20120824Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: NEIL PRICE
DEPUTY ATTORNEY GENERAL

DATE: AUGUST 23, 2012

SUBJECT: INTERMOUNTAIN GAS COMPANY’S ANNUAL PURCHASED GAS
COST ADJUSTMENT (PGA) FILING, CASE NO. INT-G-12-01

On August 10, 2012, Intermountain Gas Company (“Intermountain” or “Company”)
filed its annual Purchased Gas Cost Adjustment (“PGA”) and requested a Commission Order,
pursuant to Idaho Code §§ 61-307 and 61-622, to institute new rate schedules which will
decrease its annualized revenues by $6.0 million. Application at 2. Intermountain also “seeks to
refund $11.9 million of variable deferred credits in a one-time bill credit.” Id. Intermountain
attached copies of its current rate schedules and proposed rate schedules. Id., Exh. 1-2.
THE FILING
Intermountain’s Application lists the following cost variations that it seeks to pass
through to each of its customer classes through this filing:
(1) An increase in costs billed Intermountain from Northwest Pipeline GP
(“Northwest” or “Northwest Pipeline”) reflecting a January 1, 2013 price
increase and the purchase of additional Northwest capacity;

(2) A decrease in Intermountain’s Weighted Average Cost of Gas, or
“WACOG”;

(3) An updated customer allocation of gas related costs pursuant to the
Company’s PGA provision;

(4) The inclusion of temporary surcharges and credits for one year relating to
natural gas purchases and interstate transportation costs from
Intermountain’s deferred gas cost accounts, and
DECISION MEMORANDUM 2
(5) Benefits resulting from Intermountain’s management of its storage and
firm capacity rights on various pipeline systems. Intermountain also seeks
with this Application to eliminate the temporary surcharges and credits
included in its current prices during the past 12 months, pursuant to Order
No. 32372 per Case No. INT-G-11-01.

Id. at 3-4. The Company asserts that the net effect of the “above changes would result in an
overall price decrease to Intermountain’s customers.” Id. at 4.
According to Intermountain, its “proposed prices incorporate all changes in costs
relating to the Company’s firm interstate transportation capacity including, but not limited to,
any price changes or projected cost adjustments implemented by the Company’s pipeline
suppliers as well as any volumetric adjustments in contracted transportation agreements which
have occurred since Intermountain’s PGA filing in Case No. INT-G-11-01.” Id.
Intermountain notes that “Northwest Pipeline and its shippers settled Northwest’s
recent rate case filing resulting in an approximate 9% price increase effective January 1, 2013.
Id., Exh. 3. Next, Intermountain recounted the efforts the Company has taken to “effectively
manage its natural gas storage assets.” Id. at 4-5, Exh. 4.
The Application lists a decrease in the WACOG price from the current price of
$0.41812 per therm to the proposed price of $0.33489 per therm. Id. at 5, Exh. 4. Intermountain
declares that natural gas prices have continued to fall. Id. Intermountain states that natural gas
storage balances are at “record levels.” Id. Thus, record storage levels combined with “ample
natural gas supplies . . . has kept the near term prices for natural gas low.” Id. Intermountain
states that it “has entered into various fixed price agreements to lock-in the price for significant
portions of its underground storage and other winter ‘flowing’ supplies.” Id.
Intermountain’s Application seeks “to pass through to its customers the benefits that
will be generated from the management of its transportation capacity totaling $3.7 million as
outlined on Exhibit No. 7.” Id. at 6. Intermountain’s proposal seeks to “allocate deferred gas
costs from its Account No. 186 balance to its customers through temporary price adjustments to
be effective during the 12-month period ending September 30, 2013. . . .” Id. at 7, Exh. 6, 8-9.
Intermountain filed “an out-of-cycle PGA which was effective February 2012 to
account for rapidly falling natural gas prices. . . .” Id. Nevertheless, prices continued to drop
and “lower natural gas commodity prices from July 2011 through June 2012 resulted in a credit
balance of $11.9 million.” Id. at 7, Exh. 10. Intermountain’s proposal includes a “refund of this
DECISION MEMORANDUM 3
balance through a one-time credit on customer bills in December 2012.” Id. The credit balance
would be divided by actual sales volumes over the time period it was generated to arrive at the
per therm credit. Id., Exh. 10. “This calculated credit would be reflected as a line item on
customer bills in December 2012.” Id. at 8, Exh. 10. Intermountain did not apply “a straight
cent per therm price decrease . . . for the LV-1 tariff as no fixed costs are currently recovered in
the tail block of the LV-1 tariff.” Id. The changes to the WACOG price, as well as other
variable deferred credits, “are applied to all three blocks of the LV-1 tariff” but “adjustments
relating to fixed costs are applied only to the first two blocks of the LV-1 tariff.” Id.
“Each block of the proposed LV-1, T-3, T-4 and T-5 tariffs include a uniform cents
per therm increase to adjust for Lost and Unaccounted For Gas as detailed on Exhibit No. 9,
Lines 13 through 20, Col. (b).” Id. An analysis of the overall price changes by class of customer
is outlined in Exhibit No. 11. Id.
Intermountain states it has provided notice of the proposed changes to its tariff
schedules through the issuance of a formal Customer Notice and Press Release. Id.
Intermountain proposes an effective date for the proposed changes of October 1, 2012. Id. at 10.
COMMISSION DECISION
Does the Commission wish to process Intermountain’s PGA Application through
Modified Procedure with a comment deadline of September 20, 2012?

M:INT-G-12-01_np