20130327Reply Comments.pdf

EXECUTIVE OFFICES
INTERMOUNTAIN GAS COMPANY RECEVET
555 SOUTH COLE ROAD • P.O. BOX 7608 • BOISE, IDAHO 83707 • [phone] • FAX: [phone] P MAR 27 37
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March 27, 2013
Ms. Jean Jewell
Idaho Public Utilities Commission
472 W. Washington Street
P.O. Box 83720
Boise, ID 83720-0074
RE: Intermountain Gas Company
Case No. INT-G-13-02
Dear Ms. Jewell:
Enclosed for filing with this Commission is an original and seven (7) copies of Intermountain
Gas Company's Reply to Staff's and the Northwest Industrial Gas User's comments in the above
referenced Case.
Please acknowledge receipt of this filing by stamping and returning a copy of this Application
cover letter to us.
If you have any questions or require additional information regarding the attached, please contact
me at 377-6105 or Dave Swenson at 377-6118.
Very truly yours,
Scott W. Madjs/1
Executive Vice President - General Manager
cc: K.F. Morehouse
D. Haider
M. Parvinen
Scott Madison RECEJV
Executive Vice President & General Manager 27 PM 4:37 Intermountain Gas Company
Boise, Idaho 83707
Telephone: [phone] UTI
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
In the Matter of the Application of
INTERMOUNTAIN GAS COMPANY
for Authority to Sell LNG
Case No. 1NT-G-13-02
REPLY OF
INTERMOUNTAIN GAS COMPANY
Pursuant to Idaho Public Utilities Commission ("Commission") Order No. 32735 in the
above referenced Case, Intermountain Gas Company ("Intermountain" or "Company), files this
Reply to Comments filed by the Commission Staff ("Staff') and, separately, the Northwest
Industrial Gas Users ("NWIGU").
STAFF RECOMMENDATIONS
Although Intermountain does not concur with all the information provided in Staffs
analysis, Intermountain will only respond to Staff Recommendations that the Company disagrees
with or takes exception to.
RECOMENDATION #4:
Require the Company to credit 70% of the total net margin to ratepayers for sales of LNG
through the PGA, allowing the Company to keep 30%.
COMPANY REPLY:
There is no down-side risk to the customers in the Company's proposal. The Company is
proposing 50150 as a means of providing a return to customers for the use of the core asset.
Equally, the Company is proposing 50150 for the significant level of risk that the Company is
willing to absorb. Staff provided a good explanation of those risks on page 8 of the Staff
Comments. Clearly the risks as well as the markets themselves are substantially different than the
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off-system sales provided by the electric utilities. Also, customers are being compensated the first 5
cents (2.5 cents for O&M reimbursement and 2.5 cents for future capital investment) off the top
before any sharing.
The basic reason for the Company's proposal is that yes customers have essentially
provided the investment but it is the Company taking the risk and totally insulating customers
from any risk. The Company chose the 50150 level because it felt the risk to the Company and
the return to rate payers were equally weighted at 50150. Anything less than 50150 would
materially affect the Company's decision on whether the service would be worthwhile at the
magnitude or revenue levels the Company is anticipating especially if margins tighten when the
market more fully develops. Staff has identified what the Company would consider to be the
maximum potential revenue to be shared. The Company is not anticipating reaching these
revenue levels.
Also, the Company considers this service to be temporary while the capacity is available
and while the market develops and there is adequate competition. The Commission should
consider this an opportunity to help develop a fledgling service that IGC expects to participate in
during its infancy while there are potential benefits.
As an alternative, the Company suggests sharing 50150 until the Company's share totals
$1.5 million and then 70/30 after that. This will provide adequate sharing to compensate for
risks and returns of both the customer and the Company based on expected revenues as well as
provide exceptional benefits to customers if the service performs beyond expectations.
RECOMMENDATION #5:
Require the Company to prepare a review of all costs and benefits as a result of selling LNG
as part of the annual PGA filing.
COMPANY REPLY:
The Company agrees to a review of the costs and benefits as a result of selling LNG as part
of the PGA filing, but any required analysis to separate "internal" and "incremental" O&M would
be burdensome at best. This is why the Company specifically looked at making sure customers
would be more than held harmless with the 2.5 cent deferral for O&M. Certainly if the Company
believes the credit is too high, the burden would be on the Company to evaluate and propose an
REPLY OF INTERMOUNTAIN GAS COMPANY -2
adjustment. If the Company were to be able to specifically identify those costs, we would have
proposed that the costs be a cost of the sale. There would then be no need for the 2.5 cent collection
and the difference would just fall to margin to be allocated. In this scenario, the customers would
lose out on our proposal to allow LNG sales to off-set the base rate collection of LNG O&M
expenses.
RECOMMENDATION #6:
As part of the next IRP filing, require the Company to prepare a review of the method and
framework for selling LNG and whether the Company should continue to sell it.
COMPANY REPLY:
The general focus of an IRP is to determine what the future loads of the Company are likely
to be and identify how the Company intends to potentially meet the identified requirements. The
IRP will certainly identify if the LNG is entirely needed to meet core peaking needs however it
seems inappropriate to use the IRP process to examine whether to continue the service or not. The
Company will cease the service when 100% of the capacity is needed for core or if there is no
longer an adequate economic benefit to continue the service. As an example; if the market matures
and additional providers enter the business, margins could be squeezed to the point that
Intermountain would no longer be inclined to participate in the market.
NWIGU COMMENTS
IGC appreciates NWIGU's support of the application. We are committed to ensuring that
utility customers will not subsidize in any way non-utility customer's service. IGC has proposed a
review of the revenue and costs associated with LNG sales by the Commission Staff through the
PGA mechanism. Specific contracts and sales prices, however, would be proprietary information
and subject to Staff review under "Trade Secrets" protection. Thus, any opportunity for "other
interested parties review" would necessarily be limited to aggregated costs and revenues.
The Company also feels that it would be meaningless and inappropriate to perform the
suggested cost of service study outside the context of a general rate case.
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CONCLUSION
Based on the foregoing comments, Intermountain requests that the Commission approve its
Case No. 1NT-G-13-02 as originally filed except where Company has agreed to Staff's
recommendations relating to the deferral of 2.50 per gallon of LNG sold to be passed back to
customers through the Company's PGA mechanism in lieu of an O&M credit.
Respectfully submitted this 27th day of March, 2013.
INTERMOUNTAINGAS COMPANY
By:
Scott Madison
Executive Vice President - General Manager
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CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 27th day of March, 2013, I served a copy of
Intermountain Gas Company's Reply Comments relating to Case No. 1NT-G-13-02 upon:
Ed Finklea
Northwest Industrial Gas Users
326 Fifth Street
Lake Oswego, Oregon 97034
R. Scott Pasley
J. R. Simplot Company
P0 Box 27
Boise, ID 83707
Chad Stokes
Cable Huston et al.
1001 SW Fifth Avenue, Suite 2000
Portland, Oregon 97204-1136
Steven Gray
J. R. Simplot Company
P0 Box 27
Boise, ID 83707
Conley E. Ward, Jr.
Givens, Pursley, Webb & Huntley
277 N. 6th St., Suite 200
P0 Box 2720
Boise, ID 83701
by depositing true copies thereof in the United States Mail, stage prepaid, in envelopes addressed
to said persons at the above addresses.
/
Scott W. Madison
Executive Vice President - General Manager
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