20120131final_order_no_32450.pdf

Office of the Secretary
Service Date
January31,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF INTERMOUNTAIN GAS COMPANY )CASE iSO.INT-G-11-03
FOR AUTHORITY TO DECREASE ITS )
PRICES )
)ORDER NO.32450
________________________________________________________________________________________
)
On December 22,2011,Intermountain Gas Company applied for authority to place
into effect new rate schedules that will decrease the Company’s revenues from February 1,2012
to September 30,2012 by 56.0 million.Application at 2.The proposed revenue decrease arises
from changes in the Company’s gas purchase costs that will decrease customer rates while not
affecting the Company’s earnings.Id.at 2.The Company asked for the new rates to take effect
February 1,2012.Ic!.at 6.
On January 5,2012,the Commission issued a Notice of ApplicationlModified
Procedure that allowed interested persons to file comments until January 19,2012,with the
Company to file any reply comments by January 26,2012.See Order No.32428 at 3.With this
Order,the Commission approves the Company’s Application.
THE APPLICATION
Intermountain Gas seeks to pass-through to its sales customer classes a decrease in
gas commodity costs resulting from a decrease in Intermountain’s weighted average cost of gas
(“WACOG”).The Company says this would result in an overall price decrease to
Interniountain’s RS-1,RS-2,GS-1,LV-1,IS-R and IS-C customers.Application at 3.
Intermountain proposes decreasing the WACOG from the currently approved
50.45342 per therm to 50.41812 per therm because regional natural gas prices have continued to
decline since Intermountain filed TNT-G-1l-01 in August 2011.Id.at 4.The Company
attributes the decline to:(1)the continued prolific availability of U.S.shale gas production;(2)
storage balances being at or near record high levels;(3)the lack of material hurricane activity
that would typically reduce natural gas deliverability;and (4)a mild winter that has dampened
natural gas demand across the Pacific Northwest.Id.Additionally,the Company says the
domestic Ruby pipeline has displaced traditional Canadian natural gas supplies and softened
ORDER NO.32450
“prices at the AECO hub in Alberta which makes up a significant portion of the Company’s gas
supply portfolio.”Id.
Intermountain says it has allocated the proposed price changes to each of its customer
classes based on Intermountain’s Purchased Gas Cost Adjustment (PGA)provision.Id.The
Company says the proposed price changes are just,fair,and equitable.Id.at 5.
Intermountain asserts that customers have been notified regarding Intermountain’s
Application through a customer notice and press release.Id.
THE COMMENTS
Staff comments
Staff notes that the Company’s current filing results from the Company’s adherence
to Order No.32372,which requires that the Company apply to reduce prices whenever
purchased gas costs materially deviate from those currently authorized and embedded in rates.
The Company proposes to reduce the WACOG from $0.45342 per therm to $0.41812 per therm.
Staff says this is 7.79%less than the WACOG approved in the 2011 PGA,which took effect on
October 1,2011.See Staff Comments at 2.
Staff reviewed the Company’s Application primarily by comparing it to Staffs
analysis of the WACOG approved in the October 1,2011 PGA (Case No.TNT-G-11-01).Id.at
3.Based on this review,Staff found that:
1.The Company’s method to determine the WACOG is rigorous and the
calculations are accurate (id.);
2.The Company’s proposed reduction in its WACOG correlates with market
trends identified in Staffs comments for the October 2011 PGA filing and
that these trends persist (Id.at 3-4);and
3.The cost of purchased gas that forms the basis for the proposed WACOG
reasonably compares to current benchmark market prices forecasted by
third-party sources (Id.at 3,5-6).
Accordingly,Staff recommended that the Commission approve the Company’s
request to establish a WACOG of $041812 per therm and reduce rates by $0.03530 per therm
for the Company’s RS-l,RS-2,GS-l,LV-I,IS-R and IS-C customers.Id.at 3,6.
Public Comments
The sole public commenter is a customer who is pleased with the Company’s
proposed rate decrease.
ORDER NO.32450 2
FINDINGS AND DISCUSSION
The Commission has reviewed the record for this case,including the Application and
comments.The Commission has jurisdiction over Intermountain Gas Company,a public utility,
its Application for authority to change rates and prices,and the issues involved in this case
pursuant to Title 61 of the Idaho Code,and more specifically,Idaho Code §61-117,61-129,
61-307,61-501,and 61-502,along with the Commission’s Rules of Procedure,IDAPA
31.01.01.000,ci seq.
The Commission must establish just,reasonable,and sufficient rates for utilities
subject to its jurisdiction.Idaho Code §61-502.The PGA mechanism is used to adjust rates to
reflect changes in the Company’s costs for the purchase of natural gas from suppliers —including
transportation,storage and other related costs.See Order No.26019.The Company’s earnings
are not to be increased from changes in prices and revenues resulting from the PGA.The PGA
mechanism is designed to pass through prudently incurred commodity costs in a timely fashion.
With regard to the current Application,we note that natural gas prices continue to
decrease for various reasons.Supply is abundant due to new drilling technologies and pipeline
infrastructure.Record quantities of stored gas also exist,and there has been no material
hurricane activity that might otherwise interfere with delivery.The demand for gas,on the other
hand,has softened due to a mild winter.Consequently,we find it reasonable to grant the
Company’s request to decrease the approved WACOG from $0.45342 per therm to $0.41812 per
therm,and to reduce rates by $0.03530 per therm for the Company’s RS-l,RS-2,GS-l,LV-I,IS
R and IS-C customers.The Commission appreciates the Company’s prompt Application to
decrease its rates in the face of falling natural gas prices.
ORDER
IT IS HEREBY ORDERED that Intermountain Gas Company’s Application is
approved.Intermountain is authorized to pass through its proposed adjustments,surcharges,and
credits to customers as filed.The Company shall establish a WACOG of $0.418l2 per therm
and reduce rates by $0.03530 per therm for the Company’s RS-1,RS-2,GS-1,LV-I,IS-R and IS-
C customers.The tariff sheets filed with the Company’s Application are hereby approved,
effective February 1,2012.
IT IS FURTHER ORDERED that Intermountain Gas promptly apply to amend its
WACOG should gas prices materially deviate from the presently approved $0.4 1812 per therm.
ORDER NO.32450 3
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 62-6 19.
/DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this i I
day of January 2012.
-‘—
MACK A REDFORD COMMISSIONER
MARSHA 1-I.SMITH,COMMISSIONER
ATTEST:
1717
Jean D.Jewell
Commission Secretary
0:INT-G-11 -03kk2
ORDER NO.32450 4