20130708Comments.pdf

KARL T. KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5156
Street Address for Express Mail:
472 W . WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
IN THE MATTER OF INTERMOUNTAIN GAS
COMPANY'S 2013.2017 INTEGRATED
RESOURCE PLAN.
u'.j- -f , r".! t F
l\J
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. INT.G.13.O3
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on
Intermountain Gas Company' s Application.
BACKGROUND
On February Z&,2}73,Intermountain Gas Company filed its Integrated Resource Plan
("lRP"; for the years 2013 -2017. The Company provides natural gas service to more than
315,000 customers in southern Idaho. Every two years, the Company files an IRP that describes
the Company's plans to meet its customers' future natural gas needs. The IRP must discuss the
subjects required by Section 303(b)(3) of the Public Utility Regulatory Policies Act of 1978
("PURPA"), as amended, and Commission Order Nos. 25342,27024,27098, and 30643. In
summary, these four Commission Orders direct gas utilities to file biennial IRPs that include:
1. A forecast of future gas demand for each customer class, which includes
the number, type, and efficiency of gas end-users as well as effects from
economic forces on gas consumption;
2. An analysis of gas supply options for each customer class, which includes
a projection of spot market versus long-term purchases for both firm and
STAFF COMMENTS JULY 8,2013
intenuptible markets, an evaluation of the opportunities for using
company-owned or contracted storage or production, an analysis of
prospects for company participation in a gas futures market, and an
assessment of opportunities for access to multiple pipeliire suppliers or
direct purchases from producers;
3. A comparative evaluation of gas purchasing options and improvements in
the efficient use of gas based on a consistent method for calculating cost-
effectiveness, which considers the total costs of each resource including
externalities;
4. An explanation of whether or not there are cost-effective Demand-Side
Management ("DSM") opportunities;
5. The integration of the demand forecast and resource evaluations into at
least a five-year integrated resource plan describing the strategies designed
to meet current and future needs at the lowest cost to the utility and its
ratepayers;
6. A progress report that relates the new plan to the previously filed plan; and
7. Public participation.
Intermountain Gas divides its IRP into several sections to fully illustrate how it
plans to meet its future load requirements given three different demand scenarios. The
Company includes the influence of weather on its system, and its ability to use both
traditional and non-traditional supply side resources to meet demand.
STAFF REVIEW
The Company identifies distinct geographic regions orooFocus Zones" within its service
territory: Idaho Falls Lateral ("IFL"), Sun Valley Lateral ("SVL"), Canyon County Lateral
("CCL"), and State Street Lateral ("SSL"). Each region has unique characteristics the Company
continuously monitors. For example, the SSL is closely surrounded by residential and
commercial structures that create a difficult situation for construction and/or land acquisition,
whereas the SVL has almost its entire demand at the far end of the lateral away from the gas
source.
Since the last IRP, the Company has enhanced its distribution capacity on two laterals. It
increased capacity on the IFL by adding a l6" pipeline around the city of Idaho Falls, and
increased the capacity toward the end of the SVL by adding a compressor station. In this IRP,
the only planned upgrade to the Company's distribution system is the Orchard-Farmway Loop in
the fall of 2014. The 7.8 mile loop on the CCL will circumvent a single, undersized, bottleneck
STAFF COMMENTS JULY 8,2013
which has been identified as the weakest point in the system. With this enhancement,
Intermountain's distribution system has enough capacity to meet peak demand on all of its
laterals through 2017.
Demand for Natural Gas
The first part of the Company's resource plan is forecasting future load requirements,
which is a function of the number of customers and per customer use. The core market customer
growth forecast continues to be based on three primary 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 uses the housing forecast from a third party economist to
estimate the number of potential natural gas installations, fuel conversions, and business
additions. According to the Company, the majority of new households will likely use natural gas
if it is available, and new businesses will be added to serve them.
