20130925final_order_no_32897.pdf

Office of the Secretary
Service Date
September 25,2013
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF INTERMOUNTAIN GAS COMPANY )CASE NO.INT-G-13-05
FOR AUTHORITY TO CHANGE ITS )
PRICES (2013 PURCHASED GAS COST )ORDER NO.32897
ADJUSTMENT).)
On August 9,2013,Intermountain Gas Company filed its annual Purchased Gas Cost
Adjustment (PGA)Application and asked to increase its annualized revenues by $10.3 million,
for an overall increase of about 4.15%.If granted,the Company’s proposal would increase
customer rates effective October 1,2013.The proposal would enable the Company to recover
from customers the Company’s increased costs to buy gas,but it would not increase the
Company’s earnings.On August 23,2013,the Commission issued a Notice of Application and
Notice of Modified Procedure soliciting public input on the Application and setting a September
18,2013 comment deadline.Order No.32882.Commission Staff and one member of the public
filed timely written comments.The Company did not reply.
Having reviewed the record,the Commission enters this Order granting the
Application as follows.
THE APPLICATION
The PGA is used to adjust rates to reflect annual changes in the Company’s costs to
buy natural gas from suppliers—including transportation,storage,and other related costs.See
Order No.26019.With this PGA Application,the Company seeks to pass-through to each of its
customer classes changes in gas-related costs resulting from:(1)an increase in transportation
costs billed to the Company by Northwest Pipeline GP (“Northwest”or “Northwest Pipeline”);
(2)an increase in the Company’s weighted average cost of gas (“WACOG”)(3)an updated
customer allocation of gas-related costs under 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 the Company’s deferred gas cost accounts;and (5)benefits resulting
from the Company’s management of its storage and firm capacity rights on various pipeline
systems.The Company also seeks to eliminate the temporary surcharges and credits included in
its current prices during the past 12 months,pursuant to Case No.INT-G-12-01.
ORDER NO.32897 1
Although the proposed changes would not affect the Company’s earnings,they would
increase overall prices for RS-1.RS-2,GS-1 and LV-1 customers.More specifically,residential
customers using gas for space and water heating would see a $1.85/month (3.92%)average
increase,customers using natural gas for space heating only would see a $0.68/month (1.88%)
average increase,and commercial customers would see a $14.18/month (7.26%)average
increase.The Company says its proposal would decrease prices for its T-3,T-4,and T-5
customers.
The Company says its proposed price changes 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 the Company’s last PGA filing.Case No.INT-G-12-0l.
The Company proposes increasing the WACOG from the currently approved
$033489 per therm to $037341 per therm.The Company says while there are significant shale
gas reserves,recent improvements in the economy and an increase in natural gas-fired electric
generation have increased demand and placed upward pressure on prices for natural gas.The
Company notes,however,that natural gas prices remain much lower than they were a few years
ago.
The Company says it has entered into fixed price agreements to lock-in the price for
significant portions of its underground storage and other winter flowing”supplies.
The Company seeks to pass through to its customers the benefits that will be
generated from the management of its transportation capacity totaling $3.9 million.The
Company also proposes a temporary price adjustment for the 12-month period ending September
30,2014,that would allocate to customers the fixed,variable,and lost and unaccounted-for gas
costs from the Company’s deferred Account No.186 balance.The Company notes that,under
Order No.32793,the Company’s deferred variable gas cost credits included those associated
with liquefied natural gas (LNG)sales from the Company’s Nampa,Idaho facility.
The Company says the proposed overall price changes reflect a just,fair,and
equitable pass-through of changes in gas-related costs to the Company’s customers.The
Company notified customers about the Application and price changes through a formal Customer
Notice and a Press Release.
ORDER NO.32897 2
THE COMMENTS
The Commission received one public comment and comments from Commission
Staff.The public commenter opposes the proposed rate increase because the cost of natural gas
is down and supplies are more than adequate.Staff confirms that the filing will not change the
Company’s earnings,that the deferred costs are prudent,and that the WACOG request is
reasonable.Staff Comments at 2.Staff says the Company effectively manages its pipeline
capacities and natural gas storage assets to benefit customers (id.at 10),and the Company has
changed its hedging ratios to match current market conditions and protect customers from future
upward price risk.Id.at 6-7.
Staff notes that the Company’s proposed WACOG—an increase from $0.3349 per
therm to $0.3 734 per therm—would be the first increase following six consecutive decreases and
be among the lowest since the 2000 WACOG in nominal dollars.Comments at 3-4.Staff
reviewed the market fundamentals and opines that the Company’s executed hedges were prudent
and the estimated index prices for future delivery are reasonable.Staff says the WACOG request
is reasonable,and that the Commission should approve it.Staff also recommended the Company
return to the Commission if prices materially deviate from the proposed rates during the
upcoming year.Id.at 3-6.
