to make a material difference in demand because they are the only ones who use
large enough volumes to significantly offset peak demand. Ifnecessar, Intermountain could
negotiate with its IFL industrial custom.ers to use non-traditional supplies and reduce demand
durng peak periods. Staff encourages the Company to closely evaluate the abilty of industrial
customers on the IFL to use substitute fuels. '
The Company also has aportble LNG unit to shave peak on the northern end of the IFL.
In 2007, the Company built the infrastructure necessar to accommodate injections into the IFL,
and in 2009, installed a permanent storage tan to alleviate reliance on taner trucks. The
portable equipment could be operational within 5 - 7 days anywhere in the Company's service
territory, so it also acts to remediate shortages on the other laterals. Staff encourages the
Company to closely watch the availabilty of LNG because if a prolonged peak event occured,
the Company would rely on trucking delivery beyond the storage tan's capacity. The
Company's biofuel tests were promising and soûthern Idaho is positioned well given the number
of dairy fars, a promising source of biofuel. Staff encourages the Company to continue
investigating biofuel as an alternative resource.
STAFF COMMENTS 14 NOVEMBER 29, 2010
The Company's supply options are diversified and adequately explained. In Staffs
opinion the Company has sufficiently addressed supply-side options in the IRP.
Natural Gas Purchasing Options and Cost Effectiveness
Over the last decade, there have been fudamental changes and confusing market signals
in the natural gas industry. The early par o:fthe decade saw growing demand for natual gas,
maturing supply basins, increasing challenges in finding new reserves, and interstate
transportation bottlenecks. More recently there has been a short-term drop in demand, new shale
reserves supplementing more mature basins, ånd interstate pipelines expanding transport
capacity to higher priced eastern markets. Eventhough supply is forecasted to remain plentiful
for the foreseeable future, wellhead gas prices have shown considerable volatilty over the last
ten years. According to the Company, demand for natural gas has caught up to the deliverabilty
of the fueL. While there is enough production and delivery capabilty to meet the demand, it now
taes more driling and more wells to maintain capacity. Anticipated climate change legislation
may exacerbate the fudamentals of natural gas purchasing and supply, specifically due to the
upward pressure on prices from increased natural gas fired electric generation.
Similar to the last IRP, Intermountain continues to mitigate risk associated with the
changing industr and provide a level of efficiency and security not otherwise achievable.
Intermountain has developed a forecast for planing that includes a low, base and high case gas
price forecast. The Company uses these forecasts, along with different customer growth
scenarios, in a linear programing model that evaluates all its resources and selects the most cost
effective mix of supply and transporttion resources to meet demand. Staff notes that by
evaluating the most cost effective mix of resources with several scenarios, the Company is better
positioned to determine the most cost-effective resources to meet futue demand.
Intermountain continues to utilze three geographically diverse underground storage
facilties located in Western Washingtoni Northeastern Utah, and Eastern Alberta Canada to
manage its supply and delivery portfolio. All of the Company's out-of-service terrtory storage
is either bundled with transporttion to the service terrtory or is combined with Company-
contracted transportation to the service terrtory. During every Purchase Gas Adjustment (PGA),
Staff analyzes the Company's abilty to hedge against more expensive gas durng peak load
months by injecting excess gas into storage durng off-peak periods when prices are lower. This
storage has provided more stabilty to customers, minimizing the amount of year-round interstate
STAFF COMMENTS 15 NOVEMBER 29,2010
capacity, and allowing the Company to serve the winter peak while minimizing year-around firm
gas supplies.
As discussed in the last IRP, the Company has two conventional LNG facilties, one
owned by Northwest Pipeline located near Plymouth, Washington, and a Company-owned
facility near Nampa, Idaho. When Staff analyzed the design weather optimization model, the
Nampa LNG facilty is not selected for withdrawals through 2015; however, all storage except
10,000 Dth of Plymouth was completely utilzed on the peak day. The Nampa LNG facilty is
intended as a needle peaking resource to protect customers in situations where capacity is
unavailable due to weather-related outages. Because the facilty sits behind the citygate, during
any period of supply or interstate capacity failure, Nampa withdrawals would be unaffected by
off-system events. As previously mentioned, the Company also has a portable Rexburg satellte
LNG facilty that can be located conceivably anywhere a taner truck can go. Currently the
satellte LNG is necessar on the IFL to remediate the potential near term peak day supply
deficits.
According to Staffs analysis 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, minimizing the credit risk inherent in the
,
implementation of certain price risk reducing strategies. The Company has documented the
processes, procedures, and evaluation of resources. Staff considers this section sufficiently
covered within the IRP.