Core market use per customer is based on weather sensitive and non-weather sensitive
demand. Weather sensitive demand is any usage above base usage, measured as a function of
heating degree days. Non-weather sensitive usage is not a function of weather but depends on
factors that are more difficult to measure. Intermountain's heating degree day calculation is
based on 65"F, and utilizes seven National Oceanic Atmospheric Administration weather
stations to capture variations in regional weather. Intermountain notes that having distinct
degree day calculations for each of its segments allows better forecasting in areas of the system
with unique weather characteristics. The results are used to calculate two distinct types of
heating degree days: "Normal Degree Days" and "Design Degree Days." 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 in 50 years.
The Company notes that the underlying premise for peak forecast planning is that the coldest
weather experienced for any month, season, or year will occur again. As with the past several
IRPs, Intermountain used the probability analysis of a third party climatologist to develop the
extreme weather event and the days surrounding it. However in the 2010 IRP, peak usage per
customer was based on data from 1989 through 2009. In the current IRP, the Company uses a
shorter and more recent time series ranging from 2000 through 2010 to help account for
structural shifts in usage. Staff believes it is reasonable to use a shorter and more recent time
STAFF COMMENTS JULY 8,2013
series because it more accurately captures changes in usage from building standards and
behavioral shifts.
The Company forecasts its industrial demand by doing load research and evaluating the
surveys it sends out to management of its existing industrial customers. The surveys incorporate
information from the customer's engineers and marketing personnel regarding plant expansion or
modification, equipment replacement, alternative fuel capabilities, and anticipated product
demand.
All of the Company's forecasts are developed using varying customer growth rates, gas
prices, and weather scenarios. The Company's sensitivity to these changes is shown in three
distinct forecasts: the low growth scenario, base case forecast, and high growth scenario.
The economic downturn and its impact on housing and business growth resulted in lower
demand projections when compared to the 2010 IRP. In the 2010 IRP, forecasted annual load
growth on Intermountain's system over the five-year period was expected to average 2.03o/o for
the low growth scenario, 2.26% for the base case scenario, and2.57Yo for the high growth
scenario. By comparison, annual load growth over the hve-year period for this IRP is expected
to average L02% for the low growth scenario, 1 .04% for the base case scenario, and l.07Yo for
the high growth scenario. Even though demand is not projected to grow as quickly as previously
anticipated, growth is still expected in residential and commercial customer totals, and growth in
industrial fi rm transportation.
The Company also provided data to satisfy one of Staff s recommendations noted in
Comments for the last IRP. Specifically, the Company provided a comparison of forecasted and
actual results over the past several IRPs, illustrating the number of conversions per class, number
of customers per class, and usages. Staff had recommended that the Company provide this
information because the Company projects commercial customer growth based on new
residential home construction, and Staff questioned whether these relationships provide accurate
projections given volatility in the housing industry.
Under Order No. 25342, the Company must provide future gas demand forecasts that
examine the effect of economic forces on the consumption of gas and address changes in the
number, type and effrciency of gas end-uses. Staff evaluated the Company's demand forecasts
given the methods it uses to forecast demand. Staff believes the forecasts are reasonable and can
adequately be used to determine the Company's resource options; therefore, Staff believes
Intermountain's demand forecasts satisfy Order No. 25342.
STAFF COMMENTS JULY 8,2073
Demand-Side Manaeement (DSM)
Intermountain says it continues to promote the efficient and direct use of natural gas. The
Company evaluates DSM based on two goals: 1) to ascertain whether achievable and
economically viable DSM could provide a reliable resource in the Company's peak-load
management; and 2) to facilitate year-around improvements in natural gas usage. The first goal
looks primarily at the cost of DSM employed to reduce peak demand, whereas the second looks
at improvements in the overall usage necessary to avoid having to build additional infrastructure
such as distribution pipe, compressor stations, and storage. It also considers the possible benefit
to customers of capacity releases, and the avoided costs of having to purchase additional pipeline
capacity and commodity to meet growing demand.