Pursuant to Order No.32653,the Company included temporary credits in its October
1.2012 prices.Staff notes that the main goal of including the temporary credits in prices was to
enable the Company to pass deferred gas cost charges and benefits to its customers.Staff says
the new temporary credits consist of:(1)about a $3.9 million credit in benefits generated by
releasing some pipeline capacity (2)another $8.8 million credit arising from the collection of
pipeline capacity costs,the true-up of expenses from the 2012 PGA,and capacity release credits
generated from the release of the Company’s pipeline capacity;(3)the $3.1 million deferred
surcharge balance,which is the difference in the commodity costs that the Company actually
paid for gas and the WACOG that was included in rates;and (4)a small credit recorded to reflect
the agreed percentage of LNG sales returned to ratepayers per Order No.32793.Staff says the
new temporary credits total $9.6 million.But when offset by the removal of prior temporaries
(including lost and unaccounted for (LAUF)gas),the credit decreases to $1.9 million.Staff
agrees with the Company’s proposed temporary credit balance.Comments at 7-8.
ORDER NO.32897
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 is primarily due to meter malfunctions that cause measurement error at the city
gate 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 discussing recovery of LAUF gas,Staff notes that the
Company is in a position to credit customers this year because LAUF gas amounts are less than
the amounts included in Commission-approved base rates from 1985.Staff believes the
Company’s LAUF gas estimates are reasonable and accurate and below the cap established by
the Commission in Order No.30649 (i.e.,the Company’s LAUF gas is less than 0.85%of total
throughput).Staff recommended that the Commission allow the Company to credit customers a
total of $444,316 for LAUF gas.Comments at 10-12.
Staff also recommended the Company’s future PGA filings include more information
in the “Lost and Unaccounted for Statistics”workpapers.Specifically,Staff recommended that
the Company not only summarize the amount of lost gas due to line breaks,but for all causes.
This will help the Staff evaluate the Company’s LAUF gas situation,operations and procedures.
Lastly,Staff recommended that the Company change how it prices gas lost through broken lines.
The Company currently uses the WACOG to price the lost gas.But the WACOG does not
include the Company’s fixed costs to transport the gas through pipelines or the cost of the
Company’s storage facilities.Staff thus recommended that the Company bill the responsible
party at the full retail rate when pricing gas lost through a line break.Id.
FINDINGS AND DISCUSSION
The Commission has reviewed the record for this case,including the Application and
comments.The Company is a public utility,and the Commission has jurisdiction over it and the
issues in this case under Title 61 of the Idaho Code,and more specifically,Idaho Code §§61-
117,61-129,61-307,61-501,and 61-502.The Commission must establish just,reasonable,and
sufficient rates for utilities subject to its jurisdiction.Idaho Code §6 1-502.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
ORDER NO.32897 4
revenues resulting from the PGA.The PGA mechanism is designed to pass through prudently
incurred commodity costs in a timely fashion.
The Commission has examined the Company’s Application and gas purchases for the
year,and finds that the Application should be granted and the tariffs approved as filed.We find
that the Company’s costs to buy natural gas and transport it to the Company’s system have
increased by about $10.3 million,and that the Company’s current rates are insufficient to enable
it to reasonably recover these costs.We find that the Company should be allowed to increase its
WACOG from $0.3 349 per therm to $0.3 734 per therm,and that the resulting customer rates are
just,reasonable and sufficient to enable the Company to recover its increased natural gas costs.
The Commission also finds that the Company’s proposed temporary credit balance is
accurate.With regard to LAUF gas,the Company should ensure that its future PGA filings
summarize the number of therms lost due to all causes,not just due to line breaks.Further,the
Commission finds it reasonable for the Company to bill the party that is responsible for the line
break at the full retail rate when pricing lost gas.
ORDER
IT IS HEREBY ORDERED that the Company’s Application is granted.The
Company is authorized to pass through its proposed adjustments,surcharges,and credits to
customers as filed,The Company shall establish a WACOG of $0.3734 per therm.The tariff
sheets filed with the Company’s Application are hereby approved,effective October 1,2013.
IT IS FURTHER ORDERED that the Company shall promptly apply to amend its
WACOG if natural gas prices materially deviate from the WACOG approved in this Order.
IT IS FURTHER ORDERED that the Company’s future PGA filing shall be
accompanied by LAUF gas statistics work papers that include the number of therms lost from all
causes,not just from line breaks.Further,in the future the Company shall bill the full retail rate
to the responsible party when pricing lost gas due to a line break.
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 62-619.
ORDER NO.32897 5
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 3
day of September 2013.
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•
)72(/V(2iv 7--
PAUL KJELLAN13-R,PRESIDENT
MACK A.REDFORD,COMMISSIONER
MARSHA H.SMITH,COMMISSIONER
ATTEST:
Jn D.Jewel
C6mmission Secretary
O:INT-G-I 3-05kk2
ORDER NO.32897 6