Integration of Demand and Resources
The Company integrates its peak day demand forecast with its existing distribution
capacity to determine when deficits would occur on 'each lateral if it were to forego corrective
action. This is how the Company balances its plan to acquire resources, and addresses the timing
of shortfalls. However, the Company continues to model a peak day event, or the four days
surounding its potential peak day, so it can plan its resources accordingly. Staff notes that by
modeling the four days surounding its potential peak day, the Company is better positioned to
determine the adequacy and timing of the resources necessary to meet demand during a weather
event.
Intermountain 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
STAFF COMMENTS 16 NOVEMBER 29,2010
38,793 (high growt). These customer growth scenarios are combined with the Company's price
scenarios and design weather estimates to determine the peak day load growth forecasts.
Intermountain projects its combined system-wide residential, commercial and industrial peak day
event load over the five-year period to grow at an average anual rate of 2.03% (low growth),
2.26% (base case) and 2.57% (high growth).
The Canyon County Lateral (CCL) and State Street Lateral (SSL) have no deficit during
the five-year plan when compared to the Company's peak day scenarios on each lateral to the
existing lateral's capacity. According to the IRP, the Idaho Falls Lateral (IFL) and Sun Valley
Lateral (SVL) have deficits that sta in 2011 and continue to grow through 2015 under all
scenarios. During a peak day event scenaro, the IFL deficits increase at an average anual rate
of3,098 Dth under low growth, 3,767 Dth under base case, and 6,161 Dth under high growth.
However, after Staffs review of the resources considered in these scenarios, Staff discovered the
Company's deficit on the IFL does not include 19,000 Dth of peak withdrawal capabilty at the
Rexburg satellte LNG facilty. When Staff included the withdrawal capabilty of the satellte
facilty in the Company's resource portfolio, Stafs analysis found that the Company has enough
capacity through the five-year plan to cover the deficits during a high growth peak day event
scenario. The Company also expects to add another satellte LNG storage tan in 2012 that will
increase the amount of on-site LNG storage available, so if a longer peak event would occur, the
Company would be less dependent on trucking deliveries.
During a peak day event scenario, the SVL deficits increase at an average annual rate of
311 Dth under the low growth, 410 Dth under the base case, and 684 Dth under the high growth
scenaro. The Company is in the process of completing upgrades to eliminate its capacity
shortfalls on the SVL. The Company is installng 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 star of 20 11, and
according to Staffs analysis, adds enough capacity through the five-year plan to cover the
Company's potential deficits durng a high growth peak day event scenario.
Staff is confident of the Company's abilty to allocate necessary resources according to
the magnitude of forecasted future deficits. Staff encourages the Company to work closely with
city leaders on the IFL to ensure its forecasted growth is accurate, so that Core-market growth
does not outpace its abilty to supply gas using the Rexburg satellte LNG facilty. Staff believes
the Company has specifically described and evaluated the types of additional supply resources
STAFF COMMENTS 17 NOVEMBER 29,2010
that wil be acquired, developed, or constructed to eliminate deficits and, therefore, the Company
has fulfilled its necessar IRP requirements.
Short-Term Plan (e.g. - two year)
In the last IRP, Staff recommended that Order No. 25342, p. 4, be modified to remove the
statement requiring "A short-term (e.g., two-year)'plan outlning the specific actions to be taen
by the utilty in implementing the integrated resource plan." Staff reasoned that the information
in the five-year plan provided information to adequately fulfill the two-year plan's purose, and
the filing of a two-year plan within the Company's five-year plan resulted in duplication that did
not improve the overall plan. Intermountain agreed with Staffs recommendation to remove the
two-year plan from future IRPs to eliminate the redundancy. The Commission concured and
stated: "Although the IRP is a five-year outlook and a more focused evaluation might seem
beneficial, the IRP is fied every two years, which requires the Company to re-evaluate its five-
year outlook on a biennial basis. Under these circumstaces, the Commission finds that
inclusion of a two-year plan is redundant." Order No. 30643, p. 8. Therefore the Company did
not provide a two-year plan as par of this IRP filing.
Relationship between the Plans (2008 IRP vs. 2010 IRP)
The Company discusses the differences between its key planning components in the
Company's comparative analysis between IRPs. Staffs analysis concludes that the planing
processes between IRPs are predominantly similar, although the Company highlighted some
significant changes and differences in outcomes. One notable difference includes the
incorporation of an additional distribution segment in the analysis. The Company added the
State Street Lateral (SSL) into its planing., This'lateral is a sixteen-mile stretch of high pressure
transmission main that begins in Caldwell and runs east along State Street in to north Boise.