In this IRP, the Company updated a prior study using a third party evaluator to assist in
reviewing a full spectrum of DSM opportunities. The Company will continue to offer a $200
rebate for customers converting to natural gas if they purchase a90o/o or greater efficiency
fumace. However, the Company will not implement three other pilot programs it considered
offering following the last IRP. The Company notes the significant changes in the natural gas
market, which have led to a40oh price reduction since 2008. Intermountain believes the
previously considered pilot programs will not provide the benefits estimated under the
significantly higher gas prices assumed in the previous IRP.
Staff believes the Company continues to evaluate DSM as a resource equivalent to
supply-side resources and outline its opportunities consistent with Commission Order No. 27098.
That order allows the Company, in its biennial IRP, to address efficiency measures given a
"general explanation with each IRP filing of whether there are cost effective [DSM]
opportunities." Order No. 27098, p. 2.
Lost and Unaccounted For (LAUF) Gas
LAUF gas is the difference between volumes of natural gas delivered to the distribution
system and volumes of natural gas billed to customers. Potential sources of LAUF gas vary, but
it primarily is due to meter malfunctions that cause measurement error at the citygate or at
customers' meters. LAUF gas may also occur if the Company's billing system is incorrectly
programmed, or if an industrial customer has changed its demand and, consequently, has an
incorrect meter size. When known leaks and line breaks occur between the citygate and
customers' meters, the Company completes a Gas Loss Report for each line break, which
STAFF COMMENTS JULY 8,2013
includes an estimate of total natural gas lost during the break. These reports are totaled at the
end of the year and then subtracted from the annual LAUF gas statistics.
The Company says it regularly compiles different audit results to identifu the cause of
LAUF gas. One audit at the citygate compares the measurements from meters on the Company's
distribution system to Northwest Pipeline's meters. During each billing cycle, another audit
identifies customers whose usages appear low relative to historical usage. When the account is
identified, it is first followed up with a phone call and then, if necessary, by a service technician.
Reports are also generated that allow the Company to audit billed consumption for a given meter
size. Since the billed volumes should correlate with the meter size, this audit sometimes
identifies malfunctioning meters and at other times identifies errors in the Company's
programming that translates metered consumption to billed consumption. The Company
believes these auditing measures and its normal meter rotations have allowed it to continue
identifuing LAUF gas.
In Order No. 30649, the Commission permitted the Company to recover a maximum of
0.85% of its total throughput as LAUF gas. In addition, the Commission ordered the Company
to submit quarterly reports outlining: 1) the Company's framework for how it has tested for,
identified, and remediated equipment measurement errors or leaks; and2) the business process
for alleviating measurement errors through its financial accounting of nominations, scheduling,
measurements, flow volume allocation, and billing. Since then, Commission Order No. 30913
has allowed the Company to file the reports semi-annually instead of quarterly. As directed, the
Company has also worked with Staff to improve its LAUF gas by outlining steps toward
identifying the sources. Staff believes dialogue with the Company on how to identiff LAUF gas
should continue. However, because the Company has started using the IRP to discuss the steps it
takes to identifu LAUF gas, Staff believes it would be appropriate for the Commission to
discontinue the Company's semi-annual reporting requirement. Instead, Staff believes the
statistical summary the Company has historically included in its semi-annual reports should be
shown in the Purchased Gas Adjustment ("PGA") filing as a separate exhibit. This approach
allows Staff to monitor trends in the Company's LAUF gas on an annual basis, and eliminates
the duplication in the semi-annual reports and the IRP. Even though the Company's LAUF gas
approached the maximum allowable amount in last year's PGA and Staff noted concern over the
year-to-year volatility, Staff believes that eliminating the semi-annual reporting will not harm
6STAFF COMMENTS JULY 8,2013
customers. Staff believes it will continue to have the opportunity to adequately monitor the
Company's LAUF gas trends.