Because the lateral's capacity is becoming increasingly tight, and it is closely surounded by
residential and commercial population that makes it difficult for constrction and land
acquisition, the Company included it separately in its planing. Staff agrees that given the
planing requirements necessar to make capacity upgrades, it is important to include this lateral
separately in its planing. Regarding DSM, the Company summarizes discussions with Staff
that have taen place since the 2008 IRP, specifically regarding the funding of low income
weatherization programs for customers heating with natural gas. These conversations are
STAFF COMMENTS 18 NOVEMBER 29,2010
expected to continue as the paries explore the timing, implementation, and implications of a
weatherization program.
In the 2008 IRP, Staff recommended that the Company work on clearly ilustrating
progress in methodology and program design between IRPs. Although the information in the
comparative analysis fulfills the necessar IRP requirements, the Company can make additional
progress to ilustrate efforts to advance its methodologies. This comparative evaluation does a
better job of not restating what was previously discussed in the body of the document, but stil
leaves the reader with little indication of progress in the planning methodology between IRPs. In
the next IRP, Staff encourages the Company to include a more detailed discussion in each
section, summarizing how the trends and outcome of the last IRP were used to advance future
planing or program design in the current IRP.
Public Participation
Although Staff believes the Company satisfies the requirement for public paricipation in
the IRP process, Staff encourages the Company to be more proactive in promoting public
feedback for the IRP planing process. According: to Order No. 25342, when the Company is
"formulating its plan, the gas utilty must provide an opportunity for public paricipation and
comment and must provide methods that will be available to the public of validating predicted
performance." The Company informed Staff it had two IRP public meetings, one of which
was attended by only one person. By comparson, Avista has four IRP public meetings to
receive public feedback, and generally has high paricipation. The Company should consider:
(1) having more meetings, (2) new ways of promoting paricipation in the meetings, and
(3) moving the meetings to more desirable locations and times that faciltate public attendance. "
In Production Request No.9, Staff asked the Company if it had notified city leaders of its
IRP filing. In response the Company stated:
While city leaders, as such, are not included on the Company's IRP service list,
Intermountain is committed to notifying and including city leaders and the general
public when appropriate to do so. For example, when the Company proposed the Sun
Valley Area Hook-up Fee project, city leaders from affected municipalities were
notified and public input was considered. Also, when the Company built the Rexburg
satellte LNG facilty a public foru was held to give customers and other interested
paries the opportunity to paricipate in the process. Intermountain will continue to
invite the public to paricipate in its IRP process where information relating to
capacity constraints is discussed. Overthe years the Company, like all infrastructure
STAFF COMMENTS 19 NOVEMBER 29, 2010
dependent businesses, has built and/or constructed countless projects, some large but
most small, to improve or maintain service to customers and it is simply not
reasonable to contact the public for every such project. The Company is committed
to excellent customer service and will continue to notify the public when appropriate
situations transpire.
Staff agrees with the Company that notifying the public of infrastructure projects should be at its
discretion. Nonetheless, Staff recommends that the Company notify city leaders in advance of
future IRP public meetings and filings. This is particularly importt on the IFL, where
Intermountan may have to make arrangements to meet the demand of new Large Volume and
transportation customers. City leaders are key.stakeholders that represent the communities
Intermountain serves, and should be an integral par of the IRP planning process. They
undoubtedly have local knowledge about Intermountain's customer base that contributes to
capacity planing and goes beyond the Company's third par forecasts. The Company has not
requested a general rate increase for several years, and Staff believes that city leaders who are
involved in the IRP process will have a better understanding of the issues commonly presented in
a general rate case.
STAFF RECOMMENDATION
Staff recommends that the Commission acknowledge the Company' s IRP as fulfillng the
necessary requirements. However, Staff recommends that:
(1) In future IRPs, the Company provides a forecasted versus actual comparison over the past
several IRPs ilustrating the number of conversions per class, number of customers per
class, and usages;
(2) The Commission clarify the intent of its language in Order No. 26546 regarding future
Core-market DSM programs;
(3) The Company notify city leaders in advance of future IRP public meetings and filings.
Respectfully submitted this 1. ~ day of November 2010.
~~W~
Deputy Attorney General
Technical Staff: Matt Elam
i:umisc:comments/intglO.4wsme.doc
STAFF COMMENTS 20 NOVEMBER 29,2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 29th DAY OF NOVEMBER 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. INT-G-1O-04, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
KATHERINE BARNARD DIR
MANAGER REG AFFAIRS
INTERMOUNTAIN GAS CO
PO BOX 7608
BOISE ID 83707
E-MAIL: Kathie.bamard§cngc.com
.\(~
CERTIFICATE OF SERVICE