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 typically depend on
pipeline capacity to move gas to Intermountain's distribution system or storage facilities, whereas
non-traditional resources help supplement the traditional supply side resources during peak
demand conditions. Most of the traditional supply comes from the Rockies Basin and is
transported to its citygates through Northwest Pipeline, an interstate transportation provider
whose pipeline runs through Intermountain's service territory. However, the Company also
moves gas from Canada to Northwest Pipeline by utilizing capacity on Gas Transmission
Northwest (GTN), TransCanada's Foothills Pipeline system (Foothills), and its Alberta system
known as Nova Gas Transmission (Nova).
Intermountain divides its non-traditional resources into two types: 1) alternative energy
supplies not received from an interstate pipeline supplier, producer or interstate storage operator;
and2) capacity upgrades within the distribution system that enhance the ability to flow gas
during periods of peak demand. The alternative energy supplies considered in the IRP are fuel
oil/diesel, coal, wood chips, propane, and portable liquid natural gas ("LNG"). The capacity
upgrades that are considered include pipeline loops, pipeline uprates, and a compressor stations.
The Company has several hedging strategies utilizing financial and physical delivery
contracts to reduce the Company's exposure to price volatility. Similarly, the Company utilizes
Jackson Prairie (JP) and Clay Basin underground storage to reduce price volatility and allow it to
hedge high winter gas prices. The Company also has the Plymouth and Nampa LNG facilities
that primarily act as an insurance policy to meet peak day.
Staff believes the Company sufficiently addresses its supply-side options in the IRP, and
that it continues to look for opportunities to diversify and protect customers from market
volatility.
As with the last IRP, the Company's traditional supply forecasts predict growing supplies
because of shale gas. The lower commodity costs once captive to the Northwest because of
pipeline constraints are now being made available to larger markets. This trend is expected to
continue, resulting in more market liquidity but may cause less favorable pricing for the
STAFF COMMENTS JULY 8,20I3
Northwest. Consequently, the Company plans to shift its purchasing strategy to shorter termed
spot or index contracts. According to the Company, this will allow it to balance supplies with
seasonal demand and take advantage of price shifts without having excess supply during off-
peak periods. Intermountain plans to continue hedging higher priced winter gas using
conventional underground storage. It also plans to continue using its non-traditional LNG supply
to meet a needle peak supply, and avoid purchasing year-round interstate transportation capacity.
Staff believes it is reasonable for the Company to avoid purchasing year-around interstate
transportation capacity if its non-traditional LNG supply can be used to meet the needle peak
supply.
Inteerated Resource Portfolio
The Company attempts to minimize customers' costs by utilizing an optimization model
to evaluate and select the best mix of resources to meet its forecasted loads over the planning
horizon. The optimization model evaluates four different components: 1) demand forecast; 2)
supply resources; 3) transportation capacity resources; and 4) supply prices. Intermountain
builds its supply portfolio based on several purchasing strategies given its forward market
projections in order to determine the most reliable and economical option for customers. The
Company states that as the "natural gas market continues to mature, liquidity at the purchases
[slc] points Intermountain utilizes has allowed for more flexibility in the structure of the
portfolio." IRP, p. 53.
With the addition of resources since its last IRP and the addition of the Orchard-Farmway
Loop in 2014,Intermountain maintains that its existing resources are sufficient to meet all the
design weather scenarios over the five-year planning period. Intermountain anticipates it would
cost $110,960 in variable interstate transportation costs to meet a design day that occurs in2013,
whereas it estimates the total transport cost of providing service would be $124,068,359.
Similarly, if a design day were to occur in2017, the Company anticipates its variable interstate
transmission costs would be $134,563, compared to the estimated total transport cost of
providing service of $195,003,190.r Intermountain states that it will continue to anticipate
changes in future demand requirements to plan for the use of existing resources and the timely
' Staff discovered an error in the Company's optimization reports submitted as Exhibit 4, Tables 5.1 and 5.5.
Subsequently, the transportation costs used by Staff in Comments do not reflect the Company's original exhibit, but
instead reflect the Company's corrected version of its original exhibit.
STAFF COMMENTS JULY 8,2013
acquisition of additional resources. Even though lower natural gas prices are expected to remain,
Intermountain also states that it will continue to promote the efficient, direct use of natural gas
wherever possible.
Staff believes that the Company's IRP adequately satisfies the Commissions
requirements. Specifically, the Company integrates its demand forecast with its resource
evaluations to develop a five-year integrated resource plan, and then describes the strategies
designed to meet current and future needs at the lowest cost to the utility and its ratepayers.
Public Participation
According to Order No.25342, when the Company is "formulating its plan, the gas utility
must provide an opportunity for public participation and comment and must provide methods
that will be available to the public of validating predicted performance," Staff noted low public
participation at meetings for the Company's last IRP; consequently, Staff Comments encouraged
the Company to be more proactive in promoting public participation in the IRP planning process.
Similarly, the Commission noted that the Company "should provide appropriate notice to city
and county leaders as part of the process." Order No. 32139.
The Company had two meetings during the current IRP cycle, one in Boise and another
in Idaho Falls. Staff reviewed the notification lists, the attendee lists, and notable public
feedback gathered by the Company for both meetings. Not including Intermountain's
employees, l9 people were invited to the Boise meeting. Of those invited, 11 people attended.
Similarly, 34 people were invited to the Idaho Falls meeting. Of those invited, l6 people
attended.
The Company invited Mayors, Councilmen and various city leaders to its IRP meeting
Idaho Falls, but did not appear to notify local Mayors and Councilmen of its Boise meeting.
Staff believes the Company should have notified these key stakeholders of its Boise meeting,
particularly since in 2074, the Company plans to add the Orchard-Farmway Loop to its Canyon
County lateral. In Order No. 32793, the Company was recently granted authority to sell LNG
from its Nampa facility. The purpose of the IRP planning process is to inform key stakeholders
that represent the communities Intermountain serves, and to facilitate participation and comment.
As part of Staff discovery, the Company was asked to provide any notable public
feedback it received from city and county leaders regarding the IRP process. According to the
Company, "a representative from the City of Rexburg became concerned that Intermountain
STAFF COMMENTS JULY 8,2013
Gas' IRP planning process did not adequately account for the long-term growth anticipated in the
Rexburg atea." It was explained by the Company that the IRP's five-year planning horizon is
revised every other year to include updated growth projections, and that currently there is more
than adequate natural gas delivery capacity for the Rexburg area. This kind of dialogue is
valuable and should be encouraged. By comparison, Avista has four IRP public meetings to
receive this kind of feedback, and generally has high participation. Staff believes the Company
met the basic requirements to provide an opportunity for public participation and comment, but
believes it could do more to improve public participation and feedback in the IRP.
STAFF RECOMMENDATIONS
Staff recommends that the Commission acknowledge the Company's IRP as fulfilling the
necessary requirements. However, Staff recommends that:
(l) In future IRPs, the Commission require a LAUF gas section explaining the
Company's (a) framework for how it has tested for, identified, and remediated equipment
measurement errors or leaks, and (b) business process for alleviating measurement effors through
its financial accounting of nominations, scheduling, measurements, flow volume allocation, and
billing; and
(2) The Commission no longer require that the Company file its semi-annual reports on
LAUF gas, but instead require the Company to include an exhibit in its annual PGA
summarizing the statistics that have historically been reported in its LAUF gas semi-annual
reports.
Respectfully submitted this S4 day of July 2013.
lU t/L
Karl T. Klein
Deputy Attomey General
Technical Staff: Matt Elam
i : umisc/comments/intg I 3.03kkme comments
STAFF COMMENTS 10 JULY 8,2013
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8TH DAY OF JULY
THE FOREGOING COMMENTS OF' THE COMMISSION STAX'F, IN
INT-G-13-03, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
FOLLOWING:
SCOTT MADISON
EXEC. VP & GENERAL MANAGER
LORI BLATTNER
INTERMOUNTAIN GAS CO
PO BOX 7608
BOISE ID 83707
E-MAIL: [e-mail]
lori. blattner@ intgas. com
2013, SERVED
CASE NO.
TO THE
SECRETAR
CERTIFICATE OF SERVICE